Government of Virgin IslandsNon-Profit

Finding Number: 2024-017 Prior Year Finding Number: 2023-024 Compliance Requirement: Cash Management Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN: 10.557 Award #: Various Award Period: Various Criteria – The WIC program is subject to the provisions of the Cash Management Improvement Act (CMIA) (42 USC 1786(h)(8)(J)) and federal regulation 7 CFR section 246.15(a). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 16 of the 153 drawdowns and noted that 4 drawdown requests did not contain evidence of review and approval. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – Without proper review and oversight drawdowns may not be in compliance with the cash management compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the DOH’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $2,014,096. The amount sampled is $317,786. The total drawdowns related to the sampled drawdown requests that lack evidence of review and approval is $97,870. Recommendation – We recommend that the DOH reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DOH has updated Standard Operating Procedures (SOPs) over drawdowns requiring signatures or initials on all supporting documents, certifying proper review. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-018 Prior Year Finding Number: 2023-019 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities/ Period of Performance Program: U.S. Department of Agriculture Government Department/Agency: Department of Human Services (DHS) Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.561 Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – We noted the following: • The SNAP participation report was not properly reconciled to accounting records. • One grant award was overspent by $391,000. No adjustment was made to the SEFA. • During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of the 1,806 payroll disbursements and noted the following: o 19 instances in which DHS did not consistently apply the funding allocation. The hours that should have been split 50/50 between federal and local or that should have been 100% local were charged 100% to the program. o 3 instances in which the project code on an employee’s Notice of Personnel Action (NOPA), which is used to record time and effort to the appropriate grant, were expired and had not been updated. o 9 instances in which payroll costs were charged outside of the award’s period of performance. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Cause – DHS does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or Potential Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2024 were $4,207,231. The amount sampled is $159,098. The known amount of inconsistencies noted is $38,462. The total food stamps expenditure charged to the program in fiscal year 2024 were $72,308,337. The known amount of unreconciled information is $355,108. Recommendation – We recommend that DHS reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has enhanced the internal control policies and processes to ensure compliance with federal requirements and has adopted an electronic system for payroll, replacing manual processes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-019 Prior Year Finding Number: 2023-020 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Agriculture Government Department/Agency: Department of Human Services (DHS) Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.561 Award #: Various Award Period: Various Criteria – 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its matching process. Further, 2 CFR Section 200.306 provides detailed criteria for acceptable matching costs. The basic criteria for acceptable matching costs include costs that are necessary and reasonable for accomplishment of program objectives and are allowed under 2 CFR Part 200, Subpart E (Cost Principles). Condition – We found that DHS was unable to readily exhibit and provide evidence that it met the matching requirement or monitored compliance with the matching requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Further, lack of monitoring of the match requirement appears to be the result of significant personnel turnover and lack of staffing. Effect or Potential Effect – DHS is not in compliance with the stated provisions. Without adequate internal controls to ensure compliance with matching requirements, there is an increased risk that matching will not be properly applied and funding could be jeopardized. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the matching requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has developed a specific liquidation report to ensure that matching is completed with each report submission. Additionally, an audit team is being developed to support compliance and monitoring. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-020 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Agriculture Government Department/Agency: Department of Human Services (DHS) Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.561 Award #: Various Award Period: Various Criteria – 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, and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We found that for 1 project, expenditures were incurred before the award’s period of performance without written approval from the Federal awarding agency. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Effect or Potential Effect – DHS is not in compliance with the stated provisions. Failure to obtain Federal awarding agency approval for incurring expenditures before an award’s period of performance can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $47,135. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Total expenditures for this project in the fiscal year 2024 SEFA are $47,135 and all were determined to be incurred prior to the award’s period of performance. Recommendation – We recommend that DHS strengthen its process with respect to charging expenditures between various grant awards. We also recommend DHS enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has established close-out procedures so that all open purchase orders are now submitted to the Department of Finance for closure and the grant close-out process has been shifted to the OMB. Additionally, an audit team is being developed to support compliance and oversight. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-021 Prior Year Finding Number: 2023-026 Compliance Requirement: Cash Management Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) WIC Grants to States (WGS) ALN: 10.578 Award #: 1VI700748 Award Period: 07/01/19 - 12/31/23 Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 6 of the 8 drawdowns and noted that all 6 drawdown requests did not contain evidence of review and approval. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – Without proper review and oversight drawdowns may not be in compliance with the cash management compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the DOH’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $2,051,331. The total drawdowns related to the sampled drawdown requests that lack evidence of review and approval is $1,971,498. Recommendation – We recommend that the DOH reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The matter will be considered in future recommendations; however, as the program has been closed, no further action can be taken to address the observation at this time. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-022 Prior Year Finding Number: 2023-027 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) WIC Grants to States (WGS) ALN: 10.578 Award #: 1VI700748 Award Period: 07/01/19 - 12/31/23 Criteria - When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Per Procurement Manual, User Agencies are required to submit a written justification letter to the Government’s Department of Property and Procurement (DPP), which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Further, non-Federal entity must comply with section 70914 of the Build America, Buy America Act (BABA), including through incorporation of a Buy America preference in the terms and conditions of each award with an infrastructure project or obtain waiver. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 5 of 13 procurement transactions and noted the following: • The support provided for 3 procurement transactions did not contain sufficient supporting documentation to validate adherence to procurement policy. • The support provided for 5 procurements did not include Buy America domestic preference provisions in the agreement or obtained a BABA waiver. Cause – DOH and DPP do not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Effect or Potential Effect – DOH and DPP could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Questioned Costs – None. Context – This is a condition identified per review of the DOH’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $2,016,062. The known amount of exceptions is $2,016,062. Recommendation – We recommend that DOH and DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The matter will be considered in future recommendations; however, as the program has been closed, no further action can be taken to address the observation at this time. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-023 Prior Year Finding Number: 2023-028 Compliance Requirement: Reporting Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) WIC Grants to States (WGS) ALN: 10.578 Award #: 1VI700748 Award Period: 07/01/19 - 12/31/23 Criteria - Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected all reports submitted, consisting of 2 financial reports and 2 progress reports, and noted the following: • 1 financial report and 1 progress report did not appear to be submitted as required. • 1 financial report where the basis of accounting used in reporting the data was not specified. • 1 progress report did not contain evidence that it was reviewed by an authorized reviewer prior to submission. Further, it does not appear that the controls are operating at a level of precision to ensure compliance with reporting compliance requirements. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Further, the Government does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Effect or Potential Effect – The Government is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of the DOH’s compliance with the specified requirements. Recommendation – We recommend that the DOH reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The matter will be considered in future recommendations; however, as the program has been closed, no further action can be taken to address the observation at this time. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-025 Prior Year Finding Number: 2023-029 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2, W9127P-24-2 Award Period: 10/01/2022 – 09/30/2023 10/01/2023 – 09/30/2024 Criteria – CFR 200.403(g) states that for costs to be allowed under Federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.403(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. The Uniform Guidance in 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected a sample of 60 out of 3,696 payroll transactions and identified the following: • 3 instances where the timesheets for the pay period selected were not provided. • 1 instance in which total hours worked on the employees’ timesheet did not agree with total hours worked as recorded in the payroll register. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles compliance requirements. Cause – OTAG does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and the required period of performance stipulations. Effect or Potential Effect – OTAG is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program during fiscal year 2024 were $1,669,934 and the total amount of our sample was $52,772. The known amount of the exceptions totaled $11,469. Recommendation – We recommend that OTAG strengthen internal controls by developing and implementing policies and procedures to ensure compliance with Federal requirements related to payroll expenditures, including applicable cost principles and documentation standards. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG has reviewed the payroll transactions identified during the audit and has initiated corrective measures to strengthen controls over payroll documentation, appendix charging, and period-of-performance compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-026 Prior Year Finding Number: 2023-030 Compliance Requirement: Cash Management and Reporting Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2, W9127P-24-2 Award Period: 10/01/2022 – 09/30/2023 10/01/2023 – 09/30/2024 Criteria – U.S. Department of the (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations requires state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assisting Lising that meet the funding threshold for a major federal assistance program under the CMIA. Treasury-State Agreements also specify the terms and conditions under which an interest would be incurred. Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. SF-270, Request for Advance or Reimbursement Report, is required to be filed in connection with cash drawdowns. Further, the Uniform Guidance in 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – As a part of its reporting requirements, OTAG is required to submit the SF-270, 'Request for Advance or Reimbursement' Report to the Federal grantor to facilitate cash drawdown requests for reimbursements. We were unable to verify the completeness of the SF-270 (cash management and reporting) population. As a result, we were unable to test compliance and internal controls over compliance related to the cash management and reporting compliance requirements. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – OTAG is not in compliance with the stated provisions. Inaccurate information may have been reported to the Federal government in the absence of required reconciliations and reviews. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend that OTAG reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG will enhance internal control processes and procedures including reconciliations, a centralized tracking log, and supervisory review and approval. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-027 Prior Year Finding Number: 2023-031 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2, W9127P-24-2 Award Period: 10/01/2022 – 09/30/2023 10/01/2023 – 09/30/2024 Criteria – According to the Master Cooperative Agreement Section 303, Cost Sharing, cost sharing requirements are found in a grantees individual Cooperative Agreements. The Government has various cost-sharing requirements within their Cooperative Agreements. Further, the Uniform Guidance in 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – OTAG was unable to readily exhibit and provide its computation of the matching calculation or provide evidence that it was monitoring compliance with said requirement. Therefore, we were unable to determine if the matching requirement had been met or if the expenditures being claimed towards the matching requirement are allowable activities/costs. Further, it does not appear that the controls in place are operating at level of precision to ensure compliance with the matching compliance requirement. Cause – OTAG does not appears to have adequate policies and procedures in place to ensure compliance with the matching requirement. Effect or Potential Effect – OTAG is not in compliance with the stated provisions. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend that OTAG deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the matching requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG will enhance internal control processes and procedures including a formal methodology for calculating, documenting, and monitoring matching requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-028 Prior Year Finding Number: 2023-032 Compliance Requirement: Period of Performance Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2, W9127P-24-2 Award Period: 10/01/2022 – 09/30/2023 10/01/2023 – 09/30/2024 Criteria – National Guard Bureau O&M cooperative agreements (CA) are funded with one-year appropriations. By policy, only state costs obligated during the period of the federal fiscal year or period of performance identified in the CA are reimbursable per National Guard Regulation (NGR) 5-1, chapter 3 and 11. The recipient shall not request reimbursement for any expenditure it made before the date that all required parties execute the Master Cooperative Agreement (MCA) unless the United States Property & Fiscal Officer (USPFO) expressly authorized expenditures made during the funding period, but prior to the date of final signature, the parties may also agree on a specific start or effective date (NGR 5-1, Chapter 11). Within 90 days after the end of the federal fiscal year or upon termination of the CA, whichever is earlier, the recipient shall promptly deliver to the USPFO a final accounting of all funding and disbursements under the agreement for the fiscal year (NGR 5-1, Chapter 11). If unliquidated claims and undisbursed arising from the recipient’s performance of the CA will remain 90 days after the close of the federal fiscal year, the recipient shall provide a detailed listing of uncleared obligations and a projected timetable for their liquidation and disbursement no later than 31 December. The USPFO shall then set an appropriate new timetable for the recipient to submit its final accounting (NGR 5-1, Chapter 11). Costs incurred in a federal fiscal year, which are not disclosed by the recipient within 90 days of the end of the federal fiscal year, except costs associated with unliquidated claims and undisbursed obligations arising from the recipient’s performance of the CA that the recipient has reported, shall not be eligible for reimbursement by NGB. The USPFO may extend the 90-day limit for good cause shown (NGR 5-1, Chapter 11). Additionally, a non-federal entity may charge to the Federal award, allowable costs incurred during the period of performance and any cost incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 83 of 489 transactions and noted the following: • 28 instances where transactions were charged to the incorrect grant award based on the noted period of performance for each award. • 2 instances where transactions were paid outside the liquidation period. Additionally, we tested period of performance and noted the following : • We selected a sample of 60 of 619 non-payroll transactions and identified 13 instances in which non-payroll expenditures were incurred and charged outside of the allowable liquidation period, without evidence of an approved extension or authorization, in noncompliance with Federal award requirements. • We selected a sample of 60 out of 3,696 payroll transactions and noted 6 instances in which payroll costs were charged to prior-year Federal grant projects that were outside the approved period of performance and lacked evidence of an authorized extension. Cause – OTAG did not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance. Effect or Potential Effect – OTAG is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws regulations along with loss of funding. Questioned Costs – 257,468. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements using a statistically valid sample. The total amount expenditures charged to program was $3,300,673 and the total amount of our sample was $881,480. The known amount of the exceptions totaled $257,468. Recommendation – We recommend that OTAG strengthen its processes with respect to setting up and charging expenditures between various grants awards. We also recommend that OTAG enhance its review process to properly determine the activities of each grant relative to the appropriated period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG will implement tracking tools to monitor award periods, liquidation deadlines, and expenditure charging. In addition, OTAG should enhance its review and monitoring processes to ensure payroll costs are properly supported and charged within the appropriate period of performance for each Federal award. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-029 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Fish and Wildlife Cluster ALN: 15.605, 15.611 Award #: Various Award Period: Various Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed and allowable cost/cost principal process. Condition – In our review of 60 of 538 non-payroll transactions, we noted 5 instances in which the expenditure was not approved by authorized personnel. Cause – DPNR does not appear to have adequate policies and procedures in place to ensure internal controls are consistently and diligently applied. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – None. Context – This is a condition identified per review of the DPNR’s compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program were $1,565,197. Total amount sampled is $828,341. The known amount of the instances of noncompliance is $27,015. Recommendation – We recommend that DPNR improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR will review and update its policies and procedures to ensure all non-payroll expenditures are approved by authorized personnel, provide staff training on proper approval processes and internal control requirements, and conduct periodic checks to monitor compliance and promptly address any exceptions. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-030 Prior Year Finding Number: 2023-033 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Fish and Wildlife Cluster ALN: 15.605, 15.611 Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed and allowable cost/cost principal process. CFR 200.403(g) requires all costs charged to a federal award must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of 620 payroll disbursements and noted the following: • 1 instance in which the approved timesheet for the pay period selected was not available for review, and there was a variance between the hours reported on the payroll register and the Detail Check History. • 13 instances in which the employee assigned project code documented on the Notice of Personnel Action was not associated with the grant. Additionally, the payroll register reflected a different project code for these transactions. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DPNR does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and to ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or Potential Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Questioned Costs – $43,593. Context – This is a condition identified per review of the DPNR’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2024 were $1,704,442. The amount sampled is $181,084. The value of transactions with exceptions totaled $43,593. Recommendation – We recommend that DPNR reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR will enhance internal control procedures to include reconciliations and increased review and approval requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-031 Prior Year Finding Number: 2023-034 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Fish and Wildlife Cluster ALN: 15.605, 15.611 Award #: Various Award Period: Various Criteria - Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s DPP maintains the equipment register for the Government. DPNR was unable to provide accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2024. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management and real property compliance requirements. Cause – DPNR and DPP do not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Effect or Potential Effect – Inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements. Equipment purchased in 2024 totaled $47,748. Recommendation – We recommend that DPNR and DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Asset Management Division (AMD) adheres to Federal Equipment guidelines. Assets are tagged, and records are created using the Tyler Munis Resource system (ERP) The completed Standard Operating Policies and Procedures (SOPP) are pending update and approval crucial for enhancing internal controls. Training sessions will occur and additional staff will be needed to support the initiative effectively. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-032 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – The payroll expenditures recorded in the Schedule of Expenditures of Federal Awards (SEFA) agree to the payroll expenditures recorded in the accounting system. The summary level payroll transactions recorded in the accounting system could not be reconciled to the transaction level detail obtained from the payroll system. When comparing the two populations, we identified multiple differences that net to a variance of $38,439. Cause – DPNR did not adhere to their internal policies and procedures to ensure the accuracy of the SEFA. Effect or Potential Effect – The SEFA may not be completely and accurately stated. In addition, the lack of established internal control policies and procedures to ensure the SEFA is completely and accurately stated can lead to noncompliance with federal statutes, regulations, and provisions of grant agreements. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPNR system’s population completeness over the compliance requirements for the program. Total payroll expenditure charged to the program for the year is $16,218. Recommendation – We recommend that the DPNR develop policies and procedures and enhance existing their existing reconciliation process to ensure completeness and accuracy of the SEFA, and that amounts reported on the SEFA are supported by transaction level detail. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR will implement enhanced internal control procedures to ensure that payroll expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA) are complete, accurate, and fully supported by transaction-level detail in accordance with Federal statutes and regulations by implementing monthly payroll reconciliations, by developing and enhancing internal controls and procedures, and by providing training to relevant personnel. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-033 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Procurement and Suspension and Debarment Program: U.S. Department of the Interior Government Department/Agency: Office of Management and Budget (OMB) Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria – Funds may be used only for activities that are authorized under the terms and conditions of the award, the approved project budget, and applicable federal requirements, including 2 CFR Part 200. Costs charged to the program must be necessary, reasonable, allocable, and directly related to carrying out the approved program objectives. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In mid-2024, an inquiry was conducted by the United States Department of Justice (DOJ) into potential criminal activity associated with three individuals, each of whom were senior government officials working in their respective capacities as Director/Commissioner of the U.S. Virgin Islands Office of Management and Budget, Virgin Islands Police Department, and Department of Sports, Parks, and Recreation. As of January 2025, the DOJ filed formal indictments against the now former USVI officials (collectively the “Indicted Individuals”). DOJ alleged that the Indicted Individuals were involved in activities associated with bribery, and specifically providing, or attempting to provide, accelerated approval of contracts and payments on invoices to a vendor, Mon Ethos Pro Support, LLC. The court cases are on-going. In 2024, Mon Ethos Pro Support, LLC was paid $20,000 from Economic, Social, and Political Development of the Territories Program funds, which are considered questioned costs. Cause – OMB does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and procurement standards. Specifically, there appears to be a lack of monitoring controls and an appropriate level of review and approval of transactions prior to charging costs to a federal program. Effect or Potential Effect – Fraudulent transactions associated with a Federal program can lead to an assessment of penalties, claw back of federal funds and termination of awards. Further, an ineffective control system related to procuring of vendors and submission of allowable costs that could ultimately lead to disallowed costs for the major programs. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of current events and specific transactions related to the vendor identified in the DOJ indictment. Recommendation – We recommend that OMB should strengthen controls over vendor procurement and the review and submission of program costs to help ensure that transactions charged to federal programs are valid, properly supported, and allowable under applicable grant requirements. This should include clearer review procedures, adequate supporting documentation, supervisory approval, and periodic monitoring of procurement and cost submissions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OMB will strengthen grant management and compliance through the Public Finance Management initiative including the development of a three-tier overarching Financial and Compliance policy and procedures framework and the hiring of key personnel. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-034 Prior Year Finding Number: 2023-035 Compliance Requirement: Cash Management Program: U.S. Department of the Interior Government Department/Agency: Virgin Islands Department of Education (VIDOE) & Department of Planning and Natural Resources (DPNR) Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria – U.S. Department of the Treasury (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as amended (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations requires state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assistance Listing that meet the funding threshold for a major federal assistance program under the CMIA. The CMIA agreement for this program stipulates a reimbursement method with 7-day clearance. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 10 out of 77 drawdowns, and noted no supporting documentation was available for review for 1 drawdown. Additionally, for one project included in the program, we noted a variance of $2,288 between the cash receipts recorded in the accounting system and the amount reflected in the related federal drawdown. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – VIDOE and DPNR are not in compliance with the stated provisions. Questioned Costs – $258,122. Context – This is a condition identified per review of VIDOE and DPNR’s compliance with the specified requirements using a statistically valid sample. Total fiscal year 2024 drawdown requests were $5,674,452. Total amount sampled is $4,247,674. The total related to the drawdown request without supporting documentation is $258,122. Recommendation - We recommend that VIDOE and DPNR reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures to ensure compliance with stated provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-035 Prior Year Finding Number: 2023-036 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of the Interior Government Department/Agency: Various Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria - Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s DPP maintains the equipment register for the Government. DPP was unable to provide an accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2024. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Effect or Potential Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of the Government’s compliance with the specified requirements. Equipment purchased in 2024 totaled $ 2,633,484. Recommendation – We recommend that the Government improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Additional staff will be needed to effectively support the initiative and regular training sessions will be provided to staff to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-036 Prior Year Finding Number: 2023-037 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Interior Government Department/Agency: Various Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria - When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Per the Procurement Manual, User Agencies are required to submit a written justification letter to the Government’s DPP, which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition - In our review of 14 out of 90 procurement transactions, we noted the following: • The supporting documentation for 1 procurement transaction did not contain evidence that a quotation was obtained prior to selection of the vendor. • In addition, we noted that 6 procurement transactions did not include the following: o Contract file documents showing the significant history of the procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis of contract price. o The procurement provides full and open competition. o Documentation in support of the rationale to limit competition in those cases where competition was limited and ascertain if the limitation was justified. o Cost or price analysis in connection with procurement action, including contract modifications and that this analysis supported the procurement action. Cause – The Government does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Effect or Potential Effect – The Government could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement and suspension and debarment transactions was $6,395,225. Total amount sampled was $4,137,592. The known amount of exceptions is $1,150,428. Recommendation – We recommend that the Government improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPP has transitioned the Government of the Virgin Islands to a centralized eProcurement system, GVIBuy. Vendor profiles are centralized with all corporate documents attached. Additionally, DPP has published written guidelines that dictate adherence to federal regulations relate to the procurement of goods and services including records retention. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-037 Prior Year Finding Number: 2023-038 Compliance Requirement: Reporting Program: U.S. Department of the Interior Government Department/Agency: Various Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria - Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 24 out of 224 financial and performance reports and noted the following: • 2 performance reports were not available for review. • For 12 financial reports, sufficient supporting documentation was not available to verify that the reported financial information agreed to the underlying records. • 2 performance reports did not contain evidence of review or approval prior to submission. • For 3 performance reports and 2 financial reports, there was no evidence of submission. Additionally, the Government did not submit FFATA report where subawards were made for more than $30,000 for fiscal year 2024. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the Government does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Effect or Potential Effect – The Government is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that Government reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-038 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 11 out of 23 drawdowns and noted that sufficient supporting invoices were not available for review for 3 drawdowns. Cause – It appears sufficient documentation was not maintained or provided to support certain reimbursement requests, and review procedures over amounts requested were not functioning effectively. Effect or Potential Effect – Without adequate supporting documentation, the entity may draw Federal funds in excess of allowable and supported expenditures, resulting in noncompliance with cash management requirements and unsupported questioned costs. Questioned Costs – $142,939. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $7,857,474. The amount sampled is $7,590,468. The total of drawdowns for which we were unable to obtain support is $142,939. Recommendation – We recommend that DPNR reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures to ensure compliance with cash management provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR, with the support of the federal agency’s consultant, will implement a centralized electronic repository system to serve as the official recordkeeping location for all Federal drawdown requests and supporting documentation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-039 Prior Year Finding Number: N/A Compliance Requirement: Eligibility Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 Criteria - DPNR must have in place procedures for documenting and verifying eligibility in accordance with the Federal requirements, as well as the specific eligibility requirements in accordance with grant agreement. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DPNR did not provide supporting documentation to determine whether it implemented a formal process to ensure compliance with eligibility requirements during the year under audit. Cause – It appears that policies and procedures, including review over the eligibility of transactions, were not designed and functioning as needed. Effect or Potential Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive along with loss of funding. Questioned Costs – $6,964,757. Context - This is a condition identified per review of DPNR’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend that DPNR strengthen its policies and procedures for documenting and retaining evidence that eligibility controls are performed and operating effectively to ensure compliance with eligibility requirements. DPNR should also maintain a complete and accurate listing of eligible participants, including all relevant information needed to support eligibility determinations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR, with the support of the federal agency’s consultant, will implement a centralized electronic repository system to serve as the official recordkeeping location for all eligibility requests and supporting documentation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-040 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 Criteria – When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DPNR did not provide supporting documentation to determine whether it implemented a formal process to ensure compliance with procurement and suspension and debarment compliance during the year under audit. Cause – It appears that policies and procedures, including review over procurement and suspension and debarment transactions, were not designed and functioning as intended. Effect or Potential Effect – DPNR is not in compliance with the stated provisions. DPNR could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend that DPNR strengthen its documentation and record-retention procedures to ensure evidence is maintained to support that internal controls over procurement and suspension and debarment requirements are designed and operating effectively to ensure compliance with procurement and suspension and debarment provisions. DPNR should also maintain a complete and accurate procurement population listing to support compliance monitoring. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR, with the support of the federal agency’s consultant, will implement a centralized electronic repository system to serve as the official recordkeeping location for all procurement requests and supporting documentation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-041 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with the program requirements. Under 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 4 out of 8 financial and progress reports, and noted that 2 financial reports were reviewed by an individual other than the authorized reviewer. Additionally, DPNR was unable to provide a listing of FFATA reports submitted during the year under audit. Cause – It appears that policies and procedures, including review over reporting procedures, were not designed and/or not functioning as intended. Effect or Potential Effect – DPNR is not in compliance with the stated provisions, and inaccurate information may have been reported to the Federal government. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DPNR reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official to ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR will conduct an internal review to analyze internal controls and procedures for potential weaknesses and will implement additional measures as needed. In addition, DPNR, with the support of the federal agency’s consultant, will implement a centralized electronic repository system to serve as the official recordkeeping location for all reporting supporting documentation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-042 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 Criteria – A pass-through entity (PTE) must: • Verify the Subrecipient – Verify that the subrecipient is not excluded or disqualified in accordance with 2 CFR 180.300. Verification methods are provided in 2 CFR 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds (2 CFR 200.322(a)). • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.332(b). • Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(c)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives a single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). • Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(e) through (g)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and performance reports required by the PTE. 2. Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward in accordance with 2 CFR 200.332(e)(2). 3. Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. 4. Resolve audit findings specifically related to the subaward. • Ensure Accountability of For-Profit Subrecipients – Some Federal awards may be passed through to for-profit entities. For-profit subrecipients are accountable to the PTE for the use of the Federal funds provided. Because 2 CFR Part 200 does not make Subpart F applicable to for-profit subrecipients, the PTE is responsible for establishing requirements, to ensure compliance by for-profit subrecipients. The subaward with the for-profit subrecipient must describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring throughout the performance of the subaward, and post-award audits (2 CFR section 200.501(i)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DPNR did not provide supporting documentation to determine whether it designed and implemented a formal process to ensure compliance with subrecipient monitoring requirements during the year under audit. Additionally, DPNR was not able to provide a listing of subrecipient payments made during the year under audit. Cause – It appears that DPNR did not maintain or provide sufficient documentation to demonstrate the design and implementation of controls and compliance with subrecipient monitoring requirements. Effect or Potential Effect – Failure to properly adhere to policies and procedures can result in noncompliance with laws and regulations and failure to meet the program’s objectives along with loss of funding. Questioned Costs – $6,964,757. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements and general compliance principles. The total subrecipient payments made during the year were $6,964,757. Recommendation – We recommend that DPNR strengthen its policies and procedures for documenting and retaining the evidence to ensure that internal controls over subrecipient monitoring are designed and operating effectively. DPNR should also maintain a complete and accurate listing of subrecipients for the year to support monitoring activities. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR, with the support of federal agency’s, consultant will implement a centralized electronic repository system to serve as the official recordkeeping location for all subrecipient supporting documentation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-043 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Non-federal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the Department of Labor regulations (29 CFR part 5, Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). Condition – DPNR did not provide supporting documentation to determine whether it had implemented a formal process to ensure compliance with wage rate requirements during the year under audit. Cause – DPNR does not appear to have adequate policies and procedures in place to ensure compliance with applicable wage rate requirements. Effect or Potential Effect – DPNR is not in compliance with the stated provisions. There is the potential that the contractor or subcontractors could have paid their employees less than prevailing wage rates. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend the DPNR implement policies, procedures, and controls that will ensure adherence to Federal regulations related to wage rate requirements and to ensure that responsible project management personnel obtain and review the required certified payroll reports for each week in which contract work is performed. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR will develop and implement formal written policies and procedures to ensure compliance with applicable Wage Rate Requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-044 Prior Year Finding Number: 2023-040 Compliance Requirement: Activities Allowed or Unallowed Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – In accordance with the Uniform Guidance in 2 CFR Part 200, a State or Territory must adopt its own written fiscal and administrative requirements for expending and accounting for all funds, which are consistent with the provisions of Uniform Guidance and extend such policies to all sub-recipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions, costs are reasonable and necessary for operating these programs, and funds are not used for general expenses required to carry out other responsibilities of a State or Territory or its sub-recipients. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – VIDOL was unable to provide reconciled accounting information relating to the majority of the Unemployment Insurance Trust Fund accounts. As such, we are unable to conclude on the fiscal and administrative requirements with respect to expending and accounting for all funds related to the Unemployment Insurance program. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the above referenced compliance requirement. Cause – VIDOL does not appear to have adequate policies and procedures in place to adequately meet the requirements for expending and accounting for all funds. Effect or Potential Effect – Accounting tasks, such as periodic reconciliations, play a key role in proving the accuracy of accounting data and information included in financial statements and/or Federal reports. A lack of timely preparation of complete and accurate reconciliations results in the absence of adequate control over both cash receipts and disbursements. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements. Recommendation – We recommend that VIDOL improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for all funds. In order to prevent significant errors in the financial records as well as prevent possible irregularities, including fraud, to exist and continue without notice, we recommend that all accounts, accruals, and reconciliations be reviewed on a periodic basis. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL acknowledges the auditor's finding regarding balance discrepancies with the general ledger, attributed to an incomplete file for audit. To prevent future issues, VIDOL will develop and implement Standard Operating Policies and Procedure, a monthly reconciliation process, provide additional staff training and technical assistance, and strengthen oversight through ongoing monitoring and compliance review. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-045 Prior Year Finding Number: 2023-041 Compliance Requirement: Eligibility Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – Public Law 112-96 Section 2101 requires that as a condition of eligibility for regular compensation, a claimant must be able to work, available to work, legally authorized to work in the United States and actively seeking work. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 60 out of 5,690 unemployment claim files and noted the following: • 1 instance where an individual received benefits during the year, but VIDOL was not able to provide evidence that the claimant met the criteria for participating in the Unemployment Insurance program but had received benefits during the year. Benefits paid to the individual during fiscal year 2024 totaled $2,270. • 1 instance where VIDOL was not able to provide evidence of eligibility to work (social security card and proof of U.S. citizenship) and also failed to provide the initial claim form. Benefits paid to the individual during fiscal year 2024 totaled $14,835. Further, it does not appear that controls in place are operating at a level of precision to ensure that documentation is maintained for the proper time period to substantiate claims charged to the program. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of the data in its claimant files. Effect or Potential Effect – Noncompliance with program requirements could result in disallowances of costs and participants could receive benefits that they are not entitled to receive. Questioned Costs – Below reporting threshold. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. The total amount of unemployment claims charged to the program during fiscal year 2024 was $5,159,650. The total amount sampled is $62,844. The known amount of the instances of noncompliance is $17,105. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper maintenance and retention of complete program files and confirm that benefits are provided only to participants who are eligible to receive them. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL is reviewing its record retention policy and procedures and will provide training to staff on proper maintenance and retention of complete program files. In addition, an electronic record-keeping system for claims files is expected to be launched before the end of fiscal year 2026, enhancing record retention. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-046 Prior Year Finding Number: 2023-042 Compliance Requirement: Reporting Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – Each State or Territory must file various financial, performance, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying accounting or performance records and presented in accordance with the program requirements. (2 CFR Part 200 Subpart D). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 28 out of 109 financial, performance and special reports required to be submitted during fiscal year under audit. We noted the following reports did not have complete and adequate supporting documentation available for review: • 5 ETA 9130, Financial Reports • 2 ETA 191, Financial Status of UCFE/UCX reports • 3 ETA 2112, UI Financial Transaction Summary reports • 2 ETA 2208A, Quarterly UI Above-Base Reports • 4 ETA 9050, Time Lapse of All First Payments except Workshare reports • 4 ETA 9052, Nonmonetary Determination Time Lapse Detection reports • 4 ETA 9055, Appeals Case Aging – Lower and Higher Authority Appeals reports Further, it does not appear that controls in place are operating at level of precision to ensure documentation is maintained for the proper time period to substantiate reports submitted to the Federal government. Cause – It appears that policies and procedures, including preparation and review over reporting procedures, were not designed or functioning as intended. Further, VIDOL does not appear to have adequate control over maintenance of the underlying documentation used in preparing various reports. Effect or Potential Effect - VIDOL is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by the appropriate official to ensure that information reported is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL has reviewed its policies and procedures and is working to provide staff training to ensure supporting documentation is secure and readily accessible. VIDOL will update its policies and procedures to ensure that all supporting documentation is certified by the UI Director or designee before a report is submitted to the grantor. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-047 Prior Year Finding Number: 2023-043 Compliance Requirement: Special Tests and Provisions – UI Reemployment Programs: Worker Profiling and Reemployment Services (WPRS) and Reemployment Services and Eligibility Assessments (RESEA) Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – The Unemployment Insurance (UI) program serves as one of the principal “gateways” to the workforce system. It is often the first workforce program accessed by individuals who need workforce services. The WPRS and RESEA programs service as UI’s primary programs that facilitate the reemployment needs of UI claimants. Unemployment Insurance Program Letter (UIPL) No. 41-94 provides guidance on WPRS requirements. RESEA is authorized by Section 306 of the Social Security Act and builds on the success of both WPRS and RESEA’s predecessor, the former UI Reemployment and Eligibility Assessment (REA) program. RESEA uses an evidence-based integrated approach that combines an eligibility assessment for continuing UI eligibility and the provision of reemployment services. RESEA is a voluntary program and under certain circumstances may be designed to also satisfy WPRS requirements. Operating guidance for the RESEA program is updated annually. UIPL 10-22 provides RESEA operating Guidance for fiscal year 2022. Further, the Uniform Guidance 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – During our testing of VIDOL’s compliance with UI Reemployment Programs, we found VIDOL did not submit the 9129 Quarterly RESEA reports. Further, it appears controls are not designed to ensure the timely and proper submission of required reports. Cause – VIDOL does not appear to have adequate control over preparation and submission of various reports. Effect or Potential Effect – It appears that policies and procedures, including review over RESEA reporting procedures, were not functioning as intended. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure required reports are timely prepared and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL has reviewed its policies and procedures and is working to provide staff training to ensure supporting documentation is secure and readily accessible. VIDOL will update its policies and procedures to ensure that all supporting documentation is certified by the UI Director or designee before a report is submitted to the grantor. An electronic case management system for reporting is expected to be deployed before the end of fiscal year 2027. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-048 Prior Year Finding Number: 2023-044 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles - Non-Payroll Activities and Procurement and Suspension and Debarment Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria – Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively), Treasury’s Interim Final Rule and Final Rule at 31 CFR sections 35.7 and 35.8. The following activities are not permitted under CSLFRF: • Offset a reduction in net tax revenue (applicable to states and territories) • Deposits into pension funds (applicable to all recipients except Tribes) • Debt service or replenishing financial reserves (e.g., “rainy day funds”) (applicable to all recipients) • Satisfaction of settlements and judgements (applicable to all recipients) • Programs, services, or capital expenditures that include a term or condition that undermines efforts to stop the spread of COVID-19 (applicable to all recipients) Recipients may use payments from CSLFRF to: • Support public health expenditures, by funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff; • Address negative economic impacts caused by the public health emergency, including economic harms to workers, households, small businesses, impacted industries, and the public sector; • Replace lost public sector revenue to provide government services; recipients may use this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic. • Provide premium pay for essential workers, offering additional support to those who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors; and, • Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and to expand access to broadband internet. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In mid-2024, an inquiry was conducted by the United States Department of Justice (“DOJ”) into potential criminal activity associated with three individuals, each of whom were senior government officials working in their respective capacities as Director/Commissioner of the U.S. Virgin Islands Office of Management and Budget, Virgin Islands Police Department, and Department of Sports, Parks, and Recreation. As of January 2025, the DOJ filed formal indictments against the these now former USVI officials (collectively the “Indicted Individuals”). The DOJ alleged that the Indicted Individuals were involved in activities associated with bribery, specifically providing, or attempting to provide, accelerated approval of contracts and payments on invoices to a vendor, Mon Ethos Pro Support, LLC. The court cases are on-going. In 2024, Mon Ethos Pro Support, LLC was paid $1,638,043 from Coronavirus State and Local Fiscal Recovery Funds, which are considered questioned costs. Further, internal controls over compliance do not appear to be operating effectively to ensure compliance with the allowable activities and procurement compliance requirements. Cause – OMB does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and procurement standards. Specifically, there appears to be a lack of monitoring controls and an appropriate level of review and approval of transactions prior to charging costs to a federal program. Effect or Potential Effect – Fraudulent transactions associated with a Federal program can lead to an assessment of penalties, claw back of federal funds and termination of awards. Further, an ineffective control system related to procuring of vendors and submission of allowable costs that could ultimately lead to disallowed costs for the major programs. Questioned Costs – $1,638,043. Context – This is a condition identified per review of current events and specific transactions related to the vendor identified in the DOJ indictment. Recommendation – We recommend that OMB should strengthen controls over vendor procurement and the review and submission of program costs to help ensure that transactions charged to federal programs are valid, properly supported, and allowable under applicable grant requirements. This should include clearer review procedures, adequate supporting documentation, supervisory approval, and periodic monitoring of procurement and cost submissions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OMB will strengthen grant management and compliance through the Public Finance Management initiative including the development of a three-tier overarching Financial and Compliance policy and procedures framework and the hiring of key personnel. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-049 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of 20,245 payroll disbursements, and noted 1 instance in which the fringe benefit calculation did not agree to the fringe benefits reported on the Detail Check History. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Cause – OMB does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and to ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or Potential Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major program. Questioned Costs - Below reporting threshold. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2024 were $72,688,940. The amount sampled is $68,113,730. The known amount of instances of noncompliance is $7,155, which represents the fringe benefits charged to the program that did not agree with the calculation. Recommendation – We recommend that OMB reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OMB will coordinate with the Department of Finance to communicate the identified discrepancy and will work collaboratively to strengthen review procedures over payroll cost allocations charged to federal programs. In addition, OMB will reevaluate its existing oversight controls to ensure that payroll expenditures charged to federal awards are supported by appropriate documentation and reviewed for compliance with applicable federal requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-050 Prior Year Finding Number: 2023-046 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria – Recipients may use award funds to enter into contracts to procure goods and services necessary to implement one or more of the eligible purposes outlined in sections 602I and 603I of the Act and Treasury’s Interim Final Rule and Final Rule. As such, recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance. Specifically, a state must follow the same policies and procedures it uses for procurements from its non-federal funds and comply with 2 CFR sections 200.321, 200.322, and 200.323. States must also ensure that every contract includes the applicable contract clauses required by 2 CFR section 200.327. Per the Procurement Manual, User Agencies are required to submit a written justification letter to the DPP, which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source, and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We were unable to verify the completeness of the procurement population. As a result, we were unable to test compliance and internal controls over compliance related to the procurement and suspension and debarment compliance requirements. Cause – It appears that policies and procedures, including review over procurement transactions, were not functioning as intended. Effect or Potential Effect – OMB is not in compliance with the stated provisions. OMB could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of OMB’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend that OMB reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OMB will retain all necessary supporting documentation for purchase orders, contracts, and vendor profiles to ensure adherence to internal policies and regulatory requirements. Management will implement procedures to regularly review and verify that all procurement activities are properly documented and compliant with applicable regulations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-051 Prior Year Finding Number: 2023-047 Compliance Requirement: Reporting Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria - There are two types of reporting requirements for the CSLFRF program: Project and Expenditure Report: Report on financial data, projects funded, expenditures, and contracts and subawards over $50,000, and other information. Project and Expenditure Reports are due on a regular, recurring basis after the Interim Reports. The reporting frequency and deadlines vary by type of recipient and total allocation amount. Recovery Plan Performance Report: The Recovery Plan Performance Report (the “Recovery Plan”) will provide information on the projects that large recipients are undertaking with program funding and how they plan to ensure program outcomes are achieved in an effective, efficient, and equitable manner. It will include key performance indicators identified by the recipient and some mandatory indicators identified by Treasury. The Recovery Plan will be posted on the website of the recipient as well as provided to Treasury. In addition, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Of the 5 reports submitted during the fiscal year, we selected the following reports for review: • Projects and Expenditures Report – Quarter Ended December 31, 2023 • Projects and Expenditures Report – Quarter Ended June 30, 2024 • Recovery Plan Performance Report – Year ended June 30, 2024 During our review, we noted that the reported amounts submitted under the award did not agree to the subrecipient’s underlying accounting records and supporting documentation. The data was not accumulated and summarized accurately and/or completely in accordance with required reporting criteria. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Cause – It appears that OMB does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Effect or Potential Effect – OMB is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of the OMB’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that OMB reevaluates its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OMB will strengthen its internal controls over the preparation, review, reconciliation, and retention of documentation supporting CSLFRF reports. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-052 Prior Year Finding Number: 2023-048 Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria – A pass-through entity (PTE) must: • Verify the Subrecipient – Verify that the subrecipient is not excluded or disqualified in accordance with 2 CFR 180.300. Verification methods are provided in 2 CFR 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds (2 CFR 200.322(a)). • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.332(b). • Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(c)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives a single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). • Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(e) through (g)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and performance reports required by the PTE. 2. Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward in accordance with 2 CFR 200.332(e)(2). 3. Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. 4. Resolve audit findings specifically related to the subaward. • Ensure Accountability of For-Profit Subrecipients – Some Federal awards may be passed through to for-profit entities. For-profit subrecipients are accountable to the PTE for the use of the Federal funds provided. Because 2 CFR Part 200 does not make Subpart F applicable to for-profit subrecipients, the PTE is responsible for establishing requirements, to ensure compliance by for-profit subrecipients. The subaward with the for-profit subrecipient must describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring throughout the performance of the subaward, and post-award audits (2 CFR section 200.501(i)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 8 out of 19 subrecipients and found no evidence that the subrecipient monitoring workbook, which outlines all processes and procedures for ensuring compliance, had been reviewed by the American Rescue Plan Act (ARPA) Grants Administrator. Cause – OMB does not have policies and procedures in place to ensure personnel adhere to the internal procedures to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Effect or Potential Effect – Failure to properly adhere to policies and procedures can result in noncompliance with laws and regulations and failure to meet the program’s objectives. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2024 were $15,142,370. The total amount of our sample totaled $3,730,369. Recommendation – We recommend that OMB implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. To address this finding, OMB will strengthen its subrecipient monitoring controls and formalize procedures to ensure compliance with federal regulations, including requirements related to identifying subawards, assessing subrecipient risk, documenting monitoring activities, following up on deficiencies, and maintaining evidence of supervisory review. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-053 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Public Works (DPW) Department of Planning and Natural Resources (DPNR) Construction Grants for Wastewater Treatment Works ALN: 66.418 Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, Factors Affecting Allowability of Costs, “Except where otherwise authorized by statute, costs must meet the following general criteria to be allowable under federal awards: a. Be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. b. Conform to any limitations or exclusions set forth in these principles or in the federal award as to types or amounts of cost items. c. Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity. d. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. e. Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f. Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g. Be adequately documented.” Condition – Expenditures in excess of the award amount totaling $67,068 were reported on the 2024 SEFA. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles compliance requirements. Cause – The Government did not adhere to their internal policies and procedures to ensure the accuracy of the SEFA. Effect or Potential Effect – The SEFA is not accurately stated. Lack of established internal control policies and procedures to ensure the SEFA is completely and accurately stated can lead to noncompliance with federal statutes, regulations, and provisions of grant agreements. Questioned Costs – $67,078. Context – This is a condition identified per review of the completeness of the non-payroll expenditures population for the program. Recommendation – We recommend that DPNR develop policies and procedures and enhance existing reconciliation process to ensure completeness and accuracy of the SEFA and that amounts reported on the SEFA are not in excess of award amounts. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-054 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Public Works (DPW) Department of Planning and Natural Resources (DPNR) Construction Grants for Wastewater Treatment Works ALN: 66.418 Award #: Various Award Period: Various Criteria – CFR 200.403(g) states that for costs to be allowed under Federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.403(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. The Uniform Guidance in 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled 6 out of 55 payroll transactions, and noted 4 employee timesheets were not available for review. Cause – DPNR does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and the required period of performance stipulations. Effect or Potential Effect – DPNR is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – Below reportable threshold. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program during fiscal year 2024 were $44,751 and the total amount of our sample was $5,086. The known amount of the exceptions totaled $3,029. Recommendation – We recommend that DPNR strengthen internal controls to ensure adherence to federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-055 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Public Works (DPW) Department of Planning and Natural Resources (DPNR) Construction Grants for Wastewater Treatment Works ALN: 66.418 Award #: Various Award Period: Various Criteria – U.S. Department of the (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations requires state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assisting Lising that meet the funding threshold for a major federal assistance program under the CMIA. Treasury-State Agreements also specify the terms and conditions under which an interest would be incurred. Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. SF-270, Request for Advance or Reimbursement Report, is required to be filed in connection with cash drawdowns. Further, the Uniform Guidance in 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We were unable to verify the completeness of the cash management population. As a result, we were unable to test compliance and internal controls over compliance related to the cash management compliance requirements. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – DPW and DPNR were not in compliance with the stated provisions. Inaccurate information may have been reported to the Federal government in the absence of required reconciliations and reviews. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPW and DPNR’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend that DPW and DPNR reevaluate its policies and procedures to ensure proper monitoring over cash management requirements. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPW and DPNR will implement enhanced internal control procedures including monthly reconciliations, assigning oversight, and will conduct internal reviews. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-056 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Public Works (DPW) Department of Planning and Natural Resources (DPNR) Construction Grants for Wastewater Treatment Works ALN: 66.418 Award #: Various Award Period: Various Criteria - Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with the program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected all reports submitted and noted the following: • 1 financial report did not contain evidence that it was reviewed by an authorized reviewer prior to submission, and the reported financial information did not agree with the underlying records. • 1 programmatic report and 1 performance report were not available for review. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the Government does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Effect or Potential Effect – DPW and DPNR are not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of DPW and DPNR’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DPW and DPNR reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by the appropriate official who would ensure that information reported is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPW and DPNR will implement enhanced internal control procedures including establishing review and approval procedures, maintaining supporting documentation and a central repository for reports. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-057 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Public Works (DPW) Department of Planning and Natural Resources (DPNR) Construction Grants for Wastewater Treatment Works ALN: 66.418 Award #: Various Award Period: Various Criteria - A pass-through entity (PTE) must: • Verify the Subrecipient – Verify that the subrecipient is not excluded or disqualified in accordance with 2 CFR 180.300. Verification methods are provided in 2 CFR 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds (2 CFR 200.322(a)). • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.332(b). • Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(c)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives a single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). • Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(e) through (g)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and performance reports required by the PTE. 2. Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward in accordance with 2 CFR 200.332(e)(2). 3. Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. 4. Resolve audit findings specifically related to the subaward. • Ensure Accountability of For-Profit Subrecipients – Some Federal awards may be passed through to for-profit entities. For-profit subrecipients are accountable to the PTE for the use of the Federal funds provided. Because 2 CFR Part 200 does not make Subpart F applicable to for-profit subrecipients, the PTE is responsible for establishing requirements, to ensure compliance by for-profit subrecipients. The subaward with the for-profit subrecipient must describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring throughout the performance of the subaward, and post-award audits (2 CFR section 200.501(i)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DPW did not provide supporting documentation to demonstrate whether they implemented a formal process during the year to ensure compliance with subrecipient monitoring requirements. Cause – DPW does not have policies and procedures in place to ensure personnel adhere to the internal procedures to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Effect or Potential Effect – DPW is not in compliance with the stated provisions. Failure to properly adhere to policies and procedures can result in noncompliance with laws and regulations and failure to meet the program’s objectives. Questioned Costs – $6,364,139. Context – This is a condition identified per review of DPW’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2024 were $6,364,139. Recommendation – We recommend that DPW implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPW will develop subrecipient monitoring policies and procedures: including subrecipient risk assessments, tracking and monitoring over reporting, and audit findings. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-058 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Planning and Natural Resources (DPNR) Capitalization Grants for Drinking Water State Revolving Fund ALN: 66.468 Award #: Various Award Period: Various Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing, documenting and maintaining a system of internal control that should include controls over its activities allowed or unallowed, and the allowable cost/cost principle process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 10 of 91 payroll disbursements. For each of the 10 samples, the employee pay rate documented in the approved Notice of Personnel Action did not agree with the pay rate reflected in the payroll register. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DPNR does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review was completed prior to charging costs to a federal program. Effect or Potential Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major program. Questioned Costs – Below reportable threshold. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2024 was $132,646. The amount sampled is $18,936. Recommendation – We recommend that DPNR reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll transactions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR will conduct a comprehensive internal review of the payroll transactions identified in the audit sample to determine the cause of the discrepancies between the payroll registers and the Notices of Personnel Action provided during the audit. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-059 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Planning and Natural Resources (DPNR) Capitalization Grants for Drinking Water State Revolving Fund ALN: 66.468 Award #: Various Award Period: Various Criteria – U.S. Department of the Treasury (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as amended (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations require state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assistance Listing that meet the funding threshold for a major federal assistance program under the CMIA. The CMIA agreement for this program stipulates a reimbursement method with 54-day clearance. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 4 out of 6 drawdowns and noted the following: • No supporting documentation was available for 2 drawdowns. • There were 2 instances in which funding was received in advance and vendor payment documentation was not available to verify DPNR minimized the time between receipt of funds and disbursement. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – DPNR is not in compliance with the cash management requirements. Questioned Costs – $1,127,439. Context – This is a condition identified per review of the DPNR’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $3,860,135. Total amount sampled is $3,151,128. Recommendation – We recommend that the DPNR reevaluate its policies and procedures to ensure proper monitoring over cash management requirements including retention of supporting documentation for drawdowns and vendor payments. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR will reevaluate and strengthen its cash management policies and procedures to ensure compliance with the Cash Management Improvement Act (CMIA), Treasury-State Agreement requirements, and federal cash management regulations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-060 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Planning and Natural Resources (DPNR) Capitalization Grants for Drinking Water State Revolving Fund ALN: 66.468 Award #: Various Award Period: Various Criteria - 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Additionally, the Uniform Guidance in 2 CFR Section 200.344(b), states that unless the federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial 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. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – During our period of performance testing, we sampled and selected 6 of 11 transactions. We identified 1 instance in which payment for the expenditure was made after the period of performance liquidation period. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DPNR does not appear to have adequate policies and procedures to ensure compliance with the required period of performance requirements. Effect or Potential Effect – DPNR is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – Below reportable threshold. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DPNR enhance its review process to ensure adherence to federal regulations related to the fiscal administrative requirement relating to liquidation provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-061 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. Condition – In our review of 12 out of 119 non-payroll transactions, we noted 1 instance where the supporting documentation was not available for review. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review was completed prior to charging costs to a federal program. Effect or Potential Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total non-payroll expenditures charged to the program in fiscal year 2024 was $1,791,690. The amount sampled is $337,470. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE is addressing audit findings related to non-payroll expenditures by enhancing internal controls and procedures to ensure compliance with federal regulations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-062 Prior Year Finding Number: 2023-049 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Furthermore, CFR 200.113 requires that an applicant, recipient, or subrecipient of a Federal award must promptly disclose, in writing, whenever it has credible evidence of the commission of a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code, or a violation of the civil False Claims Act, in connection with the Federal award (including any activities or subawards thereunder). The disclosure must be made to the Federal agency, the agency's Office of Inspector General, and the pass-through entity (if applicable). Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 40 of 3,392 payroll disbursements and noted the following: • 6 instances where the approved timesheets for the selected pay periods were not available for review. In addition, in 1 of these instances the check detail payment was not available for review. • 1 instance where there was inconsistency between the project code reflected on the check detail and on the NOPA for the selected pay period. • 1 instance where the hours per the timesheet did not agree to the check history detail. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review was completed prior to charging costs to a federal program. Effect or Potential Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2024 was $6,233,846. The amount sampled is $88,200. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll transactions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE is addressing audit findings related to payroll activities by enhancing internal controls to ensure compliance with federal regulations and by providing mandatory training. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-063 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Indirect Cost Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, indirect costs charged to the program must be supported by a valid negotiated indirect cost rate agreement or applied using the de minimis rate, and must be allowable, allocable, reasonable, and adequately supported. Condition – During our testing of allowable costs for indirect cost expenditures incurred throughout the year, we sampled and selected 4 transactions out of 13 transactions and noted 4 instances where the check payment details and other related supporting documentation were not available for review. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $94,264. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total indirect cost expenditures charged to program in fiscal year 2024 is $390,164. Total amount sampled is $94,264. The known amount of the instances of noncompliance is $94,264. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for indirect costs. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE will reinforce its procedures for tracking, compiling, and storing documentation related to grant expenditures to ensure compliance with federal regulations. VIDE is scheduling mandatory trainings for all relevant VIDE staff. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-064 Prior Year Finding Number: 2023-050 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While VIDE maintains an equipment listing for fixed assets purchased with federal funding, VIDE was unable to provide a complete equipment listing which met the stated requirements. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Effect or Potential Effect – There is a risk that inadequate recordkeeping or equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE plans to improve management and documentation of federally funded equipment by enhancing its asset tracking system and maintaining centralized records with detailed asset information. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-065 Prior Year Finding Number: 2023-051 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Further, in accordance with the Uniform Guidance in 2 CFR Section 200.306, a State may not reduce the amount of State financial support for special education and related services for children with disabilities (or State financial support otherwise made available because of the excess costs of educating those children) below the amount of State financial support provided for the preceding fiscal year. The Secretary reduces the allocation of funds under 20 USC 1411 for any fiscal year following the fiscal year in which the State fails to comply with this requirement by the amount by which the State failed to meet the requirement. Additionally, a Local Education Agency (LEA) can use not more than 15% of the amount of federal Part B funds the LEA receives for any fiscal year (less any amount by which it reduces its expenditures under 20 USC 1413(a)(2)(C)) (see III.G.2.1.b.(6) in this section), in combination with other funds, to develop and implement, early intervening services for children in kindergarten through grade 12 who have not been identified under IDEA but need additional academic and behavioral support to succeed in the general education environment (20 USC 1413(f); 34 CFR section 300.226). Condition – We reviewed the level of effort calculations and noted the following: • VIDE was unable to provide supporting documentation that shows the approval of the amounts in the Maintenance of Financial support at the State Education level. • At the State level, VIDE did not meet the Maintenance of Effort requirement. In addition, for Earmarking, we noted that the number of students in poverty for St. Thomas/St. John and the Total Students in Poverty for the Territory used in the calculation did not agree with the underlying support. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the level of effort and earmarking compliance requirement. Cause – VIDE did not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of the requirements. Effect or Potential Effect – VIDE is not in compliance with the stated provisions. Without adequate internal controls to ensure compliance with level of effort requirements and earmarking, there is an increased risk that level of effort and earmarking requirements will not be properly applied, and funding could be jeopardized. Questioned Costs – None. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to federal regulations relating to the level of effort and earmarking requirements at the SEA and LEA levels by deploying resources that are given the responsibility to ensure periodic monitoring and compliance of the level of effort and earmarking requirements. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE will establish and update internal control policies and procedures to meet federal standards over data collection and certification for level of effort and earmarking requirements. VIDE will establish a team for quarterly reviews of documentation and reporting issues and to recommend corrective actions. The IDEA State Office will set procedures for verifying accuracy of data reported by LEAs. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-066 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – During our testing of costs incurred throughout the year, we sampled and selected 8 disbursements and noted 6 instances in which supporting documentation evidencing payment was not available. In addition, in 1 of these instances, the reimbursement report for the indirect cost sample was not available for review. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the period of performance compliance requirement. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable liquidation provisions. Effect or Potential Effect – VIDE is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $73,481. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total non-payroll expenditures charged to the program in fiscal year 2024 were $659,602 and indirect costs totaled $66,901. The amount sampled is $167,809. The known amount of instances of noncompliance is $73,481. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for adhering to liquidation provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE is strengthening its internal controls and record retention procedures to ensure strict adherence to federal period of performance and liquidation provisions. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-067 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Criteria - When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Per Procurement Manual, User Agencies are required to submit a written justification letter to the Government’s DPP, which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition - In our review of 7 out of 50 procurement transactions, we noted the following: • 2 instances where the purchase order was over $25,000 for services, but no VIDE Standard Short Form Contract or Sole Source letter was provided for review. • 1 instance where the Justification Letter(s) (including the additional letter to the Commissioner of DPP) and requisition/workflow approval were not available for review. • 1 instance where no supporting documentation was made available for review. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the procurement compliance requirements. Cause – VIDE does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Effect or Potential Effect – VIDE could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Questioned Costs – $563,674. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $2,042,339. Total amount sampled was $737,526. The known amount of exceptions is $563,674. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to federal regulations relating to the procurement of services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE has implemented additional system controls to ensure all procurements meet federal documentation standards and to adequately maintain completed contract files. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2024-068 Prior Year Finding Number: 2023-052 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of 3,236 payroll disbursements and noted the following: • 4 instances where the approved timesheet for the selected pay period was not available for review. In addition, in 1 of these instances, the NOPA/per diem support was also not available for review. • 1 instance where the project code was not reflected in check detail and NOPA. • 1 instance where the payment support (check detail) and the NOPA/per diem support were not available for review. • 2 instances where recorded timesheet hours did not agree with payroll register. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or Potential Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2024 was $6,052,527. The amount sampled is $128,721. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE is addressing audit findings related to payroll activities by enhancing internal controls to ensure compliance with federal regulations and by providing mandatory training. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-069 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Indirect Cost Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally indirect costs charged to the program must be supported by a valid negotiated indirect cost rate agreement or applied using the de minimis rate, and must be allowable, allocable, reasonable, and adequately supported. Condition – During our testing of allowable costs for indirect cost expenditures incurred throughout the year, we sampled and selected 4 transactions out of the 16 transactions and noted 4 instances where the check payment details and other related supporting documentation were not available for review. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $229,560. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total indirect cost expenditures charged to program in fiscal year 2024 is $801,866. Total amount sampled is $229,560. The known amount of the instances of noncompliance is $229,560. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for indirect costs. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE will reinforce its procedures for tracking, compiling, and storing documentation related to grant expenditures to ensure compliance with federal regulations. VIDE is scheduling mandatory trainings for all relevant VIDE staff. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-070 Prior Year Finding Number: 2023-053 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While the VIDE maintains an equipment listing for fixed assets purchased with federal funding, VIDE was unable to provide a complete equipment listing which met the stated requirements. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Effect or Potential Effect – There is a risk that inadequate recordkeeping or equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE plans to improve management and documentation of federally funded equipment by enhancing its asset tracking system and maintaining centralized records with detailed asset information. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2024-071 Prior Year Finding Number: 2023-054 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Criteria - When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Per Procurement Manual, User Agencies are required to submit a written justification letter to the Government’s DPP, which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition - In our review of 40 out of 381 procurement transactions, we noted the following: • 5 instances where evaluation reports or bid response documentation were not available. • 1 instance where the justification letter did not correspond to the selected vendor. • 1 instance where all supporting documentation was not available for review. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the procurement compliance requirements. Cause – VIDE does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Effect or Potential Effect – VIDE could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Questioned Costs – $95,084. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $7,501,502. Total amount sampled was $514,529. The known amount of exceptions is $95,084. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to federal regulations relating to the procurement of services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE has implemented additional system controls to ensure all procurements meet federal documentation standards and to adequately maintain completed contract files. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2024-072 Prior Year Finding Number: 2023-055 Compliance Requirement: Reporting Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. For Reporting, each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Per 2 CFR Section 200.329, Submitting performance reports - (1) The recipient or subrecipient must submit performance reports as required by the Federal award. Intervals must be no less frequent than annually nor more frequent than quarterly except if specific conditions are applied (See § 200.208). Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal agency or pass-through entity may require annual reports before the anniversary dates of multiple-year Federal awards. The final performance report submitted by the recipient must be due no later than 120 calendar days after the period of performance. A subrecipient must submit a final performance report to a pass-through entity no later than 90 calendar days after the conclusion of the period of performance. See also § 200.344. The Federal agency or pass-through entity may extend the due date for any performance report with justification from the recipient or subrecipient. As applicable, performance reports should contain information on the following: (i) A comparison of accomplishments to the objectives of the Federal award established for the reporting period (for example, comparing costs to units of accomplishment). Where performance trend data and analysis would be informative to the Federal agency program, the Federal agency should include this as a performance reporting requirement. (ii) Explanations on why established goals or objectives were not met; and (iii) Additional information, analysis, and explanation of cost overruns or higher-than-expected unit costs. Under 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 – We noted the following: • For Performance Reporting, 1 annual report contained amounts that did not agree with the supporting documentation, and annual reports were not prepared and submitted as required for 4 grant awards. • For FFATA Reporting, VIDE failed to submit subaward data to fulfill the Transparency Act reporting requirements for the first tier subawards of $30,000 or more. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Effect or Potential Effect – VIDE is not in compliance with reporting requirements as it failed to provide evidence of identifying and reporting Transparency Act reporting requirements. Questioned Costs – None. Context – This is a condition noted per review of VIDE’s compliance with reporting requirements. In fiscal year 2024, VIDE passed through approximately $472,820 to 4 subrecipients. Recommendation – We recommend that VIDE implement policies, procedures and controls that will comply with all required laws, guidelines, and requirements under the award. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE plans to address the audit finding on reporting by developing detailed reporting policies and procedures. These will include guidelines for identifying and tracking subawards, collecting required data, and setting submission timelines. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-073 Prior Year Finding Number: 2023-056 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) COVID-19 – Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 – 09/30/2022 01/13/2021 – 09/30/2023 COVID-19 – American Rescue Plan – Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records: • Reasonable reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – For ALN 84.425 subprograms A and X, we sampled and selected 60 of 5,693 payroll expenditures and noted the following: • 1 instance where the approved timesheet was not available for review. • 1 instance where a duplicate payment of retirement costs was made to an employee. • 2 instances where the hours recorded on the employees’ timesheets did not agree with the hours recorded per the payroll register. • 4 instances where there was inconsistency between the project code reflected on the check detail and the NOPA. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the activities allowed or unallowed and allowable costs/cost principles compliance requirements. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to program in fiscal year 2024 is $7,941,259. Total amount sampled is $112,072. The known amount of the instances of noncompliance is $17,628. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of VIDE in a timely manner. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE is addressing audit findings related to payroll activities by enhancing internal controls to ensure compliance with federal regulations and by providing mandatory training. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-074 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Indirect Cost Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) COVID-19 – Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 – 09/30/2022 01/13/2021 – 09/30/2023 COVID-19 – Education Stabilization Fund Governors (Outlying Areas) (ESF Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 – 09/30/2022 01/13/2021 – 09/30/2023 COVID-19 – American Rescue Plan – Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally indirect costs charged to the program must be supported by a valid negotiated indirect cost rate agreement or applied using the de minimis rate, and must be allowable, allocable, reasonable, and adequately supported. Condition – During our testing of allowable costs for indirect cost expenditures incurred throughout the year, we sampled and selected 3 transactions out of 16 transactions and noted 3 instances where the detailed project expenditure report was not available for review. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the activities allowed or unallowed and allowable costs/cost principles compliance requirements. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $637,951. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total indirect cost expenditures charged to program in fiscal year 2024 is $2,539,845. Total amount sampled is $637,951. The known amount of the instances of noncompliance is $637,951. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for indirect costs. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE will reinforce its procedures and controls over grant expenditures and indirect costs and will coordinate to facilitate trainings for all relevant VIDE staff. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-075 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) and Office of Management and Budget (OMB) COVID-19 – Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 – 09/30/2022 01/13/2021 – 09/30/2023 COVID-19 – Education Stabilization Fund Governors (Outlying Areas) (ESF Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 – 09/30/2022 01/13/2021 – 09/30/2023 COVID-19 – American Rescue Plan – Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While the VIDE maintains an equipment listing for fixed assets purchased with federal funding, VIDE was unable to provide a complete equipment listing which met the stated requirements. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Effect or Potential Effect – There is a risk that inadequate recordkeeping or equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE plans to improve management and documentation of federally funded equipment by enhancing its asset tracking system and maintaining centralized records with detailed asset information. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-076 Prior Year Finding Number: 2023-057 Compliance Requirement: Reporting Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) COVID-19 – Education Stabilization Fund Governors (Outlying Areas) (ESF Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 – 09/30/2022 01/13/2021 – 09/30/2023 Criteria - Each State or Territory must file various financial, programmatic and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Under 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). Furthermore, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed VIDE and OMB's compliance with the reporting requirements and noted that OMB was unable to provide evidence of submission for the FFATA reports and the required quarterly reports for ALN 84.425, subprogram H. Further, it does not appear that the controls in place are operating at a level of precision to ensure the timely filing of reports. Cause – The internal controls established for the submission of reporting requirements did not fully operate as designed, resulting in noncompliance with the reporting requirements under the Transparency Act related to the program’s subrecipients and the required quarterly reports. Effect or Potential 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. Questioned Costs – None. Context – This is a condition identified per review of the OMB’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that VIDE and OMB reevaluate its policies and procedures to ensure submission of the required reports by an appropriate official after ensuring that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-077 Prior Year Finding Number: 2023-060 Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) COVID-19 – Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 – 09/30/2022 01/13/2021 – 09/30/2023 COVID-19 – Education Stabilization Fund Governors (Outlying Areas) (ESF Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 – 09/30/2022 01/13/2021 – 09/30/2023 COVID-19 – American Rescue Plan – Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Non-federal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the Department of Labor regulations (29 CFR part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). Condition – VIDE did not implement a formal process for the wage rate requirements compliance for fiscal year 2024. In addition, VIDE was unable to provide a complete listing of construction contracts which met the stated requirements. Further, it does not appear that there are controls in place to ensure compliance with the special tests and provisions compliance requirements. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable wage rate requirements. Effect or Potential Effect – VIDE is not in compliance with the stated provisions. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that VIDE implement policies, procedures, and controls that will ensure adherence to Federal regulations related to wage rate requirements, and to ensure that responsible project management personnel obtain and review the required certified payroll reports for each week in which contract work is performed. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE is addressing compliance gaps related to wage rate requirements under the COVID-19 Education Stabilization Fund by reviewing all contracts to ensure they include appropriate compliance language. Contract templates will be updated to mandate compliance and specify consequences for noncompliance. Additionally, VIDE will implement a system requiring contractors to submit certified payroll reports weekly, with a designated team responsible for collecting, reviewing, and retaining these reports to verify compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-078 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Health (DOH) Epidemiology and Laboratory Capacity for Infectious Disease ALN: 93.323 Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principle process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records; • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – DOH was unable to reconcile the payroll expense include in the SEFA with the payroll expense in the payroll register. As a result, we were not able to establish the completeness of the population and were unable to perform testing procedures. Cause – DOH does not appear to have adequate policies and procedures in place to review and reconcile program expenditures. Effect or Potential Effect – Lack of proper reconciling information can result in noncompliance with laws and regulation along with loss of funding. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DOH’s compliance with the specified requirements. Recommendation – We recommend that DOH improve internal controls to ensure program data is reconciled, monitored and retained in order to facilitate adherence to federal regulations and compliance requirements. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-079 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Health (DOH) Epidemiology and Laboratory Capacity for Infectious Disease ALN: 93.323 Award #: Various Award Period: Various Criteria – Per 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. Further, a physical inventory of equipment should be taken at least once every two years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s DPP maintains the equipment register for the Government. DOH was unable to provide accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2024. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – DOH does not appear to have a process in place to adequately monitor property and equipment acquired with Federal funds. Effect or Potential Effect – There is a risk that inadequate recordkeeping could lead to misappropriation of assets and noncompliance with Federal regulations, resulting in loss of funding. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DOH’s compliance with the specified requirements. Recommendation – We recommend that DOH and DPP improve internal controls to ensure adherence to federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Additional staff will be needed to effectively support the initiative and regular training sessions will be provided to staff to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-080 Prior Year Finding Number: 2023-062 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 60 out of 857 non-payroll transactions, we noted 8 instances in which the expenditures were not approved by the authorized personnel. Cause – DHS does not appear to have adequate policies and procedures in place to ensure internal controls are consistently and diligently applied. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – None. Context – This is a condition identified per review of the DHS’ compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program were $13,817,623. Total amount sampled is $7,953,867. The known amount of the instances of noncompliance is $1,963,765. Recommendation – We recommend that DHS improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will review and update its policies and procedures to ensure all non-payroll expenditures are approved by authorized personnel, provide staff training on proper approval processes and internal control requirements, and conduct periodic checks to monitor compliance and promptly address any exceptions. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-081 Prior Year Finding Number: 2023-064 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – Real property, equipment, and intangible property, that are acquired or improved with a federal award must be held in trust by the nonfederal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The Department of Health and Human Services (HHS) awarding agency may require the nonfederal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a federal award and that use and disposition conditions apply to the property (45 CFR section 75.323 and 45 CFR section 1303 – Subpart E). Real property acquired or improved under a federal award must be used for the authorized purpose so long as it is needed for that purpose, during which time the Head Start Agency (HSA) may not dispose of, replace or encumber the property without prior the Administration for Children and Families (ACF) approval (45 CFR section 75.318; 45 CFR section 75.308(c)(1)(xi)). Equipment acquired under a federal award must be used for the authorized purposes of the project during the period of performance, or until the property is no longer needed for the purposes of the project. A HSA may not dispose of, replace, or encumber title to equipment without prior ACF approval (45 CFR section 75.319; 45 CFR section 75.308(c)(1)(xi)). Per 2 CFR Section 200.313, Equipment, property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s DPP maintains the equipment register for DHS. DHS was unable to provide complete property records which met the stated requirements. Further, no physical inventory of equipment was taken in the previous two years. Cause – DHS does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Effect or Potential Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Recommendation – We recommend that DHS and DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will be onboarding dedicated staff for Head Start inventory. DHS will continue to collaborate with DPP to ensure compliance with Federal regulations regarding equipment and its maintenance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-082 Prior Year Finding Number: 2023-065 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the compliance supplement, the states and territories are required to submit to the Federal administering agency, the Administration for Children and Families (ACF), the SF-429 Real Property Status Report and SF-429 A General Reporting on an annual basis 90 days after the end of the reporting period and the SF-428, SF-428 B, and if needed, SF-428 S Tangible Personal Property Report at closeout 90 days after the grant closes. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 6 out of 14 special reports required to be submitted during the fiscal year and noted program personnel did not ensure these special reports were prepared and submitted to the federal grantor agency as prescribed. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Cause – It appears that policies and procedures, including oversight over submission of required reports, were not functioning as intended. Effect or Potential Effect – DHS is not in compliance with the stated provisions. Failure to submit required reports could result in reduction or disallowance of Federal funding. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that DHS strengthen its process with respect to ensuring proper retention, monitoring, and review of the required reports by an appropriate official. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will enhance internal control policies and processes by establishing a reporting tracking system, by assigning clear roles and responsibilities, by requiring proper documentation and record retention over reports and supporting documents, by increasing program staff training, and by developing an audit compliance unit. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-083 Prior Year Finding Number: 2023-066 Compliance Requirement: Special Tests and Provisions – Protection of Federal Interest in Real Property and Facilities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – Head Start uses specific terms related to real property and facilities, which are defined at 45 CFR section 1305.2, including construction, facility, federal interest, major renovation, and modular unit. Facilities activities (purchase, construction, major renovation, subordination of a federal interest, refinancing, and disposition) are initiated through the submission of Form SF429 (cover sheet) and applicable attachments B (Request to Acquire, Improve or Furnish) or C (Disposition or Encumbrance Request). With written prior approval from Administration for Children and Families (ACF), a Head Start Agency (HSA) may use Head Start funds to purchase, construct, or renovate (major) a facility, including using Head Start funds to pay ongoing purchase costs which include principal and interest on approved loans (45 CFR sections 1303.40 through 1303.44). A HSA that uses Head Start funds to purchase real property or purchase, construct, or renovate (major) a facility appurtenant to real property (either owned or leased) must record a Notice of Federal Interest (also referred to as “reversionary interest”) (45 CFR sections 1303.46). The Notice of Federal Interest must include the required language content from 45 CFR section 1303.47(a) and be properly recorded in the official real property records for the jurisdiction where the facility is or will be located. A similar Notice of Federal Interest is required for leased facilities on land the HSA does not own (45 CFR section 1303.47(b)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Based on audit procedures performed, we identified 4 of 6 facilities with major repairs that did not have evidence of the required Notice of Federal Interest. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with protection of Federal interest in real property and facilities. Effect or Potential Effect – There is a risk that lack of compliance with the stated requirements can result in a loss of funding. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Recommendation – We recommend that DHS strengthen and improve internal controls to ensure adherence to Federal regulations related to protection of Federal interest in real property and facilities. This includes incorporating the necessary internal controls to ensure the Notice of Federal Interest is obtained when required. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has taken immediate corrective actions to record the required Notices of Federal Interest for the two facilities cited. DHS will enhance internal control policies and processes by ensuring a comprehensive facilities review, by designating roles and responsibility, by training and providing technical assistance to relevant program and fiscal staff, and by developing ongoing monitoring and internal reviews. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-084 Prior Year Finding Number: 2023-067 Compliance Requirement: Special Tests and Provisions – Program Governance Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – A Head Start Agency (HSA) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). Head Start governing body has a legal and fiscal responsibility for the HSA. The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: • approval of all major financial expenditures of the agency; • annual approval of the operating budget of the agency; • selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and • monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – When evaluating DHS’ compliance with the above-mentioned compliance requirements, we found the following: • DHS was unable to validate that they provided training and technical assistance to the governance board during the fiscal period under review. • Financial information is not shared with the governing board monthly. Instead, we observed financial information being shared quarterly. • We found no discussion by the governing board relating to monitoring of DHS actions to correct audit findings. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with program governance. Effect or Potential Effect – There is a risk that lack of compliance with the stated requirements can result in significant fiscal issues that may put the Head Start program they administer at risk along with loss of funding. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Recommendation – We recommend that DHS strengthen and improve internal controls to ensure adherence to Federal regulations related to program governance training and technical assistance to governing body and policy council. There should be regular training that will enable the governing body to perform its legal, fiscal, and oversight responsibilities. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will strengthen internal controls and governance oversight processes to ensure full compliance with Head Start Act requirements and Uniform Guidance by implementing monthly financial reporting, establishing a governance training program, and by strengthening audit oversight procedures. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-085 Prior Year Finding Number: 2023-068 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various Criteria – DHS must have in place procedures for documenting and verifying eligibility in accordance with the Federal requirements, as well as the specific eligibility requirements selected by the Territory in its approved Plan. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The CCDF program appears to have policies and procedures in place for eligibility determinations and childcare provider voucher preparation and distribution. However, DHS was unable to provide a complete listing of childcare provider voucher distributions that includes relevant information in order to test eligibility of recipients. As a result, it appears DHS did not perform a reconciliation of the benefits paid to eligible participants and the expenditures recorded in the general ledger. Further, internal controls were not operating at a level of precision to ensure compliance with the eligibility compliance requirement. Cause – It appears that policies and procedures, including review over eligibility transactions, were not functioning as intended. Effect or Potential Effect – Noncompliance with program requirements could result in disallowances of costs, and program participants could be receiving benefits that they are not entitled to receive. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Approximately $2.4 million was expended for child care vouchers. Recommendation - We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has updated the childcare database to more efficiently produce monthly vouchers. An independent audit will be conducted to verify processes, review files, and to make recommendations. Additionally, An Audit and Compliance Unit has been established within the Fiscal Division. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-086 Prior Year Finding Number: 2023-069 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various Criteria – In accordance with the Compliance Supplement, the State or Territory: • May not spend on administrative costs more than five percent of total CCDF awards expended (i.e., the total of Assistance Listings 93.575, 93.596, and 93.489 with the exception of any ARP Act stabilization funds and of any Disaster Relief funds spent on construction and renovation) and any state expenditures for which Matching Funds (Assistance Listing 93.596) are claimed (42 USC 9858c(c)(3)(C); Pub. L. no. 116-20; CFR section 98.52). • Quality Earmark – For fiscal year 2020 and succeeding fiscal years, states and territory Lead Agencies must spend on quality activities, as provided in the state/territorial plan, not less than nine percent of CCDF funds expended (i.e. the total of Assistance Listing 93.575, 93.596, and 93.489 with the exception of any CARES Act, CRRSA Act, and ARP Act, and of any Disaster Relief funds spent on construction and renovation) and any state expenditures for which Matching Funds (Assistance Listing 93.596) are claimed (45 CFR section 98.53). States and territory Lead Agencies must spend at least an additional three percent on quality improvement for infants and toddlers (45 CFR section 98.50(b)). • Direct Spending Earmarks - (1) From the aggregate amount of Discretionary funds (Assistance Listing 93.575) and Disaster Relief funds (Assistance Listing 93.489) provided for a year (with the exception of any CARES Act, CRRSA Act, and ARP Act, and of any Disaster Relief funds used for construction or major renovation), state Lead Agencies, territory Lead Agencies, as well as those tribal Lead Agencies with allocations of at least $250,000 must reserve funds for administrative costs (described above) and the minimum amount required for quality activities (described above). (2) From the remainder, the Lead Agency must use not less than 70 percent to fund direct services. In addition, states and territories must spend not less than 70 percent of the Mandatory and federal and state share of Matching funds (Assistance Listing 93.596) to provide child care assistance to families who: (a) receive Temporary Assistance for Needy Families (TANF); (b) are attempting through work activities to transition of TANF; and (c) are at risk of becoming dependent on TANF (45 CFR section 98.50(e) and (f)). • Direct spending requirements do not apply to supplemental funds provided by the CARES Act (Pub. L. No. 116-136), the CRRSA Act (Pub. L. No. 116-260) and the ARP Act (Pub. L. No. 11702). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – For one project that ended during the fiscal year, management was unable to provide a final ACF-696 Financial Reporting Form for State and Territory CCDF Lead Agencies that reconciled to accounting records. As such, we are unable to determine if the Administrative, Quality and Direct Spending earmarks for this project have been met. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic monitoring of the requirements. Effect or Potential Effect – DHS is not in compliance with the stated provisions. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Recommendation - We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has added new roles, one filed and one open to be filled, tasked with oversight of the reporting process to ensure compliance with earmarking. Internal controls have been enhanced, outlining roles and responsibility over supervisory review and approval. Additionally, an Audit and Compliance unit has been established. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-087 Prior Year Finding Number: 2023-070 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various Criteria – Pursuant to CCDF regulations at 45 CFR 98.65(g), and as part of the terms and conditions of the grant award, States and Territories are required to complete and submit a quarterly financial status report (ACF-696). The form must be submitted quarterly (reports are due 30 days after the end of the quarter). States must submit quarterly reports for each federal fiscal year until all funds are expended or when the liquidation period expires. Since CCDF funds are awarded each federal fiscal year, a Lead Agency might submit multiple separate quarterly ACF-696 forms for multiple overlapping grant award years simultaneously. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 9 of the 32 reports required to be filed during the fiscal year. During our testing, we noted the following: • 4 financial reports had not been submitted in a timely manner, ranging from 7 to 43 days late. • 9 financial reports where we could not determine if the amounts reported were complete and accurate. Further, internal controls were not operating at a level of precision to ensure compliance with the reporting compliance requirement. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, DHS does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Effect or Potential Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context –This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has added new roles, one filed and one open to be filled, tasked with oversight of the reporting process. Internal controls have been enhanced, outlining roles and responsibility over supervisory review and approval. Additionally, an Audit and Compliance unit has been established. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-088 Prior Year Finding Number: 2023-071 Compliance Requirement: Special Tests and Provisions – Health and Safety Requirements Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various Criteria – As part of their CCDF plans, Lead Agencies must certify that procedures are in effect (e.g., monitoring and enforcement) to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers (unless they meet an exception, e.g., family members who are caregivers or individuals who object to immunization on certain grounds) serving children who receive subsidies meet requirements pertaining to health and safety. These requirements must address 11 specific areas—including first aid and CPR, safe sleeping practices, and administration of medication—and child care workers must be trained in these areas (42 USC 9858c(c)(2)(I); 45 CFR section 98.41). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 9 of the 47 child care providers and noted that for 3 of the 9 providers selected for testing, there was no evidence of monitoring for compliance with applicable minimum health and safety requirements. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Effect or Potential Effect – DHS in not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of child care expenditures charged to the program were $2,446,801. Total amount sampled is $606,615. The known amount of inconsistencies is $329,116. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the health and safety requirements are documented throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has onboarded additional licensing staff which has built increased capacity to conduct provider visits for the purpose of assessing compliance with health and safety requirements. Efforts to recruit additional staff continue. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-089 Prior Year Finding Number: 2023-072 Compliance Requirement: Special Tests and Provisions – Fraud Detection and Repayment Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various Criteria – Lead Agencies shall recover childcare payments that are the result of fraud. These payments shall be recovered from the party responsible for committing the fraud (45 CFR section 98.60). The Lead Agency must correctly identify and report fraud and take steps to recover payment. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While DHS has a procedure for identifying and recovering payments resulting from fraud, via its internal audit process, it was unable to evidence that such audit(s) had been conducted during the fiscal year. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Effect or Potential Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud that may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance with fraud detection and repayment requirements throughout the fiscal year. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will implement a centralized, secure tracking matrix for all fraud referrals to monitor and to track total funds identified for recovery and recovery status to date. Internal audits will be conducted quarterly, and quality staff will conduct unannounced visits of childcare facilities to monitor attendance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-090 Prior Year Finding Number: 2023-073 Compliance Requirement: Special Tests and Provisions – Child Care Provider Eligibility for ARP Act Stabilization Funds Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various Criteria – To be qualified to receive ARP Act stabilization funds, a provider on the date of application for the award must either be: (1) open and available to provide child care services, or (2) closed due to public health, financial hardship, or other reasons relating to the COVID-19 public health emergency. In addition, the provider must either (1) be eligible to serve children who receive CCDF subsidies at the time of application for stabilization funds, or (2) be licensed, regulated, or registered in the state, territory, or tribe as of March 11, 2021 and meet applicable state and local health and safety requirements at the time of application for stabilization funds. In their application for stabilization funds, a child care provider must certify: a. That the provider will, when open and providing services, implement policies in line with guidance and orders from corresponding state, territorial, tribal, and local authorities and, to the greatest extent possible, implement policies in line with guidance from the CDC. b. For each employee, the provider must pay at least the same amount in weekly wages and maintain the same benefits for the duration of the stabilization funding. c. The provider will provide relief from copayments and tuition payments for the families enrolled in the provider’s program, to the extent possible, and prioritize such relief for families struggling to make either type of payment. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected a sample of 11 of 48 child care providers that received ARP Act stabilization funds. During our testing, we were not provided evidence to substantiate that the child care providers selected for testing were eligible to receive ARP Act stabilization funds. Further, internal controls were not operating effectively to ensure the maintenance of documentation evidencing compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Effect or Potential Effect – DHS in not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of ARP Act stabilization expenditures charged to the program were $8,952,043. Total amount sampled is $3,448,197. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the ARP Act stabilization provider eligibility requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will review current procedures to strengthen monitoring and documentation of provider eligibility for ARP Act stabilization funds. DHS is committed to improving internal controls and ensuring compliance with all program requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-091 Prior Year Finding Number: 2023-074 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Condition – We sampled 60 of the 362 non-payroll transactions and noted 1 instance where the benefit date and payment are outside of the period under audit. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Effect or Potential Effect - Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $29,985. Context – This is a condition identified per review of compliance with the specified requirements using a statistically valid sample. Total amount of non-payroll expenditures charged to the program in fiscal year 2024 were $2,642,402. Total amount sampled is $918,181. The known amount of the exception is $29,985. Recommendation – We recommend that DHS improve internal controls to ensure adherence to federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will update policies and procedures to ensure all costs are properly documented and comply with federal allowable cost principles. DHS is committed to addressing the identified issues and maintaining ongoing compliance with federal regulations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-092 Prior Year Finding Number: 2023-075 Compliance Requirement: Period of Performance Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various Criteria – 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Additionally, the Uniform Guidance in 2 CFR Section 200.344(b), states that unless the federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial 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. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition - We sampled and selected 1 out of 10 transactions recorded at the beginning of a project's period of performance and noted 1 instance where fringe benefits were incorrectly charged to the program. Specifically, the employer share of fringe benefits was charged to the program without any associated time and effort by the employee. The employee had retired, yet the fringe benefit continued to be charged to the program after retirement. Additionally, internal controls do not appear to be operating at a level of precision to ensure grant expenditures are charged to the correct grant and within the allowable period of performance. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Effect or Potential Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Total amount of expenditures recorded during the grant’s beginning period of performance are $1,310. Recommendation – We recommend that DHS strengthen its process with respect to charging expenditures between various grant awards. We also recommend that DHS enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has strengthened internal control policies and processes including reconciliations, retrospective reconciliations, and team engagement to better understand the underlying factors and nuances resulting in discrepancies. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-093 Prior Year Finding Number: 2023-076 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the compliance Supplement, the states and territories are required to submit to the Federal administering agency, the Office of Community Services (OCS), SF-425 ‘Federal Financial Report’ and an annual ‘Post Expenditure Report’ (42 USC 1397e) no later than six months following the close of the fiscal year. Further, in accordance with OCS SSBG Supplemental Terms and Conditions, SSBG is required to submit an interim and final SF-425 report covering Year 1 and the entire 2-year of the project period, 90 days following Year 1 (FFY 1) and 90 days following the end of Year 2 (FFY 2), respectively. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition - We sampled and selected 2 out of 4 financial (SF-425) and special (Post-Expenditure) reports and noted the following: • For 1 financial report, we were unable to agree a line item of the report to the underlying supporting records. • For 1 special report, there was no evidence indicating the date the report was prepared, reviewed, or submitted to the federal grantor. Additionally, we were unable to agree the key line item reported to the underlying supporting records. Additionally, internal controls do not appear to be operating at a level of precision to ensure federal reports are prepared accurately, reviewed and submitted timely, and maintained for inspection. Cause – It appears that policies and procedures, including oversight over submission of required reports were not functioning as intended. Effect or Potential Effect - DHS is not in compliance with the stated provisions. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DHS strengthen its process with respect to ensuring proper retention, monitoring, and review of the required reports by an appropriate official. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS remains in collaboration with Federal Partners relative to the required change to reflect a consolidated report in the Payment Management System financial reporting module and for formal notification of report submissions. In addition, a Federal Grants Financial Analyst has been onboarded and processes enhanced to allow for a match to all reports inclusive of Federal draws. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-094 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 Criteria – Federal funds can be used only for Medicaid and CHIP benefit payments (as specified in the state plan, federal regulations, or an approved waiver/demonstration), expenditures for administration and training, expenditures for the State Survey and Certification Program, and expenditures for the establishment and operation of state MFCUs (42 CFR 435.10, 440.210, 440.220, and 440.180). Payments may only be made to providers determined by the SMA to be eligible to participate in the Medicaid program. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 60 of 971 payroll transactions and noted the following: • 1 instance where the project code on an employee’s Notice of Personnel Action (NOPA), used to record time and effort to the appropriate grant, had not been updated. However, during the fiscal year, program personnel made adjustments to ensure the employee’s time and effort was recorded to the correct grant. • 1 instance in which the hours noted per the employee’s timesheet did not agree to the hours in the payroll register. We have also noted that the expense population included expenditures for 3 grant awards with award periods beginning after September 30, 2024. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with stated provisions. Effect or Potential Effect – DHS is not in compliance with the stated provisions. Failure to properly review and report expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $61,457. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure monitoring and compliance of stated requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will continue to strengthen its review and documentation procedures to ensure compliance with federal requirements and has adopted an electronic system for payroll, replacing manual processes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-095 Prior Year Finding Number: 2023-078 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2022 – 09/30/2025 Criteria – Plan and eligibility requirements must comply with various Federal requirements. The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with the State Plan under Title XIX of the Social Security Act, Section 4.7, Maintenance of Records, the Medicaid agency maintains or supervises the maintenance of records necessary for the proper and efficient operation of the plan, including records regarding applications, determination of eligibility, the provisions of medical assistance, and administrative costs, statistical, fiscal and other records necessary for reporting and accountability. Condition – In our review of 60 of 2,207 participant case files, we noted the following: • 33 instances where documentation supporting the eligibility determinations were not available. • 4 instances where there was no evidence of completed application. • 12 instances where there was no evidence that the eligibility determination had been reviewed and approved, or that the application was processed in a timely manner. In addition, we were unable to determine the completeness of the population of eligible participants, as an ADP/Risk analysis was not performed on the VIBES system (which houses the eligibility database). Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review and maintenance of the data in its participant case files. Effect or Potential Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DHS perform regular reviews of the data in its participant case files to ensure accuracy and completeness and confirming that only eligible participants are receiving the entitled benefits. Additional levels of review by a supervisor or manager can provide more timely quality assurance oversight over the eligibility process. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has enhanced internal control policies and processes including implementing in-person/active renewal requirements, enhancing the treatment and steps for obtaining and maintaining required supporting documentation, updating system configurations, implementing a review tracker, outlining roles and responsibilities, and conducting targeted staff training. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-096 Prior Year Finding Number: 2023-080 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2022 – 09/30/2025 Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. In accordance with the Compliance Supplement, the State or Territory is required to submit CMS-64, Quarterly Statement of Expenditures for the Medicaid Assistance Program, thirty days after the end of the quarter. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – For Medicaid Cluster, we reviewed 2 of 4 quarterly CMS-64 reports submitted during the fiscal year and noted the following: • 1 report did not contain evidence of review or approval. • 2 reports had not been submitted in a timely manner. For Children’s Health Insurance Program, we noted 1 of 2 reports tested that did not contain evidence of review or approval. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Effect or Potential Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has implemented a shared folder where copies of approval emails and any time extension requests are stored to enhance current internal control processes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-097 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Medicaid Fraud Control Unit Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2023 – 09/30/2024 Criteria – The Medicaid Fraud Control Unit (MFCU) is required to submit the SF-425, Federal Financial Report. As per the requirements, the: • Quarterly expenditure reports are due 30 days after the end of each quarter. • If the grantee will be unable to submit the financial expenditure report by the due date, the grantee must request an extension. Condition – We reviewed 2 out of the 4 reports submitted during the fiscal year and noted the following: • 1 report and its related documentation were not provided for review. • 1 report was not submitted in a timely manner. • For 1 report, supporting accounting detail was not provided to verify the data reported. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause - It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the DHS and DOJ do not have adequate control over maintenance of the underlying documentation used in preparing various reports. Effect or Potential Effect – DHS and DOJ are not in compliance with the stated provisions with respect to special reporting requirements. Questioned Costs - None. Context - This is a condition identified per review of DHS and DOJ’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DHS and DOJ reevaluate their policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS and DOJ have established internal controls and accountability measures to ensure the timely preparation, review, and submission of reporting. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-098 Prior Year Finding Number: 2023-082 Compliance Requirement: Special Tests and Provisions - Inpatient Hospital and Long-Term Care Facility Audits Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 Criteria – The SMA pays for inpatient hospital services and long-term care facility services through the use of rates that are economic and efficient and are in accordance with the state plan. To the extent the state pays reconciled costs, the SMA must provide for the filing of uniform cost reports for each participating provider in order to establish payment rates. The SMA must provide for the periodic audits of financial and statistical records of participating providers. The specific audit requirements will be established by the state plan (42 CFR 447.253). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS provides Medicaid services to eligible Territory residents through inpatient hospitals and long-term care facilities. These hospitals and facilities include various Territory agencies and third-party service providers. The costs incurred by these facilities are summarized in a cost report that is submitted to DHS. DHS awarded a contract in August 2017 for the audit of these cost reports; however, we noted that DHS had not received any audited cost reports for fiscal year 2024. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place for the provision of audited cost reports of its participating providers. Effect or Potential Effect – Without timely audits of the cost reports, DHS has no assurance that the costs incurred by the medical facilities are actual costs incurred. Further, the difference between costs submitted for reimbursement and the costs actually reimbursed result in the use of local, rather than Federal, dollars to fund Medicaid expenditures. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Recommendation – We recommend that DHS evaluate and develop policies and procedures to obtain and audit the cost reports. This will allow DHS to reduce the time between the Medicaid expenditures being incurred and the ultimate reimbursement from the Federal government. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has strengthened its oversight of Medicaid financial reporting through the establishment of a Director of Audits position in September 2025. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-099 Prior Year Finding Number: 2023-083 Compliance Requirement: Special Tests and Provisions – ADP Risk Analysis and System Security Review Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 Criteria – SMAs must establish and maintain a program for conducting periodic risk analyses to ensure that appropriate and cost-effective safeguards are incorporated into new and existing systems. SMAs must perform risk analyses whenever significant system changes occur. SMAs shall review the ADP system security installations involved in the administration of HHS programs on a biennial basis. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures, and personnel practices. The SMA shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR 95.621). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS did not perform the required ADP Risk Analysis and System Security Review for the systems that support the Medicaid Program. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS’ records do not permit a determination as to the sufficiency of the design and operation of key controls surrounding the environment in which the Medicaid claims reside. Effect or Potential Effect - The absence of policies to ensure these analyses and reviews are performed may lead to physical and data security issues and noncompliance with program requirements. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Recommendation - We recommend that DHS should perform and review a risk analysis and system security review for all systems that support the Medicaid program. All issues should be addressed by DHS. If DHS becomes aware that such a report will not be available, we recommend that management conduct its own review. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. To address this finding, DHS is actively pursuing Requests for Qualifications (RFQs) seeking to partner with a technology system vendor to perform a comprehensive security risk assessment of the Medicaid Enterprise Systems (MES), including the VIBES Eligibility and Enrollment System, Provider Enrollment Application (PEA), Pharmacy Benefit Management (PBM) solution, and related supporting systems. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-100 Prior Year Finding Number: 2023-084 Compliance Requirement: Special Tests and Provisions – Provider Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2022 – 09/30/2025 Criteria – Medicaid – In order to receive Medicaid payments, providers must: (1) be licensed in accordance with federal, state, and local laws and regulations to participate in the Medicaid program (42 CFR 431.107 and 447.10; and Section 1902(a)(9) of the Act (42 USC 1396a(a)(9)); (2) screened and enrolled in accordance with 42 CFR Part 455, Subpart E (sections 455.400 through 455.470); and make certain disclosures to the state (42 CFR Part 455, Subpart B, sections 455.100 through 455.106). Medicaid managed care network providers are subject to the same disclosure, screening, enrollment, and termination requirements that apply to Medicaid fee-for-service providers in accordance with 42 CFR Part 438, Subpart H. Providers who have been barred from participation by the OIG exclusion list are not eligible to be enrolled in the Medicaid program (see 42 CFR 455.436). CHIP – In order to receive CHIP payments, CHIP providers must: (1) be licensed in accordance with federal, state, and local laws and regulations to participate in the CHIP program (42 CFR 457.900); (2) screened and enrolled in accordance with 42 CFR Part 455, Subpart E (sections 455.400 through 455.470); and make certain disclosures to the state (42 CFR 457.990(a), cross referencing 455.107). CHIP managed care network providers are subject to the same disclosure, screening, enrollment, and termination requirements that apply to Medicaid fee-for-service providers in accordance with 42 CFR Part 438, Subpart H. Guidance was provided to states in the Medicaid Provider Enrollment Compendium (MPEC) to enroll CHIP providers into their Medicaid programs to ensure that they meet federal requirements. Providers who have been barred from participation by the OIG exclusion list are not eligible to be enrolled in the CHIP program (42 CFR 457.990, 42 CFR 455 Subpart E). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled 60 of 834 providers that provided Medicaid and CHIP services during fiscal year 2024. We noted 26 total exceptions: • 9 instances in which no supporting documentation was provided for review. • 16 instances in which the Medicaid Provider Agreement was not provided for review. • 11 instances in which evidence of exclusion screening from the Office of Inspector General (OIG) list was not provided for review. In addition, we were unable to determine the completeness of the population of eligible providers, as an ADP/Risk analysis was not performed on the VIBES system (which houses the eligibility database). Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure documentation is maintained and available to be inspected. Effect or Potential Effect – DHS is not in compliance with the stated provisions for provider eligibility, including maintaining appropriate evidence of compliance. Noncompliance with program requirements could result in future impacts to funding. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Recommendation - We recommend that DHS implement policies and procedures to ensure provider enrollment documentation is maintained and available for inspection. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. To address these challenges and strengthen program integrity, DHS implemented the Provider Enrollment Application (PEA) Portal on March 2, 2026. In addition to implementing the PEA Portal, DHS is strengthening policies and procedures related to provider file maintenance, document retention, and quality assurance reviews. Staff training and periodic monitoring will help ensure required enrollment documents and exclusion screening records are consistently maintained and available for inspection. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-101 Prior Year Finding Number: 2023-081 Compliance Requirement: Special Tests and Provisions - Utilization Control and Program Integrity Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2024 Criteria – The state plan must provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, the state must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials (42 CFR parts 455, 456, and 1002). Credible allegations of provider fraud must be referred to the state MFCU or an appropriate law enforcement agency in states with no certified MFCU (42 CFR Part 455.21). The SMA must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. The agency must have procedures for the ongoing post-payment review, on a sample basis, of the need for, and the quality and timeliness of, Medicaid services. The SMA may conduct this review directly or may contract with an independent entity (42 CFR 456.5, 456.22 and 456.23). In addition, the SMA as required per Section 1902(a)(68) – [42 USC 1396a(a)(68)] False Claims Education must ensure that providers and contractors receiving or making payments of at least $5 million annually under a state’s Medicaid program have (a) established written policies for all employees (including management) about the Federal False Claims Act, whistleblower protections, administrative remedies, and any pertinent state laws and rules; (b) included as part of these policies detailed provisions regarding detecting and preventing fraud, waste, and abuse; and (c) included in any employee handbook a discussion of the False Claims Act, whistleblower protections, administrative remedies, and pertinent state laws and rules. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We noted that a Program Integrity Director was onboarded in 2024 and started implementing policies & procedure in a defined phased manner to establish the Program Integrity Unit for the compliance requirements detailed above. As such DHS was not able to provide evidence of meeting compliance requirements during Fiscal Year 2024. Specifically, we noted the following: • The method of determining criteria for identifying suspected fraud cases was still being developed. • The method for investigating these cases was still being developed. • The procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials was still being developed. Further, we noted DHS had not provided evidence of established and used written criteria for evaluating the appropriateness and quality of Medicaid services, including procedures for the ongoing post-payment review. Additionally, DHS did not provide evidence they ensure that providers and contractors receiving or making payments of at least $5 million annually under a state’s Medicaid program have (a) established written policies for all employees (including management) about the Federal False Claims Act, whistleblower protections, administrative remedies, and any pertinent state laws and rules; (b) included as part of these policies detailed provisions regarding detecting and preventing fraud, waste, and abuse; and (c) included in any employee handbook a discussion of the False Claims Act, whistleblower protections, administrative remedies, and pertinent state laws and rules. Finally, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud which may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately, with no methodology of properly identifying or tracking the amounts. Cause – DHS does not appear to have an effective system in place to address the program’s requirements. Recommendation – As the Program Integrity Director was onboarded and started the groundwork, DHS should be involved and monitor the progress of Program Integrity Unit against the planned roll out of this Unit and take corrective action for any deviations, as necessary, in a timely manner to ensure compliance. The written procedures should reflect the actual actions to be taken. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Program Integrity Unit has established SOPPs which identifies the method for identifying fraud cases, investigating cases, and developed procedures in collaborating and cooperating with legal authorities, for referring credible allegations of fraud cases to law enforcement officials. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-102 Prior Year Finding Number: 2023-085 Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award#: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR FEMA-3603-EM, FEMA-3581-EM Award Periods: 09/20/2017 – 09/07/2026 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Criteria – Under 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). Additionally, each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 60 projects with first-tier subawards greater than $30,000 and noted the following: • There was no evidence of review of the FFTA reporting prior to submission. • The timeliness of FFATA reporting could not be verified. Additionally, we sampled and selected 8 out of 40 financial and progress reports and noted that 6 performance/progress reports were not available for review. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Effect or Potential Effect – Lack of internal controls over compliance may lead to material noncompliance with the stated provision. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VITEMA remains committed to submitting all required reports by the last day of the month following each award. A certification process has also been implemented to verify the date reports are filed and reviewed. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-103 Prior Year Finding Number: 2023-086 Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award#: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR FEMA-3603-EM, FEMA-3581-EM Award Periods: 09/20/2017 – 09/07/2026 09/07975/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Criteria – A pass-through entity (PTE) must: • Verify the Subrecipient – Verify that the subrecipient is not excluded or disqualified in accordance with 2 CFR 180.300. Verification methods are provided in 2 CFR 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds (2 CFR 200.322(a)). • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.332(b). • Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(c)). This evaluation of risk may include consideration of such factors as the following: 5. The subrecipient’s prior experience with the same or similar subawards; 6. The results of previous audits including whether or not the subrecipient receives a single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 7. Whether the subrecipient has new personnel or new or substantially changed systems; and 8. The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). • Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(e) through (g)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 5. Reviewing financial and performance reports required by the PTE. 6. Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward in accordance with 2 CFR 200.332(e)(2). 7. Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. 8. Resolve audit findings specifically related to the subaward. • Ensure Accountability of For-Profit Subrecipients – Some Federal awards may be passed through to for-profit entities. For-profit subrecipients are accountable to the PTE for the use of the Federal funds provided. Because 2 CFR Part 200 does not make Subpart F applicable to for-profit subrecipients, the PTE is responsible for establishing requirements, to ensure compliance by for-profit subrecipients. The subaward with the for-profit subrecipient must describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring throughout the performance of the subaward, and post-award audits (2 CFR section 200.501(i)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We have selected 8 of 32 subrecipients for testing and found the following: • 8 instances where we were unable to obtain Quarterly Progress Reports. • 8 instances where we were unable to obtain completion/inspection certificate. • 8 subrecipients with no supporting documentation that VITEMA verified that subrecipients expected to be audited as required by 2 CFR part 200, subpart F. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements or proper identification of subrecipients. Cause – VITEMA does not have internal controls in place to properly identify and monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Effect or Potential Effect – VITEMA is not in compliance with the stated provisions. Failure to properly identify and monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the program's objectives. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2024 was $194,161,499. The total amount of our samples totaled $104,355,230. Recommendation – We recommend that VITEMA implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VITEMA has implemented new policies and procedures by implementing a quarterly report deadline, a centralized location for supporting documentation and audit compliance, an inspection and certification of reports, and an annual notification to subrecipients of their audit responsibilities. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-019 Prior Year Finding Number: 2022-020 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Agriculture Government Department/Agency: Department of Human Services (DHS) Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.551, 10.561 Award #: Various Award Period: 10/01/21 - 09/30/22 10/01/22 – 09/30/23 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records. - Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and - Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of 1,798 payroll disbursements and noted the following: - 34 instances in which DHS did not consistently apply the funding allocation. The hours that should have been split 50/50 between federal and local were charged 100% to the program. - 5 instances in which the hours recorded on the employees’ timesheets did not agree with the hours recorded per the payroll register. - 1 instance in which the employee timesheet was not provided for the pay cycle tested. - 1 instance in which the employee timesheet was not approved by personnel authorized to do so. - 4 instances in which COVID-19 telework hours were not split 50/50 as required by the employees’ funding allocation and charged 100% to the program. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not Determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2023 were $3,942,422. The amount sampled is $168,409. The known amount of inconsistencies noted is $53,501. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – DHS does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that DHS reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) adopted the electronic Timeforce (STATS) system for payroll, replacing manual processes. Time and attendance are approved through management levels, with payroll based on Notice of Personnel Action (NOPA) cost centers. Financial Analysts reconcile payroll, and a workflow ensures accurate NOPA listings for payroll purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-020 Prior Year Finding Number: 2022-021 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Agriculture Government Department/Agency: Department of Human Services (DHS) Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.551, 10.561 Award #: Various Award Period: 10/01/21 - 09/30/22 10/01/22 – 09/30/23 Criteria – CFR Section 200.303, Internal Controls, (a) states DHS must establish and maintain effective internal control over federal awards that provides reasonable assurance that DHS is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its matching process. Further, 2 CFR Section 200.306 provides detailed criteria for acceptable matching costs. The basic criteria for acceptable matching costs include costs that are necessary and reasonable for accomplishment of program objectives and are allowed under 2 CFR Part 200, Subpart E (Cost Principles). Condition – We found that DHS was unable to readily exhibit and provide evidence that it met the matching requirement or monitored compliance with the matching requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Effect – DHS is not in compliance with the stated provisions. Without adequate internal controls to ensure compliance with matching requirements, there is an increased risk that matching will not be properly applied and funding could be jeopardized. Cause – DHS does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Further, lack of monitoring of the match requirement appears to be the result of significant personnel turnover and lack of staffing. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the matching requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. While the ERP provides an overall expense report, a specific liquidation report has been developed to ensure that matching is completed with each report submission. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-021 Prior Year Finding Number: 2022-022 Compliance Requirement: Special Tests and Provisions – EBT Card Security Program: U.S. Department of Agriculture Government Department/Agency: Department of Human Services (DHS) Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.551, 10.561 Award #: Various Award Period: 10/01/21 - 09/30/22 10/01/22 – 09/30/23 Criteria – CFR Section 200.303, Internal Controls, Section (a) states DHS must establish and maintain effective internal control over federal awards that provides reasonable assurance that DHS is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its EBT Card Security process. Per 7 CFR Section 274.8(b)(3), System Security, as an addition to or component of the Security Program required of Automated Data Processing (ADP) Systems, the State or Territory agency shall ensure that a certain electronic benefits transfer (EBT) security requirements are established. As such, DHS is required to maintain adequate security over, and documentation/records for EBT cards, to prevent their theft, embezzlement, loss damage, destruction, unauthorized transfer, negotiation, or use. Condition – DHS contracted with Fidelity National Information Service (FIS) for the issuance and security of the EBT cards; however, it is DHS’ ultimate responsibility to ensure the contractor has controls in place to maintain adequate security over, and documentation/records of EBT cards. We sampled 8 out of 24 monthly card reconciliations and found 3 reconciliations with differences between new/replacements issued cards status report and the actual new/replacements cards issued. Specifically, we identified differences of 2 new cards and 1 replacement card issued. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The reconciliations sampled reported 451 new cards and 1,659 replacement cards issued. Effect – Without adequate internal controls to ensure compliance with EBT card security requirements, there is an increased risk that the inventory of EBT cards will not be properly maintained and accounted for which can lead to noncompliance with laws, regulations, and the provision of the grant agreement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure adequate safeguarding and documentation of EBT cards. Recommendation - We recommend that DHS strengthen formal policies and procedures to maintain adequate security, documentation, and records over EBT Cards to ensure internal controls over EBT cards security are operating effectively. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A Standard Operating Procedures and Procedures (SOPP) document is being developed to outline the EBT Reconciliation process. Additionally, a Director of Support Services will be hired to oversee and review all reports. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-022 Prior Year Finding Number: 2022-023 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Agriculture Government Department/Agency: Department of Education (VIDE) Child Nutrition Cluster ALN: 10.555, 10.559, 10.582 Award #: 1VI300308, 4VI300308, 4VI308908 Award Period: 10/01/2021 – 09/30/2022 10/01/2022 – 09/30/2023 10/01/2022 – 09/30/2024 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the nonfederal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records. - Reasonably reflect the total activity for which the employee is compensated across all grantrelated and non-grant related activities (100%); and - Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 20 of 196 payroll disbursements and noted the following: - 11 instances where the approved timesheet for the pay period selected was not available for review. - 20 instances where VIDE did not provide support that time and effort is charged in accordance with A-87 requirements. - 4 instances where the NOPA provided did not include any evidence that the employee was approved to be federally reimbursed for the project code utilized in the payroll register. - 4 instances where the employee’s pay rate in the approved NOPA provided did not agree with the pay rate in the payroll register. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – $10,789. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2023 was $196,740. The amount sampled is $21,572. The known amount of the instances of inconsistent funding allocation is $10,789. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE will develop and institute stricter fiscal controls to address the root causes of documentation and allocation discrepancies for this program. To prevent discrepancies including unapproved project codes and pay rate mismatches between NOPAs and payroll registers, the Fiscal Team will take the lead in preparing and maintaining the official staffing list for federally funded personnel within this program, an effort that involves reviewing the grant application for all positions and informing HR of required action entries. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-023 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Period of Performance Program: U.S. Department of Agriculture Government Department/Agency: Department of Education (VIDE) Child Nutrition Cluster ALN: 10.555, 10.559, 10.582 Award #: 1VI300308, 4VI300308, 4VI308908 Award Period: 10/01/2021 – 09/30/2022 10/01/2022 – 09/30/2023 10/01/2022 – 09/30/2024 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, a non-federal entity may charge to the Federal award, 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Unless the federal awarding agency or pass-through entity authorizes an extension, a non-federal entity must liquidate all financial 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 (2 CFR section 200.344(b)). Condition – During our testing of costs incurred throughout the year, we sampled and selected 40 disbursements and found one instance where the disbursement was paid outside the extended liquidation period of the grant award. The expenditure in question was paid 18 days after the approved extended liquidation period ending May 5, 2023. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the period of performance compliance requirement. Questioned Costs – $30,733. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total non-payroll expenditures charged to the program in fiscal year 2023 were $3,524,322. The amount sampled is $873,942. The known amount of the instances of noncompliance is $30,733. Effect – VIDE is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable liquidation provisions. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for adhering to liquidation provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE will enforce strict protocols for grant closeout and liquidation. To achieve this, VIDE will establish an internal hard stop deadline for invoice submission, requiring that all invoices for expiring grants be submitted to the Fiscal Office no later than 45 days prior to the federal liquidation deadline to provide a necessary buffer to resolve vendor disputes and process payments before the federal cutoff. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-024 Prior Year Finding Number: 2022-024 Compliance Requirement: Cash Management Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN: 10.557 Award #: Various Award Period: Various Criteria - The WIC program is subject to the provisions of the Cash Management Improvement Act (CMIA). (42 USC 1786(h)(8)(J); 7 CFR section 246.15(a)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 60 out of 349 drawdowns and noted the following: - 60 drawdown requests did not contain evidence of review and approval; and - 5 drawdowns did not adhere to the CMIA average clearance of zero days for payroll activities. In all instances, funds were drawn 1 day in advance of the related payroll payment. Questioned Costs – None. Context – This is a condition identified per review of the DOH’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $4,488,679. The amount sampled is $1,296,470. Total amount of drawdowns with compliance exceptions is $117,231. Effect – Without proper review and oversight drawdowns may not be in compliance with the CMIA Agreement and cash management compliance requirements. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation – We recommend that the DOH reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Health (DOH) updated drawdown Standard Operating Procedures (SOPs) for Fiscal Year 2025 to require signatures or initials on all supporting documents, certifying proper review. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-025 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN: 10.557 Award #: Various Award Period: Various Criteria - When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Per Procurement Manual, User Agencies are required to submit a written justification letter to the Government’s Department of Property and Procurement (DPP), which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition - In our review of 9 out of 86 procurement transactions, we noted the following: - 1 procurement that did not have supporting documentation to verify the method of procurement, selection of the contract type and basis for the contract price. -2 procurements did not contain evidence that a quotation was obtained prior to selection of the vendor. -1 procurement where no supporting documentation was available for review. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the procurement compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of DPP’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $314,776. Total amount sampled was $40,332. The known amount of exceptions is $29,256. Effect – DPP could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – DPP does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DOH will collaborate with DPP to strengthen internal controls and ensure compliance with federal procurement regulations. DOH will also encourage DPP to review records retention policies. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-026 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) WIC Grants to States (WGS) ALN: 10.578 Award #: 1VI700748 Award Period: 07/01/19 - 12/31/23 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 12 out of 30 drawdowns and noted that all 12 drawdown requests did not contain evidence of review and approval. Questioned Costs – None. Context – This is a condition identified per review of the DOH’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $3,317,520. The amount sampled is $2,992,269. Effect – Without proper review and oversight drawdowns may not be in compliance with the cash management compliance requirements. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation – We recommend that the DOH reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DOH revised drawdown Standard Operating Procedures (SOPs) to mandate that all supporting documents include a signature or initial to certify that a proper review was conducted internally or externally. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-027 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) WIC Grants to States (WGS) ALN: 10.578 Award #: 1VI700748 Award Period: 07/01/19 - 12/31/23 Criteria - When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Per Procurement Manual, User Agencies are required to submit a written justification letter to the Government’s Department of Property and Procurement (DPP), which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Further, non-Federal entity must comply with section 70914 of the Build America, Buy America Act (BABA), including through incorporation of a Buy America preference in the terms and conditions of each award with an infrastructure project or obtain waiver. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition - In our review of 5 out of 13 procurement transactions, we noted the following: - 1 procurement transaction did not contain sufficient supporting documentation to validate adherence to procurement policy. - 1 procurement transaction did not contain evidence that a quotation and justification letter was obtained prior to selection of the vendor. - 2 procurements did not include Buy America domestic preference provisions in the agreement or obtained a BABA waiver. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the procurement compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of DPP’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $3,133,788. Total amount sampled was $3,100,835. The known amount of exceptions is $3,096,961. Effect – DPP could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – DPP does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. To ensure that the WIC program is included in all processes and receive all documents and correspondence relating to WIC Special Funding as a secondary oversight of the transactions. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-028 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) WIC Grants to States (WGS) ALN: 10.578 Award #: 1VI700748 Award Period: 07/01/19 - 12/31/23 Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 4 out of 8 financial and progress reports and noted the following: - 2 financial reports where there was no evidence of submission and review by the authorized reviewer. Additionally, sufficient supporting documentation was not available to validate accounting basis used in reporting the data and the respective financial information agreed with accounting records. - 2 progress reports did not contain evidence that the report was reviewed by an authorized reviewer prior to submission. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Effect – The Government is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the Government does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that Government reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Health will create an internal control procedure to indicate proper review and approval of the SF-425 excel print out from the electronic USDA FPRS System. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-029 Prior Year Finding Number: 2022-026 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2-1001, W9127P-22-2-1001 Award Period: 10/01/2021 – 09/30/2022 10/01/2022 – 09/30/2023 Criteria – CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records. - Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and - Support the distribution of employee salary across multiple activities or cost objectives. The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 60 out of 652 payroll transactions and noted the following: - 1 instance where health insurance costs continued to be charged to the program after the employee retired, with no related time and effort. - 1 instance where the employee pay rate did not agree to the pay rate listed on their NOPA form. - 7 instances where the timesheet for the pay period selected was not provided. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program during fiscal year 2023 were $1,810,965 and the total amount of our sample was $188,082. The known amount of the exceptions amounted to $26,694. Effect – OTAG is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – OTAG does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles stipulations. Recommendation – We recommend that OTAG improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG implemented enhanced payroll controls including a dual manual and electronic timesheet system, verification of pay rates against NOPA forms, and separation controls to discontinue benefit charges upon employee separation or retirement. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-030 Prior Year Finding Number: 2022-027 Compliance Requirement: Cash Management and Reporting Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2-1001, W9127P-22-2-1001 Award Period: 10/01/2021 – 09/30/2022 10/01/2022 – 09/30/2023 Criteria – U.S. Department of the Treasury (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as amended (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations requires state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assistance Listing that meet the funding threshold for a major federal assistance program under the CMIA. Treasury-State Agreements also specify the terms and conditions under which an interest liability would be incurred. Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. SF-270, Request for Advance or Reimbursement Report, is required to be filed in connection with cash drawdowns. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We were unable to verify the completeness of the SF-270 (cash management and reporting) population. As a result, we were unable to test compliance and internal controls over compliance related to the cash management and reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements and general compliance principles. Effect – OTAG is not in compliance with the stated provisions. Inaccurate information may have been reported to the Federal government in the absence of required reconciliations and reviews. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation - We recommend that OTAG reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG established a centralized SF-270 tracking log and implemented reconciliation procedures to ensure completeness and accuracy of cash drawdowns prior to submission. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-031 Prior Year Finding Number: 2022-028 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2-1001, W9127P-22-2-1001 Award Period: 10/01/2021 – 09/30/2022 10/01/2022 – 09/30/2023 Criteria – According to the Master Cooperative Agreement Section 303, Cost Sharing, cost sharing requirements are found in a grantees individual Cooperative Agreements. The Government has various cost-sharing requirements within their Cooperative Agreements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – OTAG was unable to readily exhibit and provide its computation of the matching calculation or provide evidence that it was monitoring compliance with said requirement. Therefore, we were unable to determine if the matching requirement has been met or if the expenditures being claimed towards the matching requirement are allowable activities/costs. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the matching compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements and general compliance principles. Effect – OTAG is not in compliance with the stated provisions. Cause – OTAG does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Recommendation – We recommend that OTAG deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the matching requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG implemented a formal match tracking mechanism and assigned responsibility for calculating, documenting, and monitoring match requirements throughout the fiscal year. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-032 Prior Year Finding Number: 2022-029 Compliance Requirement: Period of Performance Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2-1001, W9127P-22-2-1001 Award Period: 10/01/2021 – 09/30/2022 10/01/2022 – 09/30/2023 Criteria – National Guard Bureau O&M cooperative agreements (CA) are funded with one-year appropriations. By policy, only state costs obligated during the period of the federal fiscal year or period of performance identified in the CA are reimbursable. (National Guard Regulation (NGR) 5-1, chapters 3 and 11). The recipient shall not request reimbursement for any expenditure it made before the date that all required parties execute the Master Cooperative Agreement (MCA) unless the United States Property & Fiscal Officer (USPFO) expressly authorizes expenditures made during the funding period, but prior to the date of final signature, the parties may also agree on a specific start or effective date (NGR 5-1, Chapter 11). Within 90 days after the end of the federal fiscal year or upon termination of the CA, whichever is earlier, the recipient shall promptly deliver to the USPFO a final accounting of all funding and disbursements under the agreement for the fiscal year (NGR 5-1, Chapter 11). If unliquidated claims and undisbursed obligations arising from the recipient’s performance of the CA will remain 90 days after the close of the federal fiscal year, the recipient shall provide a detailed listing of uncleared obligations and a projected timetable for their liquidation and disbursement no later than 31 December. The USPFO shall then set an appropriate new timetable for the recipient to submit its final accounting (NGR 5-1, Chapter 11). Costs incurred in a federal fiscal year, which are not disclosed by the recipient within 90 days of the end of the federal fiscal year, except costs associated with unliquidated claims and undisbursed obligations arising from the recipient’s performance of the CA that the recipient has reported, shall not be eligible for reimbursement by NGB. The USPFO may extend the 90-day limit for good cause shown (NGR 5-1, Chapter 11). Additionally, a non-federal entity may charge to the Federal award, 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We sampled and selected 163 out of 1,533 transactions and noted the following: - 21 instances where transactions were charged to the incorrect grant award. - 34 instances where the transaction was paid outside the liquidation period. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the period of performance compliance requirements. Questioned Costs – $384,389. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements using a statistically valid sample. The total amount expenditures subject to sampling were $4,170,938 and the total amount of our sample was $937,482. The known amount of the exceptions amounted to $384,389. Effect – OTAG is not in compliance in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – OTAG did not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation – We recommend that OTAG strengthen its processes with respect to setting up and charging expenditures between various grant awards. We also recommend that OTAG enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG enhanced grant setup, expenditure charging, and closeout controls to ensure costs are charged to the correct award and within the approved period of performance, including 90-day liquidation monitoring. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-033 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources Fish and Wildlife Cluster ALN: 15.605, 15.611 Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records. - Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and - Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of 620 payroll disbursements and noted the following: - 8 instances where the approved timesheet for the pay period selected were not available for review. - 10 instances where an employees assigned project code documented on the Notice of Personnel Action was not a project code associated with the grant. Additionally, the payroll register reflected a different project code for these transactions. - 1 instance with a variance between the hours reported on the payroll register and the hours reported on the Detail Check History. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – $38,914. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2023 was $1,572,926. The amount sampled is $165,134. The value of transactions with exceptions totaled $38,914. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – The Government does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that the Government reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. We recognize that these findings highlight areas where improvements are necessary to ensure better compliance with applicable policies and regulations governing payroll and grant management. We are committed to implementing corrective actions and enhancing the internal controls to prevent recurrence. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-034 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources Fish and Wildlife Cluster ALN: 15.605, 15.611 Award #: Various Award Period: Various Criteria – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for the Government. DPP was unable to provide an accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2023. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements. Equipment purchased in 2023 totaled $259,076. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation – We recommend that DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Asset Management Division (AMD) adheres to Federal equipment guidelines. Assets are tagged, and records are created using the Tyler Munis Resource Planning system (ERP). In 2022, AMD inventoried four agencies, ensuring compliance with Federal regulations. The completed Standard Operation Policies and Procedures (SOPP) are pending approval, crucial for enhancing internal controls. Training sessions for fixed assets employees are planned, and additional staff will be needed to support the initiative effectively. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-035 Prior Year Finding Number: 2022-030 Compliance Requirement: Cash Management Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources Virgin Islands Energy Office Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria – US Department of the Treasury (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as amended (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations requires state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assistance Listing that meet the funding threshold for a major federal assistance program under the CMIA. The CMIA agreement for this program stipulates a reimbursement method with 7-day clearance. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 23 out of 109 drawdowns and noted the following: - No supporting invoices were available for review for 2 drawdowns. - No supporting documentation was available for review for 1 drawdown. - Documentation confirming receipt of the funds was not available for review for 2 drawdowns. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the cash management compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Total fiscal year 2023 drawdown requests were $8,059,011. Total amount sampled is $4,705,168. The total amount of the exceptions is $1,023,933. Effect – The Government is not in compliance with the stated provisions. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation - We recommend that the Government reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures to ensure compliance with stated provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The GVI is currently in the process of developing a comprehensive Grants Management Overarching Standard Operating Policies and Procedures (SOPP) to establish uniform guidance for all grant-related processes, including drawdowns, documentation retention, and compliance monitoring. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-036 Prior Year Finding Number: 2022-031 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of the Interior Government Department/Agency: Various Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for the Government. DPP was unable to provide an accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2023. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements. Equipment purchased in 2023 totaled $1,452,046. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation – We recommend that DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Property and Procurement (DPP) acknowledges the findings and is actively implementing measures to strengthen compliance with federal equipment requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-037 Prior Year Finding Number: 2022-032 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Interior Government Department/Agency: Various Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria – When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Per Procurement Manual, User Agencies are required to submit a written justification letter to the Government’s Department of Property and Procurement (DPP), which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 15 out of 78 procurement transactions, we were unable to obtain the contract files for 4 procurement transactions to validate adherence to procurement policy. In addition, we noted 5 procurements did not include the following: - Contract file documents showing the significant history of the procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis of contract price. - The procurement provides full and open competition. - Documentation in support of the rationale to limit competition in those cases where competition was limited and ascertain if the limitation was justified. - Cost or price analysis in connection with procurement action, including contract modifications and that this analysis supported the procurement action. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the procurement compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of DPP’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $4,159,155. Total amount sampled was $2,948,589. The known amount of exceptions is $2,336,143. Effect – DPP could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – DPP does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government updated its procurement laws and issued revised manuals, along with position-specific Standard Operating Procedures. Processes to enforce internal controls and ensure adherence to procurement laws have been established and are regularly reinforced. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-038 Prior Year Finding Number: 2022-033 Compliance Requirement: Reporting Program: U.S. Department of the Interior Government Department/Agency: Various Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 18 out of 164 financial and performance reports and noted the following: - 6 financial reports and 4 performance reports were not available for review. - 3 financial reports where sufficient supporting documentation were not available to validate that the respective financial information agreed with the underlying records. - 2 performance reports did not contain evidence of review or approval before submission. Additionally, the Government did not submit FFATA reports where subawards were made for more than $30,000 for fiscal year 2023. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Effect – The Government is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the Government does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that Government reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government plans a high-level review of internal control policies and closely monitoring reports for completeness, accuracy, timeliness, and consistency with Cognizant Agency guidelines. An analyst will be assigned to track reporting schedules, oversee grant activity, and manage document storage, ensuring timely submission of all required reports for each grant award. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-039 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria – A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 2 of 4 subrecipients and found the following: - No supporting documentation of monitoring the subawards and evaluating the risk of noncompliance for each subrecipient. - No evidence that pass-through entity verified that subrecipients expected to be audited as required by 2 CFR part 200, subpart F. - No supporting documentation if the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient. Additionally, there was no evidence of review of performance and special reports, as no supporting documentation was available for review by the pass-through entity for 1 of the 2 subrecipients tested. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2023 were $341,920. The total amount of our sample totaled $131,920. Effect – Failure to properly adhere to policies and procedures can result in noncompliance with laws and regulations and failure to meet the program's objectives. Cause – DPNR does not have policies and procedures in place to ensure personnel adhere to the internal procedures to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that DPNR implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The GVI is currently in the process of developing a comprehensive Grants Management Overarching Standard Operating Policies and Procedures (SOPP) to establish uniform guidance for all grant-related processes, including drawdowns, documentation retention, subrecipient and compliance monitoring. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-040 Prior Year Finding Number: 2022-034 Compliance Requirement: Activities Allowed or Unallowed Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – In accordance with the Uniform Guidance in 2 CFR Section Part 200, a State or Territory must adopt its own written fiscal and administrative requirements for expending and accounting for all funds, which are consistent with the provisions of Uniform Guidance and extend such policies to all sub-recipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions, costs are reasonable and necessary for operating these programs, and funds are not used for general expenses required to carry out other responsibilities of a State or Territory or its subrecipients. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – VIDOL was unable to provide reconciled accounting information relating to the majority of the Unemployment Insurance Trust Fund accounts. As such, we are unable to conclude on the fiscal and administrative requirements with respect to expending and accounting for all funds related to the Unemployment Insurance program. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the above referenced compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements. Effect – Accounting tasks, such as periodic reconciliations, play a key role in proving the accuracy of accounting data and information included in various interim financial statements and/or Federal reports. A lack of timely preparation of complete and accurate reconciliations results in the absence of adequate control over both cash receipts and disbursements. Cause – VIDOL does not appear to have adequate policies and procedures in an effort to adequately administer the expending and accounting for all funds. Recommendation – We recommend that VIDOL improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for all funds. In order to prevent significant errors in the financial records as well as prevent possible irregularities, including fraud, to exist and continue without notice, we recommend that all accounts, accruals, and reconciliations be reviewed on a periodic basis. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL acknowledges the auditor's finding regarding balance discrepancies with the general ledger, attributed to an incomplete file for audit. To prevent future issues, VIDOL updated the report writer for balance queries and will work with staff to provide training on VIDOL Standard Operating Policies and Procedures. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-041 Prior Year Finding Number: 2022-035 Compliance Requirement: Eligibility Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – Public Law 112-96 Sec. 2101 requires that as a condition of eligibility for regular compensation, a claimant must be able to work, available to work, legally authorized to work in the United States and actively seeking work. Claimants must meet other conditions of eligibility for Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC) and Federal Pandemic Unemployment Compensation (FPUC). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 60 out of 4,741 unemployment claim files and noted the following: - 1 instance where VIDOL was not able to provide evidence that the claimant met the criteria for participating in the UI program but had received benefits during the year. Benefits paid to the individual during 2023 totaled $6,832. - 2 instances where VIDOL was not able to provide evidence to confirm benefit payments were discontinued when the eligibility period expired. Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate claims charged to the program. Questioned Costs – $6,832. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Total amount of unemployment claims charged to the program during fiscal year were $5,125,575. The total amount sampled is $81,571. The known amount of the exceptions is $6,832. Effect – Noncompliance with program requirements could result in disallowances of costs and participants could receive benefits that they are not entitled to receive. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of the data in its claimant files. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper maintenance and retention of complete program files and confirm that only eligible participants are receiving benefits they are entitled to. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. An electronic record-keeping system for claims files is expected to be launched before the end of FY 2026, enhancing record retention. VIDOL is reviewing its record retention policy and procedures and will provide training to staff on proper maintenance and retention of complete program files. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-042 Prior Year Finding Number: 2022-036 Compliance Requirement: Reporting Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with the program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 28 out of 103 financial, performance and special reports required to be submitted. We noted the following reports did not have supporting documentation available for review: - 2 ETA 191, Financial Status of UCFE/UCX reports - 4 ETA 2112, UI Financial Transaction Summary - 2 ETA 2208A, Quarterly UI Above-Base Report - 4 ETA 9050, Time Lapse of All First Payments except Workshare - 4 ETA 9052, Nonmonetary Determination Time Lapse Detection - 4 ETA 9055, Appeals Case Aging – Lower and Higher Authority Appeals Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate reports submitted to the Federal government. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Effect - VIDOL is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VIDOL does not appear to have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by the appropriate official who would ensure that information reported is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL has reviewed its policies and procedures and is working to provide staff training to ensure supporting documentation is secure and readily accessible. VIDOL will update its policies and procedures to ensure that all supporting documentation is certified by the UI Director or designee before a report is submitted to the grantor. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-043 Prior Year Finding Number: 2022-038 Compliance Requirement: Special Tests and Provisions – UI Reemployment Programs (WPRS and RESEA) Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – The UI program serves as one of the principal “gateways” to the workforce system. It is often the first workforce program accessed by individuals who need workforce services. The WPRS and RESEA programs service as UI’s primary programs that facilitate the reemployment needs of UI claimants. RESEA is authorized by Section 306 of the Social Security Act and builds on the success of both WPRS and RESEA’s predecessor, the former UI Reemployment and Eligibility Assessment (REA) program. RESEA uses an evidence-based integrated approach that combines an eligibility assessment for continuing UI eligibility and the provision of reemployment services. RESEA is a voluntary program and under certain circumstances may be designed to also satisfy WPRS requirements. Operating guidance for the RESEA program is updated annually. UIPL 7-19 provides RESEA operating guidance for FY 2019. Per 2 CFR section 200.303(a), a nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition – During our testing of VIDOL’s compliance with UI Reemployment Programs, we found VIDOL did not submit the 9129 Quarterly RESEA reports. Further, it appears controls are not designed to ensure the timely and proper submission of required reports. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements. Effect – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Cause – VIDOL does not appear to have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by the appropriate official who would ensure that information reported is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL has reviewed its policies and procedures and is working to provide staff training to ensure supporting documentation is secure and readily accessible. VIDOL will update its policies and procedures to ensure that all supporting documentation is certified by the UI Director or designee before a report is submitted to the grantor. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-044 Prior Year Finding Number: 2022-042 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles – Non-Payroll Activities and Procurement and Suspension and Debarment Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria – Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively), Treasury’s Interim Final Rule and Final Rule at 31 CFR sections 35.7 and 35.8. The following activities are not permitted under CSLFRF: - Offset a reduction in net tax revenue (applicable to states and territories) - Deposits into pension funds (applicable to all recipients except Tribes) - Debt service or replenishing financial reserves (e.g., “rainy day funds”) (applicable to all recipients) - Satisfaction of settlements and judgements (applicable to all recipients) - Programs, services, or capital expenditures that include a term or condition that undermines efforts to stop the spread of COVID-19 (applicable to all recipients) Recipients may use payments from CSLFRF to: - Support public health expenditures, by funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff; - Address negative economic impacts caused by the public health emergency, including economic harms to workers, households, small businesses, impacted industries, and the public sector; - Replace lost public sector revenue to provide government services; recipients may use this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic. - Provide premium pay for essential workers, offering additional support to those who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors; and, - Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and to expand access to broadband internet. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In mid-2024, an inquiry was conducted by the United States Department of Justice (“DOJ”) into potential criminal activity associated with three individuals, each of whom were senior GVI officials working in their respective capacities as Director/Commissioner of the U.S. Virgin Islands Office of Management and Budget, Virgin Islands Police Department, and Department of Sports, Parks, and Recreation. As of January 2025, the DOJ filed formal indictments against the these now former USVI officials (collectively the “Indicted Individuals”). The DOJ alleged that the Indicted Individuals were involved in activities associated with bribery, specifically providing, or attempting to provide, accelerated approval of contracts and payments on invoices to a vendor, Mon Ethos Pro Support, LLC. The court cases are on-going. In 2023, Mon Ethos Pro Support, LLC was paid $60,387 from Coronavirus State and Local Fiscal Recovery Funds, which are considered questioned costs. Further, internal controls over compliance do not appear to be operating effectively to ensure compliance with the allowable activities and procurement compliance requirements. Questioned Costs – $60,387. Context – This is a condition identified per review of current events and specific transactions related to the vendor identified in the DOJ indictment. Effect – Fraudulent transactions associated with a Federal program can lead to an assessment of penalties, claw back of federal funds and termination of awards. Further, an ineffective control system related to procuring of vendors and submission of allowable costs that could ultimately lead to disallowed costs for the major programs. Cause – OMB does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and procurement standards. Specifically, there appears to be a lack of monitoring controls and an appropriate level of review and approval of transactions prior to charging costs to a federal program. Recommendation – We recommend that OMB evaluate its policies and procedures to ensure appropriate internal controls in order to comply with federal regulations relating to the procurement of goods and services and review current records retention policies. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A comprehensive corrective action plan has been implemented to strengthen grant management and compliance. Key personnel have been hired, including a Grants Administrator and an external accounting firm, to provide oversight and expertise. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-045 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 – Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria – Recipients may use payments from SLFRF to replace lost public sector revenue to provide government services. Recipients may use this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic. Under the Final Rule, recipients can elect a one-time “standard allowance” of $10.0 million (not to exceed the recipient’s award amount) to spend on the “provision of government services” during the period of performance. Alternatively, recipients can calculate lost revenue for the years 2020, 2021, 2022, and 2023 based on the formula provided in the Final Rule to determine the amount of SLFRF funds that can be used for the “provision of government services.” Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government opted to calculate the lost revenue for the years 2020, 2021, 2022, and 2023 using the formula provided in the Final Rule. We reviewed the revenue loss calculation and noted that there was no evidence of review of the calculation. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements. Effect – Without adequate internal controls to ensure compliance with earmarking requirements, there is an increased risk that earmarking requirements will not be properly applied, and funding could be jeopardized. Cause – OMB does not appear to have adequate policies and procedures to ensure consistent review and monitoring of the requirements. Recommendation – We recommend that OMB improve internal controls to ensure adherence to federal regulations to the earmarking requirements by deploying resources that are given responsibility to ensure periodic monitoring and review of the earmarking requirements. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. Moving forward, OMB will enhance its internal controls to ensure all procedural documentation is thoroughly reviewed and approved, with clear evidence of such approval. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-046 Prior Year Finding Number: 2022-043 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 – Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria – Recipients may use award funds to enter into contracts to procure goods and services necessary to implement one or more of the eligible purposes outlined in sections 602I and 603I of the Act and Treasury’s Interim Final Rule and Final Rule. As such, recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance. Specifically, a state must follow the same policies and procedures it uses for procurements from its non-federal funds and comply with 2 CFR sections 200.321, 200.322, and 200.323. States must also ensure that every contract includes the applicable contract clauses required by 2 CFR section 200.327. Per Procurement Manual, User Agencies are required to submit a written justification letter to DPP, which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source, and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. As such, please provide the justification letter for these three Task Order Contracts. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) is primarily responsible for procurement transactions. In our review of 10 out of 99 procurement transactions, we noted 5 transactions where documentation demonstrating compliance with the VI Procurement Laws were not available for review. Further, internal controls over compliance do not appear to be designed to ensure relevant procurement documentation is retained to demonstrate compliance with the procurement compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Total amount of the procurement transactions was $32,835,869. The total amount of the samples was $5,210,713. The known amount of the exceptions is $4,507,396. Effect – OMB could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – OMB does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that OMB and DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government updated its procurement laws and issued revised procurement manuals, along with issuing position-specific Standard Operating Procedures. Processes for enforcing Internal controls and adherence to procurement laws have been established and are regularly reinforced. In early 2025, the Government-wide training reinforced expectations for full and open competition. User Agencies now access GVIBUY for informal solicitations in the eProcurement system, with ongoing training to prioritize competition and enhance oversight by the Department of Property and Procurement. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-047 Prior Year Finding Number: 2022-044 Compliance Requirement: Reporting Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 – Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria – There are two types of reporting requirements for the CSLFRF program: Project and Expenditure Report: Report on financial data, projects funded, expenditures, and contracts and subawards over $50,000, and other information. Project and Expenditure Reports are due on a regular, recurring basis after the Interim Reports. The reporting frequency and deadlines vary by type of recipient and total allocation amount. Recovery Plan Performance Report: The Recovery Plan Performance Report (the “Recovery Plan”) will provide information on the projects that large recipients are undertaking with program funding and how they plan to ensure program outcomes are achieved in an effective, efficient, and equitable manner. It will include key performance indicators identified by the recipient and some mandatory indicators identified by Treasury. The Recovery Plan will be posted on the website of the recipient as well as provided to Treasury. In addition, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Of the 5 reports submitted during the fiscal year, we selected the following reports to review: - Projects and Expenditures Report – Quarter Ended December 31, 2022 - Projects and Expenditures Report – Quarter Ended March 31, 2024 - Recovery Plan Performance Report – Year ended June 30, 2023 We found all reports did not contain evidence of review and approval prior to submission. Further, we noted all reports contained inaccurate data. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Effect – OMB is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, OMB does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that OMB reevaluates its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. Starting in 2024, OMB has implemented a reporting approval memo, signed by the OMB Director, to confirm the review and approval of Treasury reports. OMB has enhanced the collection and storage of supporting financial information for all projects in quarterly reports, ensuring necessary support is available upon request as of FY23. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-048 Prior Year Finding Number: 2022-045 Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 – Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria – A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 10 of 21 subrecipients and found no evidence the subrecipient monitoring workbook was reviewed by the American Rescue Plan Act (ARPA) Grants Administrator. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2023 were $104,779,873. The total amount of our sample totaled $89,247,731. Effect – Failure to properly adhere to policies and procedures can result in noncompliance with laws and regulations and failure to meet the program’s objectives. Cause – OMB does not have policies and procedures in place to ensure personnel adhere to the internal procedures to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that OMB implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. Starting FY25, OMB will identify and monitor federal awarding agencies, requesting single audit results for applicable recipients and including them in monitoring reviews. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-049 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027A, 84.027X Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records. - Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and - Support the distribution of employee salary across multiple activities or cost objectives. Furthermore, CFR 200.113 requires that an applicant, recipient, or subrecipient of a Federal award must promptly disclose, in writing, whenever it has credible evidence of the commission of a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code, or a violation of the civil False Claims Act, in connection with the Federal award (including any activities or subawards thereunder). The disclosure must be made to the Federal agency, the agency’s Office of Inspector General, and the pass-through entity (if applicable). Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 40 of 2,573 payroll disbursements and noted 2 instances where the employee’s pay rate in the approved Notice of Personnel Action provided did not agree with the pay rate in the payroll register. Additionally, a fraud incident related to falsified payroll timesheet entries charged to this program was discovered and investigated during the year. It was discovered that bus driver timesheets were being approved with falsified time entries. An analysis conducted by VIDE determined the amount of theft to be $5,221. This incident was not disclosed or reported to the Federal awarding agency as required. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – $5,221. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2023 was $5,744,863. The amount sampled is $102,945. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review was completed prior to charging costs to a federal program. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll transactions. Additionally, fraud incident should be reported to the appropriate federal awarding agency in accordance with mandatory disclosure requirements. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE is taking immediate action to align payroll controls with our established fiscal improvement plan and to institutionalize a mandatory federal reporting protocol for fraud. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-050 Prior Year Finding Number: 2022-046 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027A, 84.027X Award #: Various Award Period: Various Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The VIDE maintains an equipment listing for fixed assets purchased with federal funding. VIDE was unable to provide complete property records which met the stated requirements. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping or equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. We recognize that while a dual-control workflow exists, high staff turnover and a lack of strict adherence have led to gaps in compliance, and to address this, VIDE is moving to strictly enforce its established protocols and provide targeted training to new personnel in the Procurement and Fixed Asset divisions. VIDE is enforcing strict adherence to its established collaborative dual-control process to ensure timely identification of federally funded equipment, specifically reinforcing the requirement that the Procurement Warehouse must tag assets immediately upon physical receipt so that no asset is permitted to leave the warehouse or enter the ecosystem without a unique identifier. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-051 Prior Year Finding Number: 2022-047 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027A, 84.027X Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Further, in accordance with the Uniform Guidance in 2 CFR Section 200.306, a State may not reduce the amount of State financial support for special education and related services for children with disabilities (or State financial support otherwise made available because of the excess costs of educating those children) below the amount of State financial support provided for the preceding fiscal year. The Secretary reduces the allocation of funds under 20 USC 1411 for any fiscal year following the fiscal year in which the State fails to comply with this requirement by the amount by which the State failed to meet the requirement. Additionally, an LEA can use not more than 15% of the amount of federal Part B funds the LEA receives for any fiscal year (less any amount by which it reduces its expenditures under 20 USC 1413(a)(2)(C)) (see III.G.2.1.b.(6) in this section), in combination with other funds, to develop and implement, early intervening services for children in kindergarten through grade 12 who have not been identified under IDEA but need additional academic and behavioral support to succeed in the general education environment (20 USC 1413(f); 34 CFR section 300.226). Condition – We reviewed the level of effort calculations and noted the following: - At the Local Education Agency (LEA) level, we noted that although the two LEAs appeared to meet the required financial support thresholds on the per child basis based on the level of effort compliance requirement, we were unable to verify the number of students for each LEA. - At the State Education Agency (SEA) level, we were unable to review documentation that included the approval /certification of the amounts in the Maintenance of Financial support at the State Education level. In addition, although the calculation shows that VIDE met the Maintenance of Effort at the State level, we were unable to review documentation that would allow us to verify the number of students served in the current year. We reviewed the earmarking documentation and noted the following: - At the State Education Agency (SEA) level, for the non-ARP grant, we were unable to verify the total numbers of students and the number of students in poverty. We were therefore unable to confirm that the allocation of the remaining funds to the LEA agreed with the relative numbers of children living in poverty. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the level of effort and earmarking compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements. Effect – VIDE is not in compliance with the stated provisions. Without adequate internal controls to ensure compliance with level of effort requirements and earmarking, there is an increased risk that level of effort and earmarking requirements will not be properly applied, and funding could be jeopardized. Cause – VIDE did not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of the requirements. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to federal regulations relating to the level of effort and earmarking requirements at the SEA and LEA levels by deploying resources that are given the responsibility to ensure periodic monitoring and compliance of the level of effort and earmarking requirements. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE will establish a team for quarterly reviews of documentation, report issues, and recommend corrective actions. The IDEA State Office will set procedures for verifying accuracy of data reported by LEAs. Comprehensive staff training will ensure understanding of new policies and procedures. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2023-052 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records. - Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and - Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 40 of 4,518 payroll disbursements and noted the following: - 18 instances where the approved timesheet for the pay period selected were not available for review. - 2 instances where the per diem support were not readily identifiable. - 1 instance where the employee’s pay rate in the approved NOPA provided did not agree with the pay rate in the payroll register. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2023 was $7,738,716. The amount sampled is $95,985. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE is taking immediate action to align payroll controls with the established fiscal improvement plan. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2023-053 Prior Year Finding Number: 2022-049 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition – The VIDE maintains an equipment listing for fixed assets purchased with federal funding. VIDE was unable to provide complete property records which met the stated requirements. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the equipment management compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping or equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE plans to improve management and documentation of federally funded equipment by enhancing its asset tracking system and maintaining centralized records with detailed asset information. The Procurement Division will conduct quarterly inventory audits to reconcile records with actual inventory, resolving discrepancies promptly. The Fixed Asset Director will establish communication protocols among Programs/Divisions, requiring monthly status reports to ensure data accuracy and timely updates. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2023-054 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Criteria – When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Per Procurement Manual, User Agencies are required to submit a written justification letter to the Government’s Department of Property and Procurement (DPP), which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 40 out of 354 procurement transactions, we noted 2 transactions in which the approved Short Form Contract required for service-related procurement were not available for review. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the procurement compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $6,434,229. Total amount sampled was $1,428,065. The known amount of exceptions is $95,120. Effect – VIDE could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – VIDE does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to federal regulations relating to the procurement of services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE recognizes that the unavailability of approved Short Form Contracts during the audit indicates a gap in record retention and file maintenance. To address this, the Business Office will not process any payment voucher for service-related procurements unless the approved Short Form Contract is attached to the ERP transaction as a mandatory supporting document. To ensure records are maintained and readily available for future reviews, the Procurement Division will digitize all executed Short Form Contracts and upload them to the department’s centralized SharePoint repository immediately upon execution. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2023-055 Prior Year Finding Number: 2022-050 Compliance Requirement: Reporting Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Under 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities, receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – VIDE failed to submit subaward data to fulfill the Transparency Act reporting requirements for the first tier subawards of $30,000 or more. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition per review of VIDE’s compliance with reporting requirements. In fiscal year 2023, VIDE passed through approximately $842,000 to 9 subrecipients. Effect – VIDE is not in compliance with reporting requirements as it failed to provide evidence of identifying and reporting Transparency Act reporting requirements. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Recommendation – We recommend that VIDE should implement policies, procedures and controls that will comply with all required laws, guidelines, and requirement under the award. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE plans to address the audit finding on FFATA reporting by developing detailed reporting policies and procedures. These will include guidelines for identifying and tracking subawards, collecting required data, and setting submission timelines. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-056 Prior Year Finding Number: 2022-052 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) COVID-19 – Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 – 09/30/2022 01/13/2021 – 09/30/2023 COVID-19 – American Rescue Plan – Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records: - Reasonable reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and - Support the distribution of employee salary across multiple activities or cost objectives. Condition – For ALN 84.425 subprogram A and X, we sampled and selected 60 of 6,465 payroll expenditures and noted the following: - 29 instances where the timesheet for the pay period selected were not available for review. - 1 instance where the hours recorded on the employees’ timesheets did not agree with the hours recorded per the payroll register. - 1 instance where the check detail payment support was not available for review. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the activities allowed or unallowed and allowable costs/cost principles compliance requirements. Questioned Costs – $74,108. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to program in fiscal year 2022 is $9,237,083. Total amount sampled is $116,136. The known amount of the exceptions is $74,108. Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of VIDE in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is addressing audit findings related to payroll activities by enhancing internal controls to ensure compliance with federal regulations. Key measures include improving timesheet management through electronic submission, mandatory supervisor review, and secure storage. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-057 Prior Year Finding Number: 2022-053 Compliance Requirement: Reporting Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Criteria – Each State or Territory must file various financial, programmatic and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Specifically for this program, the CARES Act 15011(b)(2) requires institution receiving funds under ESF II-Governor and ESF II-SEA to submit the required quarterly reports to the Secretary at such time and manner and containing such information as the Secretary may require. Under 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). Furthermore, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed OMB and VIDE's compliance with the reporting requirements and noted the following: - OMB was unable to provide evidence of submission of the annual performance review report, quarterly progress update reports, and FFATA reports for ALN 84.425, subprogram H. - Amounts included in the annual performance review report for ALN 84.425, subprograms A and X, did not agree to supporting documents provided. - The annual performance review report for ALN 84.425, subprograms A and X, did not contain evidence that the report was reviewed and approved prior to submission. Further, it does not appear that the controls in place are operating at a level of precision to ensure the timely filing of reports. Questioned Costs – None. Context – This is a condition identified per review of OMB and VIDE’s compliance with the specified requirements using a statistically valid sample. 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. Cause – The internal controls established for submission of reporting requirements did not fully operate as designed causing late submission and not in compliance with reporting requirements under the Transparency Act related to the program’s subrecipients. Recommendation – We recommend that OMB and VIDE reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is addressing deficiencies in the reporting processes for the COVID-19 Education Stabilization Fund (ESF-SEA) by committing to enhance reporting practices for compliance with federal requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-058 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 Criteria A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that nonfederal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 10 out of 27 subrecipients and noted that, all 10 samples where VIDE and OMB failed to provide the evidence of monitoring and reviewing sub-grantee to ensure effective management of sub-awards. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements or proper identification of subrecipients. Questioned Costs – None. Context – This is a condition identified per review of VIDE and OMB’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2023 was $4,220,685. The total amount of our sample totaled $3,051,101. Effect – VIDE and OMB are not in compliance with the stated provisions. Failure to properly identify and monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the program's objectives. Cause – VIDE and OMB do not have internal controls in place to properly identify and monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that VIDE and OMB implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. During the period under review, gaps in documentation and monitoring were impacted by staff turnover, leadership transitions, and programmatic shifts, which limited the consistency and precision of subrecipient oversight across programs. In response, Office of Federal Grants (OFG) has taken steps to reinforce its role as the pass-through entity and to formalize monitoring expectations and processes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-059 Prior Year Finding Number: 2022-054 Compliance Requirement: Special Tests and Provisions – Participation of Private School Children Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governors I and II) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per Compliance Supplement, the State or Territory or agency receiving financial assistance under ESF-SEA I and ESF-Governor I, must provide eligible private school children and their teachers or other educational personnel with equitable services or other benefits under the program. Before an agency, consortium, or entity makes any decision that affects the opportunity of eligible private school children, teachers, and other educational personnel to participate, the agency, consortium, or entity must engage in timely and meaningful consultation with private school officials. Expenditures for services and benefits to eligible private school children and their teachers and other educational personnel must be equal on a per-pupil basis to the expenditures for participating public school children and their teachers and other educational personnel, taking into account the number and educational needs of the children, teachers and other educational personnel to be served. For the programs under ESF-SEA, ESF II-SEA, ESF-Governor, ESF II- Governor will ensure equitable services will be provided to students and teachers in non-public elementary and secondary schools in the same manner provided under section 8501 of the Elementary and Secondary Education Act (ESEA). Condition – We sampled and selected 9 out of 27 non-public schools for VIDE and noted following: - VIDE was not able to provide documentation that they reviewed the planned services and communication. - Computation by VIDE of the amount allocated to nonpublic schools did not contain evidence of review and approval. - VIDE did not provide the Affirmation of Consultation/Intent to Participate for 9 out of 27 nonpublic schools consulted. - VIDE did not provide documentation to support that the educational services that were planned were provided. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the special tests and provisions requirements. Questioned Costs – None. Context – This is a condition identified per review of OMB and VIDE’s compliance with the specified requirements using a statistically valid sample. Effect – Noncompliance with program requirements could result in disallowances of costs and ineligible schools could be participating in the program. Cause – OMB and VIDE do not appear to have an effective system in place to ensure consistent and systematic review of documentation and file maintenance. Recommendation – We recommend that OMB and VIDE implement policies, procedures, and controls that will ensure equitable services are provided to eligible private school children and their teachers and other educational personnel. OMB and VIDE should also review its record retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. OMB will develop and implement formal policies and procedures to ensure compliance with federal regulations. This includes establishing guidelines and a schedule for timely consultations with nonpublic schools and collaborating with the Department of Education to ensure equitable per-pupil expenditures for both private and public school children. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-060 Prior Year Finding Number: 2022-055 Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Non-federal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the Department of Labor regulations (29 CFR part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). Condition – We reviewed VIDE's compliance with the wage rate requirements and noted the following: - VIDE did not implement a formal process for the wage rate requirements compliance for fiscal year 2023. - We randomly selected 3 contracts for classroom and office repair services and determined it did not indicate a provision that the contractor complies with wage rate requirements. - VIDE did not provide the certified payrolls required to be submitted by the contractor. Further, it does not appear that there are controls in place to ensure compliance with the special tests and provisions compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements not using a statistically valid sample. Effect – VIDE is not in compliance with the stated provisions. There is potential that contractor or subcontractors could have paid their employees less than the prevailing wage rates established by the Department of Labor. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable wage rate requirements. Recommendation – We recommend the VIDE implement policies, procedures, and controls that will ensure adherence to Federal regulations related to wage rate requirements, and to ensure that responsible project management personnel obtain and review the required certified payroll reports for each week in which contract work is performed. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is addressing compliance gaps related to wage rate requirements under the COVID-19 Education Stabilization Fund by reviewing all contracts to ensure they include appropriate compliance language. Contract templates will be updated to mandate compliance and specify consequences for noncompliance. Additionally, VIDE will implement a system requiring contractors to submit certified payroll reports weekly, with a designated team responsible for collecting, reviewing, and retaining these reports to verify compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-062 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 42 out of 520 non-payroll transactions, we noted 1 instance in which the expenditure was not approved by the personnel authorized to do so. Questioned Costs – None. Context – This is a condition identified per review of the DHS’ compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program were $6,751,631. Total amount sampled is $4,475,308. The known amount of the exceptions is $441,706. Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure internal controls are consistently and diligently applied. Recommendation – We recommend that DHS improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. A workflow is established to ensure the proper review and processing of Accounts Payables payments. This includes a level of approval by the Chief Financial Officer. Any transactions $50,000 and above require approval by the Agency Head or their Designee. The workflow is then automatically released to the Department of Finance for review, approval and check processing. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-063 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records. - Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and - Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of 2,941 payroll disbursements and noted 1 instance where fringe benefits were incorrectly charged to the program. We found the employer share of fringe benefits charged to the program with no associated time and effort by the employee. The employee retired and the fringe benefit continued to be charged to the program subsequent to retirement. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs - $4,688. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2023 were $7,037,992. The amount sampled is $150,246. The known amount of instances of noncompliance is $4,688, which represents the fringe benefits charged to the program for the entire fiscal year with no associated time and effort by the employee. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – DHS does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that DHS reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS has incorporated into its internal controls a step to ensure that the accounts, in retrospect, are reconciled to the actual Flex earning report. DHS intends on meeting with the Department of Finance to identify the nuances that create postings to occur contrary to the Flex Earning Report account coding. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-064 Prior Year Finding Number: 2022-058 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – Real property, equipment, and intangible property, that are acquired or improved with a federal award must be held in trust by the nonfederal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the nonfederal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a federal award and that use and disposition conditions apply to the property (45 CFR section 75.323 and 45 CFR section 1303 – Subpart E). Real property acquired or improved under a federal award must be used for the authorized purpose so long as it is needed for that purpose, during which time the HSA may not dispose of, replace or encumber the property without prior ACF approval (45 CFR section 75.318; 45 CFR section 75.308(c)(1)(xi)). Equipment acquired under a federal award must be used for the authorized purposes of the project during the period of performance, or until the property is no longer needed for the purposes of the project. A HSA may not dispose of, replace, or encumber title to equipment without prior ACF approval (45 CFR section 75.319; 45 CFR section 75.308(c)(1)(xi)). Property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that nonfederal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for DHS. DPP was unable to provide complete property records which met the stated requirements. Further, no physical inventory of equipment was taken in the previous two years. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation – We recommend that DHS and DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS will be onboarding dedicated staff for Head Start inventory. DHS will continue to collaborate with the Department of Property and Procurement to ensure compliance with Federal regulations regarding equipment and its maintenance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-065 Prior Year Finding Number: 2022-059 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the compliance supplement, the states and territories are required to submit to the Federal administering agency, the Administration for Children and Families (ACF), the SF-429 Real Property Status Report and SF-429 A General Reporting on an annual basis 90 days after the end of the reporting period and the SF-428, SF-428 B, and if needed, SF-428 S Tangible Personal Property Report at closeout 90 days after the grant closes. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that nonfederal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 4 out of 14 special reports required to be submitted during the fiscal year and noted program personnel did not ensure 4 SF-429 reports were prepared and submitted to the federal grantor agency as prescribed. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements not using a statistically valid sample. Effect – DHS is not in compliance with the stated provisions. Failure to submit required reports could result in reduction or disallowance of Federal funding. Cause – It appears that policies and procedures, including oversight over submission of required reports were not functioning as intended. Recommendation – We recommend that DHS strengthen its process with respect to ensuring proper retention, monitoring, and review of the required reports by an appropriate official. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. Training was provided directly by the Federal Partner to ensure the completion of said reports. Additionally, the completion and submission of this report is being repositioned to the Fiscal Office. A review of these reports will be incorporated in the Quarterly standing meetings with the Office of Head Start and the Office of Fiscal Management. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-066 Prior Year Finding Number: 2022-060 Compliance Requirement: Special Test and Provision – Protection of Federal Interest in Real Property and Facilities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – Head Start uses specific terms related to real property and facilities, which are defined at 45 CFR section 1305.2, including construction, facility, federal interest, major renovation, and modular unit. Facilities activities (purchase, construction, major renovation, subordination of a federal interest, refinancing, and disposition) are initiated through the submission of Form SF429 (cover sheet) and applicable attachments B (Request to Acquire, Improve or Furnish) or C (Disposition or Encumbrance Request). With written prior approval from ACF, a HSA may use Head Start funds to purchase, construct, or renovate (major) a facility, including using Head Start funds to pay ongoing purchase costs which include principal and interest on approved loans (45 CFR sections 1303.40 through 1303.44). A HSA that uses Head Start funds to purchase real property or purchase, construct, or renovate (major) a facility appurtenant to real property (either owned or leased) must record a Notice of Federal Interest (also referred to as “reversionary interest”) (45 CFR sections 1303.46). The Notice of Federal Interest must include the required language content from 45 CFR section 1303.47(a) and be properly recorded in the official real property records for the jurisdiction where the facility is or will be located. A similar Notice of Federal Interest is required for leased facilities on land the HSA does not own (45 CFR section 1303.47(b)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Based on audit procedures performed, we identified 5 of 8 facilities with major repairs that did not have evidence of the required Notice of Federal Interest. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that lack of compliance with the stated requirements can result in significant fiscal issues that may put the Head Start program they administer at risk along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with protection of Federal interest in real property and facilities. Recommendation – We recommend that DHS strengthen and improve internal controls to ensure adherence to Federal regulations related to protection of Federal interest in real property and facilities. This includes incorporating the necessary internal controls to ensure the Notice of Federal Interest is obtained when required. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. Training was provided directly by the Federal Partner to ensure the completion of said reports. Additionally, the completion and submission of this report is being repositioned to the Fiscal Office. A review of these reports will be incorporated in the Quarterly standing meetings with the Office of Head Start and the Office of Fiscal Management.

Finding Number: 2023-067 Prior Year Finding Number: 2022-061 Compliance Requirement: Special Tests and Provisions – Program Governance Program: U.S. Department of Health and Human Services Government Department/Agency:Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – A Head Start Agency (HAS) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). Head Start governing body has a legal and fiscal responsibility for the HSA. The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: - approval of all major financial expenditures of the agency; - annual approval of the operating budget of the agency; - selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and - monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – When evaluating DHS’ compliance with the above-mentioned compliance requirements, we found the following: - DHS was unable to validate that they provided training and technical assistance to the governance board during the fiscal period under review. - Financial information is not shared with the governing board monthly. We observed financial information being shared quarterly. - We found no discussion by the governing board relating to monitoring of DHS’ actions to correct audit findings. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that lack of compliance with the stated requirements can result in significant fiscal issues that may put the Head Start program they administer at risk along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with program governance. Recommendation – We recommend that DHS strengthen and improve internal controls to ensure adherence to Federal regulations related to program governance training and technical assistance to governing body and policy council. There should be regular training that will enable the governing body to perform it’s legal, fiscal, and oversight responsibilities. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Governing Board transitioned to virtual meetings due to the pandemic, which pre-empted the FY22 training, and has incorporated electronic voting into its procedures. Regular trainings are now conducted to enable the governing body to effectively perform its legal, fiscal, and oversight responsibilities. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-068 Prior Year Finding Number: 2022-064 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – DHS must have in place procedures for documenting and verifying eligibility in accordance with the Federal requirements, as well as the specific eligibility requirements selected by the Territory in its approved Plan. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The CCDF program appears to have policies and procedures in place for eligibility determinations and childcare provider voucher preparation and distribution. However, DHS was unable to provide a complete listing of childcare provider voucher distributions that includes relevant information to test eligibility of recipients. As a result, it appears DHS did not perform a reconciliation of the benefits paid to eligible participants and the expenditures recorded in the general ledger. Further, internal controls were not operating at a level of precision to ensure compliance with the eligibility compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements and general compliance principles. Approximately $1.0 million was expended for child care vouchers. Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Cause – It appears that policies and procedures, including review over eligibility transactions, were not functioning as intended. Recommendation - We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) has introduced a checklist as an additional internal control measure to ensure compliance with Federal requirements for review of provider enrollment applications by the provider relations staff. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-069 Prior Year Finding Number: 2022-065 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – The annual appropriations law for CCDF Discretionary Funds (Assistance Listing 93.575), the CARES Act (Pub. L. No. 116-136), and the CRRSA Act (Pub. L. No. 116-260) all specify that funds shall be used to supplement, not supplant State general revenue funds for child care assistance for low-income families. Funds appropriated by the ARP Act (Pub. L. No. 117-2) shall be used to supplement and not supplant other federal, state, and local public funds expended to provide child care services for eligible individuals. In accordance with the Compliance Supplement, the State or Territory: - May not spend on administrative costs more than five percent of total CCDF awards expended (i.e., the total of Assistance Listings 93.575, 93.596, and 93.489 with the exception of any ARP Act stabilization funds and of any Disaster Relief funds spent on construction and renovation) and any state expenditures for which Matching Funds (Assistance Listing 93.596) are claimed (42 USC 9858c(c)(3)(C); Pub. L. no. 116-20; CFR section 98.52). - Quality Earmark – For FY 2020 and succeeding fiscal years, states and territory Lead Agencies must spend on quality activities, as provided in the state/territorial plan, not less than nine percent of CCDF funds expended (i.e. the total of Assistance Listing 93.575, 93.596, and 93.489 with the exception of any CARES Act, CRRSA Act, and ARP Act, and of any Disaster Relief funds spent on construction and renovation) and any state expenditures for which Matching Funds (Assistance Listing 93.596) are claimed (45 CFR section 98.53). States and territory Lead Agencies must spend at least an additional three percent on quality improvement for infants and toddlers (45 CFR section 98.50(b)). - Direct Spending Earmarks - (1) From the aggregate amount of Discretionary funds (Assistance Listing 93.575) and Disaster Relief funds (Assistance Listing 93.489) provided for a year (with the exception of any CARES Act, CRRSA Act, and ARP Act, and of any Disaster Relief funds used for construction or major renovation), state Lead Agencies, territory Lead Agencies, as well as those tribal Lead Agencies with allocations of at least $250,000 must reserve funds for administrative costs (described above) and the minimum amount required for quality activities (described above). (2) From the remainder, the Lead Agency must use not less than 70 percent to fund direct services. In addition, states and territories must spend not less than 70 percent of the Mandatory and federal and state share of Matching funds (Assistance Listing 93.596) to provide child care assistance to families who: (a) receive Temporary Assistance for Needy Families (TANF); (b) are attempting through work activities to transition of TANF; and (c) are at risk of becoming dependent on TANF (45 CFR section 98.50(e) and (f)). Direct spending requirements do not apply to supplemental funds provided by the CARES Act (Pub. L. No. 116-136), the CRRSA Act (Pub. L. No. 116-260) and the ARP Act (Pub. L. No. 11702). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We discussed with management the process to ensure compliance with the level of effort requirement noting they do not appear to have adequate policies and procedures to monitor and ensure compliance with level of effort requirements. In addition, for one project that ended during the fiscal year, management was unable to provide a final ACF-696 Financial Reporting Form for State and Territory Child Care and Development Fund (CCDF) Lead Agencies that reconciled to accounting records. As such we are unable to determine if the Administrative, Quality and Direct Spending earmarks for this project have been met. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Effect – DHS is not in compliance with the stated provisions. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic monitoring of the requirements. Recommendation - We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS acknowledges the need to strengthen policies, procedures, and monitoring controls to ensure consistent compliance with the Child Care and Development Fund (CCDF) matching, level of effort, and earmarking requirements, as well as to ensure that final financial reporting fully reconciles to accounting records. DHS also emphasizes maintaining internal controls to support timely, accurate federal reporting. While the Child Care program does not require local matching funds, DHS will include the GVI-approved spending plan (in addition to ERP budget journals) with audit submissions so auditors can readily confirm any applicable matching requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-070 Prior Year Finding Number: 2022-067 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – Pursuant to CCDF regulations at 45 CFR 98.65(g), and as part of the terms and conditions of the grant award, States and Territories are required to complete and submit a quarterly financial status report (ACF-696). The form must be submitted quarterly (reports are due 30 days after the end of the quarter). States must submit quarterly reports for each federal fiscal year until all funds are expended or when the liquidation period expires. Since CCDF funds are awarded each federal fiscal year, a Lead Agency might submit multiple separate quarterly ACF-696 forms for multiple overlapping grant award years simultaneously. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 9 reports of 31 reports expected to be filed during the fiscal year. During our testing, we found the following: - 8 financial reports had not been submitted in a timely manner, ranging from 95 to 399 days late. - 1 financial report that did not appear to be submitted as required. - 8 financial reports where we could not determine if the amounts reported were complete and accurate. Further, internal controls were not operating at a level of precision to ensure compliance with the reporting compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, DHS does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A Federal Grants Financial Analyst for CCDF program has been hired and is tasked with ensuring the accuracy and submission of financial reports. Internal controls have been established, requiring final review and approval by a supervisor. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-071 Prior Year Finding Number: 2022-068 Compliance Requirement: Special Tests and Provisions – Health and Safety Requirements Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – As part of their CCDF plans, Lead Agencies must certify that procedures are in effect (e.g., monitoring and enforcement) to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers (unless they meet an exception, e.g., family members who are caregivers or individuals who object to immunization on certain grounds) serving children who receive subsidies meet requirements pertaining to health and safety. These requirements must address 11 specific areas—including first aid and CPR, safe sleeping practices, and administration of medication—and child care workers must be trained in these areas (42 USC 9858c(c)(2)(I); 45 CFR section 98.41). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that nonfederal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 9 of 66 child care providers and noted no evidence of monitoring of the child care service providers for applicable minimum health and safety requirements. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of child care expenditures charged to the program were $1,020,396. Total amount sampled is $315,509. Effect – DHS in not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the health and safety requirements are documented throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS remains in compliance with this finding from previous audit years, the untimely submission led to the issue in current year. To address this, a shared file will be established to ensure that the necessary information for each year is readily available for audit purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-072 Prior Year Finding Number: 2022-069 Compliance Requirement: Special Tests and Provisions – Fraud Detection and Repayment Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – Lead Agencies shall recover childcare payments that are the result of fraud. These payments shall be recovered from the party responsible for committing the fraud (45 CFR section 98.60). The Lead Agency must correctly identify and report fraud and take steps to recover payment. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While DHS has a procedure for identifying and recovering payments resulting from fraud, via its internal audit process, it was unable to evidence that such audit(s) had been conducted during the fiscal year. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud that may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance with fraud detection and repayment requirements throughout the fiscal year. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS is in the process of developing an internal audit and compliance unit. With the requisite staffing, internal audits will be conducted to ensure alignment with the Federal mandates in addition to ensuring overall compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-073 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Child Care Provider Eligibility for ARP Act Stabilization Funds Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Criteria – To be qualified to receive ARP Act stabilization funds, a provider on the date of application for the award must either be: (1) open and available to provide child care services, or (2) closed due to public health, financial hardship, or other reasons relating to the COVID-19 public health emergency. In addition, the provider must either (1) be eligible to serve children who receive CCDF subsidies at the time of application for stabilization funds, or (2) be licensed, regulated, or registered in the state, territory, or tribe as of March 11, 2021 and meet applicable state and local health and safety requirements at the time of application for stabilization funds. In their application for stabilization funds, a child care provider must certify: a. That the provider will, when open and providing services, implement policies in line with guidance and orders from corresponding state, territorial, tribal, and local authorities and, to the greatest extent possible, implement policies in line with guidance from the CDC. b. For each employee, the provider must pay at least the same amount in weekly wages and maintain the same benefits for the duration of the stabilization funding. c. The provider will provide relief from copayments and tuition payments for the families enrolled in the provider’s program, to the extent possible, and prioritize such relief for families struggling to make either type of payment. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected a sample of 10 of 45 child care providers that received ARP Act stabilization funds. During our testing, were not provided evidence to substantiate that the child care providers selected for testing were eligible to receive ARP Act stabilization funds. Further, internal controls were not operating effectively to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of ARP Act stabilization expenditures charged to the program were $14,833,930. Total amount sampled is $4,572,894. Effect – DHS in not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the ARP Act stabilization provider eligibility requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS is in the process of developing an internal audit and compliance unit. With the requisite staffing, internal audits will be conducted to ensure alignment with the Federal mandates in addition to ensuring overall compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-074 Prior Year Finding Number: 2022-071 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various Criteria – CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records. - Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and - Support the distribution of employee salary across multiple activities or cost objectives. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We sampled and selected 60 of 1,380 payroll transactions and noted the following: - 2 instances in which the project code on an employee’s Notice of Personnel Action (NOPA), which is used to record time and effort to the appropriate grant, was expired and had not been updated. During the fiscal year, program personnel did make adjustments to ensure the employee’s time and effort was recorded to the correct grant. - 1 instance in which the hours noted per the employee’s timesheet did not agree to the hours in the payroll register. We also sampled 60 of 251 non-payroll transactions and noted the following: - 18 expenditures that do not seem to conform to DHS requirements for disbursing program funds. - 6 instances where the approved requisition was not available for review. - 1 instance where the invoice date is prior to the date of the Purchase Order. - 1 instance where no supporting documentation was available for review other than the approved requisition. Questioned Costs – Not determinable. Context – This is a condition identified per review of compliance with the specified requirements using a statistically valid sample. Total amount of payroll expenditures charged to the program in fiscal year 2023 were $3,343,590. Total amount sampled is $180,273. The known amount of the exceptions is $408. Total amount of non-payroll expenditures charged to the program in fiscal year 2023 were $2,551,775. Total amount sampled is $1,004,88. The known amount of the exception is $388,742. Effect - Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that DHS improve internal controls to ensure adherence to federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll and non-payroll expenditures. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) adopted the electronic Timeforce (STATS) system for payroll, replacing manual processes. Time and attendance are approved through management levels, with payroll based on Notice of Personnel Action (NOPA) cost centers. Financial Analysts reconcile payroll, and a workflow ensures accurate NOPA listings for payroll purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-075 Prior Year Finding Number: 2022-072 Compliance Requirement: Period of Performance Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various Criteria – 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Additionally, the Uniform Guidance in 2 CFR Section 200.344(b), states that unless the federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial 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. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition - We sampled and selected 10 out of 91 expenditures recorded during the grant’s liquidation period. We found 6 expenditures that were charged to the grant during the liquidation period and incurred outside the period of availability. Such expenditures totaled $7,081. Additionally, internal controls do not appear to be operating at a level of precision to ensure grant expenditures are charged to the correct grant and within the allowable period of performance. Questioned Costs – $7,081. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Total amount of expenditures subject to sampling were $56,385. Total amount sampled is $12,211. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation – We recommend that DHS strengthen its process with respect to charging expenditures between various grant awards. We also recommend that DHS enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. As part of the close-out process, all open purchase orders are now submitted to the Department of Finance for closure. The grant close-out process has been shifted to the OMB to ensure the grant is no longer available for transaction entries or liquidations. Additionally, a dedicated Fiscal Analyst is being integrated into the workflow to ensure compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-076 Prior Year Finding Number: 2022-073 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the compliance Supplement, the states and territories are required to submit to the Federal administering agency, the Office of Community Services (OCS), SF-425 ‘Federal Financial Report’ and an annual ‘Post Expenditure Report’ (42 USC 1397e) no later than six months following the close of the fiscal year. Further, in accordance with OCS SSBG Supplemental Terms and Conditions, SSBG is required to submit an interim and final SF- 425 report covering Year 1 and the entire 2-year of the project period, 90 days following Year 1 (FFY 1) and 90 days following the end of Year 2 (FFY 2), respectively. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition - We sampled and selected 2 out of 4 financial (SF-425) and special (Post-Expenditure) reports and noted the following: - 1 financial report was not available for review. - For 1 special report, we noted no evidence of the date the report was prepared, reviewed, and submitted to the Federal grantor. Additionally, we were not able to agree the key line item of the report to the underlying records. Additionally, internal controls do not appear to be operating at a level of precision to ensure federal reports are prepared accurately, reviewed and submitted timely, and maintained for inspection. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect - DHS is not in compliance with the stated provisions. Failure to submit required reports could result in reduction or disallowance of Federal funding. Cause – It appears that policies and procedures, including oversight over submission of required reports were not functioning as intended. Recommendation – We recommend that DHS strengthen its process with respect to ensuring proper retention, monitoring, and review of the required reports by an appropriate official. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. Currently, there is a collaboration with Federal Partners to consolidate reporting in the Payment Management System portal, as there is no single report for the SSBG as required. Report requests are currently inconsistent with one consolidated grant. Additionally, pre and post expenditures are submitted through the portal, accompanied by a submission log. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-077 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2021 – 09/30/2023 Criteria – Federal funds can be used only for Medicaid and CHIP benefit payments (as specified in the state plan, federal regulations, or an approved waiver/demonstration), expenditures for administration and training, expenditures for the State Survey and Certification Program, and expenditures for the establishment and operation of state MFCUs (42 CFR 435.10, 440.210, 440.220, and 440.180). Payments may only be made to providers determined by the SMA to be eligible to participate in the Medicaid program. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – DHS was unable to provide a reconciliation of claims paid between the Medicaid Management Information System (MMIS) and the general ledger, which is used to prepare the Schedule of Expenditures of Federal Awards (SEFA). Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Effect – DHS is not in compliance with the stated provisions. Failure to properly review and report expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with stated provisions. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure monitoring and compliance of stated requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will strengthen internal controls by implementing clearer, auditable reconciliation processes to support SEFA preparation and demonstrate compliance. DHS will continue coordinating with auditors and stakeholders to ensure required documentation is received and compliance can be readily determined. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-078 Prior Year Finding Number: 2022-075 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2021 – 09/30/2023 Criteria – Plan and eligibility requirements must comply with various Federal requirements. The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with the State Plan under Title XIX of the Social Security Act, Section 4.7, Maintenance of Records, the Medicaid agency maintains or supervises the maintenance of records necessary for the proper and efficient operation of the plan, including records regarding applications, determination of eligibility, the provisions of medical assistance, and administrative costs, statistical, fiscal and other records necessary for reporting and accountability. Condition – In our review of 60 out of 34,534 participant case files, we noted 29 instances where there was no documentation to support the eligibility determinations made. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review and maintenance of the data in its participant case files. Recommendation – We recommend that DHS perform regular reviews of the data in its participant case files to ensure accuracy and completeness and confirming that only eligible participants are receiving the entitled benefits. Additional levels of review by a supervisor or manager can provide more timely quality assurance oversight over the eligibility process. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. Currently, a Standard Operating Policies and Procedures (SOPPs) for certification and recertification procedures is being updated. Additionally, DHS hired a Program Integrity Director in August 2023 and Medical Eligibility Quality Control (MEQC) Reviewer in June 2025 also tasked with the responsibility of reviewing completed case files. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-079 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2021 – 09/30/2023 Criteria – The state is required to pay part of the costs of providing Medicaid and CHIP services and part of the costs of administering the program. The percentage of federal funding is determined based on the amount of the expenditure and the application of the FMAP that is determined for each state using a formula set forth in section 1905(b) of the Act (42 USC 1396d), or other applicable federal matching rates specified by the statute. In particular, the matching rates for states’ administrative expenditures authorized by the Act are found in section 1903(a) of the Act (42 USC 1396b). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – DHS was unable to readily exhibit and provide its computation of the matching calculation or provide evidence that it was monitoring compliance with said requirement. Therefore, we were unable to determine if the matching requirement has been met. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles and matching compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Effect – DHS is not in compliance with the stated provisions. Failure to properly review and report expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with stated provisions. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure monitoring and compliance of stated requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-080 Prior Year Finding Number: 2022-076 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2021 – 09/30/2023 Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. In accordance with the Compliance Supplement, the State or Territory is required to submit CMS-64, Quarterly Statement of Expenditures for the Medicaid Assistance Program, thirty days after the end of the quarter. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 2 out of the 4 quarterly CMS-64 reports submitted during the fiscal year and noted the reports did not contain evidence of review or approval. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. To ensure access for audit purposes, the Department has implemented a shared folder where copies of approval emails and any time extension requests are stored, since the submission portal does not allow for attachments. Additionally, a Director of Federal Grants has been on-boarded who will assume the role of preparing the reports. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-081 Prior Year Finding Number: 2022-077 Compliance Requirement: Special Tests and Provisions - Utilization Control and Program Integrity Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Criteria – The state plan must provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, the state must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials (42 CFR parts 455, 456, and 1002). Credible allegations of provider fraud must be referred to the state MFCU or an appropriate law enforcement agency in states with no certified MFCU (42 CFR Part 455.21). The SMA must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. The agency must have procedures for the ongoing post-payment review, on a sample basis, of the need for, and the quality and timeliness of, Medicaid services. The SMA may conduct this review directly or may contract with an independent entity (42 CFR 456.5, 456.22 and 456.23). In addition, the SMA as required per Section 1902(a)(68) – [42 USC 1396a(a)(68)] False Claims Education must ensure that providers and contractors receiving or making payments of at least $5 million annually under a state’s Medicaid program have (a) established written policies for all employees (including management) about the Federal False Claims Act, whistleblower protections, administrative remedies, and any pertinent state laws and rules; (b) included as part of these policies detailed provisions regarding detecting and preventing fraud, waste, and abuse; and (c) included in any employee handbook a discussion of the False Claims Act, whistleblower protections, administrative remedies, and pertinent state laws and rules. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Upon investigation, DHS was not able to provide evidence of compliance with the above referenced compliance requirements. Specifically, we found the following: - No evidence of a method of determining criteria for identifying suspected fraud cases. - No evidence of a method for investigating these cases. - No evidence of procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials. Further, we noted DHS had not provided evidence of established and used written criteria for evaluating the appropriateness and quality of Medicaid services, including procedures for the ongoing post-payment review. Additionally, DHS did not provide evidence they ensure that providers and contractors receiving or making payments of at least $5 million annually under a state’s Medicaid program have (a) established written policies for all employees (including management) about the Federal False Claims Act, whistleblower protections, administrative remedies, and any pertinent state laws and rules; (b) included as part of these policies detailed provisions regarding detecting and preventing fraud, waste, and abuse; and (c) included in any employee handbook a discussion of the False Claims Act, whistleblower protections, administrative remedies, and pertinent state laws and rules. Finally, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud which may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately, with no methodology of properly identifying or tracking the amounts. Cause – DHS does not appear to have an effective system in place to address the program’s requirements. Recommendation – DHS should reconsider whether it would like to be directly responsible for Utilization Control and Program Integrity, or if the use of a QIO would better suit current needs. Once this is decided, DHS should take the necessary steps to ensure compliance with this requirement. The written procedures should reflect the actual actions to be taken. In the event a QIO is used, DHS should be involved throughout, so that it is aware of the program’s vulnerabilities and has the opportunity to make the necessary changes for improvement in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Program Integrity Unit has established SOPPs which identifies the method for identifying fraud cases, investigating cases, and developed procedures in collaborating and cooperating with legal authorities, for referring credible allegations of fraud cases to law enforcement officials. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-082 Prior Year Finding Number: 2022-078 Compliance Requirement: Special Tests and Provisions - Inpatient Hospital and Long-Term Care Facility Audits Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Criteria – The SMA pays for inpatient hospital services and long-term care facility services through the use of rates that are economic and efficient and are in accordance with the state plan. To the extent the state pays reconciled costs, the SMA must provide for the filing of uniform cost reports for each participating provider in order to establish payment rates. The SMA must provide for the periodic audits of financial and statistical records of participating providers. The specific audit requirements will be established by the state plan (42 CFR 447.253). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS provides Medicaid services to eligible Territory residents through inpatient hospitals and long-term care facilities. These hospitals and facilities include various Territory agencies and third-party service providers. The costs incurred by these facilities are summarized in a cost report that is submitted to DHS. DHS awarded a contract in August 2017 for the audit of these cost reports; however, we noted that DHS had not received any audited cost reports for fiscal year 2023. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – Without timely audits of the cost reports, DHS has no assurance that the costs incurred by the medical facilities are actual costs incurred. Further, the difference between costs submitted for reimbursement and the costs actually reimbursed result in the use of local, rather than Federal, dollars to fund Medicaid expenditures. Cause – DHS does not appear to have adequate policies and procedures in place for the provision of audited cost reports of its participating providers. Recommendation – We recommend that DHS evaluate and develop policies and procedures to obtain and audit the cost reports. This will allow DHS to reduce the time between the Medicaid expenditures being incurred and the ultimate reimbursement from the Federal government. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Department of Human Services intends to shift the responsibility of Cost Reports internally to the Fiscal Office, under the supervision of Director of Audit and Compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-083 Prior Year Finding Number: 2022-079 Compliance Requirement: Special Tests and Provisions – ADP Risk Analysis and System Security Review Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Criteria – SMAs must establish and maintain a program for conducting periodic risk analyses to ensure that appropriate and cost-effective safeguards are incorporated into new and existing systems. SMAs must perform risk analyses whenever significant system changes occur. SMAs shall review the ADP system security installations involved in the administration of HHS programs on a biennial basis. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures, and personnel practices. The SMA shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR 95.621). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS performed two ADP Risk Analysis and System Security Reviews for the systems that support the Medicaid Programs. A SOC1, Type 2 review was performed over the MMIS system covering the period October 1, 2022 through September 30, 2023 as well as a Cybersecurity review released in September 2024. Both reviews were performed by third-party organizations. Upon review of the reports, we noted the following: - The SOC1, Type 2 contained a qualified opinion stating that controls were not operating effectively to prevent unauthorized changes to the application and supporting infrastructure. - They Cybersecurity review was performed outside of fiscal year 2023. Additionally, the conclusion reached noted several critical vulnerabilities that need immediate attention. We did not note any analysis performed by DHS to assess the risk of the opinion qualification over their internal control environment nor the steps being taken to remedy the critical vulnerabilities noted in the Cybersecurity review. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - The absence of policies to ensure these analyses and reviews are performed may lead to physical and data security issues and noncompliance with program requirements. Further, DHS’ risk of incomplete or inaccurate data processing, or worse, the risk of fraud, increases. Cause – DHS’ records do not permit a determination as to the sufficiency of the design and operation of key controls surrounding the environment in which the Medicaid claims reside. Recommendation - We recommend that management should perform and review a risk analysis and system security review for all systems that support the Medicaid program. All issues should be addressed by management. If management becomes aware that such a report will not be available, we recommend that management conduct its own review. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS has conducted an overall cybersecurity risk assessment for entire IT infrastructure. The strategy to become compliant with the VIBES System Security Review includes updating the scope of work with contracted vendor for this system. The scope of work will now include annual Risk Assessments and Security Reviews. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-084 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Provider Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2023 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2021 – 09/30/2023 Criteria – Medicaid – In order to receive Medicaid payments, providers must: (1) be licensed in accordance with federal, state, and local laws and regulations to participate in the Medicaid program (42 CFR 431.107 and 447.10; and Section 1902(a)(9) of the Act (42 USC 1396a(a)(9)); (2) screened and enrolled in accordance with 42 CFR Part 455, Subpart E (sections 455.400 through 455.470); and make certain disclosures to the state (42 CFR Part 455, Subpart B, sections 455.100 through 455.106). Medicaid managed care network providers are subject to the same disclosure, screening, enrollment, and termination requirements that apply to Medicaid fee-for-service providers in accordance with 42 CFR Part 438, Subpart H. Providers who have been barred from participation by the OIG exclusion list are not eligible to be enrolled in the Medicaid program (see 42 CFR 455.436). CHIP – In order to receive CHIP payments, CHIP providers must: (1) be licensed in accordance with federal, state, and local laws and regulations to participate in the CHIP program (42 CFR 457.900); (2) screened and enrolled in accordance with 42 CFR Part 455, Subpart E (sections 455.400 through 455.470); and make certain disclosures to the state (42 CFR 457.990(a), cross referencing 455.107). CHIP managed care network providers are subject to the same disclosure, screening, enrollment, and termination requirements that apply to Medicaid fee-for-service providers in accordance with 42 CFR Part 438, Subpart H. Guidance was provided to states in the Medicaid Provider Enrollment Compendium (MPEC) to enroll CHIP providers into their Medicaid programs to ensure that they meet federal requirements. Providers who have been barred from participation by the OIG exclusion list are not eligible to be enrolled in the CHIP program (42 CFR 457.990, 42 CFR 455 Subpart E). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non- Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled 20 of 194 providers that provided Medicaid and CHIP services during fiscal year 2023. DHS was unable to provide documentation that the providers selected were: - screened, licensed, and enrolled in accordance with the state plan and the requirement of 42 CFR 455 Subpart E. - comply with the requirements of the state plan, including the disclosure requirement of 42 CFR 455 Subpart B. - comply with the requirements of the state plan, including the disclosure requirements of 42 CFR 455 Subpart B and Section 1.4 of the MPEC. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of cous and ineligible providers could be participating in the program. Cause – DHS does not appear to have adequate policies and procedures in place to ensure documentation is maintained and available to be inspected. Recommendation - We recommend that DHS implement policies and procedures to ensure provider enrollment documentation is maintained and available for inspection. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS continues working with a vendor on the implementation of the Provider Enrollment Application (PEA). Beginning in February 2026, the vendor will assume responsibility for enrolling all USVI providers—both in-territory and out-of-territory. Their enrollment process will address the three bulleted conditions. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-085 Prior Year Finding Number: 2022-081 Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award#: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR Award Periods: 09/20/2017 – 09/07/2026 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Criteria – Under 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 11 projects with first-tier subawards greater than $30,000 and found that internal controls over compliance with FFATA reporting provisions had not been implemented. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Effect – Lack of internal controls over compliance may lead to material noncompliance with stated provision. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A formalized process for the preparation and submission of financial and performance reports is now established, with clearly defined roles and responsibilities. The Disaster Program Financial Specialist is tasked with preparing the reports quarterly and submitting them to the Territorial Public Assistance Officer for review. The reports and associated certifications will be placed in a centralized database. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-086 Prior Year Finding Number: 2022-082 Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award#: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR Award Periods: 09/20/2017 – 09/07/2026 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Criteria – A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 8 of 27 subrecipients and found the following: - 4 instances where we were unable to obtain subrecipient agreements. - 8 instances with no supporting documentation that VITEMA verified that subrecipients expected to be audited as required by 2 CFR part 200, subpart F. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements or proper identification of subrecipients. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2023 was $134,242,935. The total amount of our sample totaled $124,398,401. Effect – VITEMA is not in compliance with the stated provisions. Failure to properly identify and monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the program's objectives. Cause – VITEMA does not have internal controls in place to properly identify and monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that VITEMA implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The formal process for completing and retaining Subrecipient Agreements is now operational to ensure compliance with programmatic obligations. As the Recipient, the Territory is responsible for notifying the Subrecipient when federal funds are obligated and providing them with a subrecipient agreement outlining the program's terms and conditions. The Disaster Program Financial Specialist is responsible for ensuring that the subrecipient agreement is signed by both the Applicant and the Governor's Authorized Representative and provided to the Territorial Public Assistance Officer. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-087 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Homeland Security Grant Program ALN: 97.067 Award#: Various Award Periods: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. As directed by section 2008(b)(2) of the Homeland Security Act of 2002 (codified as amended at 6 USC 609(b)(2)), all personnel and personnel-related costs, including those of intelligence analysts and operational overtime, are allowed up to 50 percent of HSGP funding without time limitation placed on the period of time that such personnel can serve. FEMA may provide a waiver at the request of the recipient to allow personnel expenses to exceed 50 percent of the amount awarded. Condition – It appears that controls do not exist, such as monitoring controls, to ensure VITEMA is in compliance with the earmarking requirements at the end of each grant period. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements. Effect – An ineffective control system related to monitoring of earmarking requirements can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – VITEMA does not appear to have adequate policies and procedures to ensure compliance with the earmarking requirements and ensure that an appropriate level of monitoring is completed prior to closing out of the grant. Recommendation – We recommend that VITEMA reevaluate and improve internal controls to ensure each grant is monitored throughout its life to ensure compliance with the earmarking requirement at the end of a grants period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. This information is documented in BSIR as part of the submittal process and does not allow for the submittal of reporting if not verified to meet this requirement. VITEMA will also document this information when preparing the SF 425 report by including this information in the notes section of this report. This will be conducted on a quarterly basis. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2023-088 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Homeland Security Grant Program ALN: 97.067 Award#: Various Award Periods: Various Criteria – Under 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 2 of 3 projects with first-tier subawards greater than $30,000 and found the following: - No evidence of review of the reporting prior to submission. - We are unable to verify the timeliness of FFATA reporting. - We are unable to agree amounts reported to adequate source documentation. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Effect – A lack of internal controls over compliance may lead to material noncompliance with stated provision. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VITEMA's Deputy Director of Grants Management will review the FFTA information and validate that the information is true and correct based on the amount approved by DHS and sub-recipient agreement. This FFTA document will be signed and dated by the Deputy Director of Grants Management within the 30 days of required enrollment The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-020 Prior Year Finding Number: 2021-019 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.551, 10.561 Award #: 4VI400408 Award Year: 10/01/20 – 09/30/21 10/01/21 – 09/30/22 Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of 1,854 payroll disbursements and noted the following: • 13 instances where DHS did not consistently apply funding allocation in accordance with the Notice of Personnel Action (NOPA). Of the 13, we found 5 instances where hours that should have been charged 100% to federal funds were split 50/50 (local/federal) and 8 instances in which hours that should have been split 50/50 were charged 100% (3), 95% (3), 75% (1), and 55% (1) to federal funds. • One instance where an employee’s compensation was charged to SNAP while working on a different federal program. • One instance in which overtime hours noted per the employees’ timesheet did not agree to the overtime hours in the payroll register. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not Determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2022 were $3,354,155. The amount sampled is $132,885. The known amount of the instances of inconsistent funding allocation is $6,453. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – DHS does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that DHS reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) adopted the electronic Timeforce (STATS) system for payroll, replacing manual processes. Time and attendance are approved through management levels, with payroll based on Notice of Personnel Action (NOPA) cost centers. Financial Analysts reconcile payroll, and a workflow ensures accurate NOPA listings for payroll purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-021 Prior Year Finding Number: 2021-020 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.551, 10.561 Award #: 4VI400408 Award Year: 10/01/20 – 09/30/21 10/01/21 – 09/30/22 Government Department/Agency: Department of Human Services (DHS) Criteria – CFR Section 200.303, Internal Controls, (a) states DHS must establish and maintain effective internal control over federal awards that provides reasonable assurance that DHS is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its matching process. Further, 2 CFR Section 200.306 provides detailed criteria for acceptable matching costs. The basic criteria for acceptable matching costs include costs that are necessary and reasonable for accomplishment of program objectives and are allowed under 2 CFR Part 200, Subpart E (Cost Principles). Condition – During the fiscal year, it appears that management's internal controls over matching compliance were not functioning as intended. We found that management was not monitoring its compliance with the matching requirement throughout the year. Further, we tested 60 of 1,455 matching transactions and noted the following: • 13 instances where DHS did not consistently apply funding allocation in accordance with the Notice of Personnel Action (NOPA). Of the 13, we found 9 instances where hours that should have been charged 100% to federal funds were split 50/50 (local/federal) and 4 instances in which hours that should have been split 50/50 were charged incorrectly. We do note, however, that all such employees did work 100% on the federal program such that time allocated to the match is allowable. • One transaction did not contain the appropriate management approvals. • One transaction totaling $4,500 that did not appear to be an allowable cost was claimed as part of the match. We do note, however, that the overall match appears to have been met with the exclusion of this transaction. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The total expenditures claimed as the match fiscal year 2022 were $3,864,719. The amount sampled is $406,626. Effect – DHS is not in compliance with the stated provisions. Without adequate internal controls to ensure compliance with matching requirements, there is an increased risk that matching will not be properly applied and funding could be jeopardized. Cause – DHS does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Further, lack of monitoring of the match requirement appears to be the result of significant personnel turnover and lack of staffing. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the matching requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) shifted to the electronic Timeforce (STATS) system for payroll, replacing manual processes. Time and attendance require multi-level management approval, finalized by the Agency Head. Payroll is based on Notice of Personnel Action (NOPA) cost centers, updated annually with ERP codes. A dedicated Financial Analyst reconciles payroll costs, and a workflow ensures accurate NOPA listings for payroll purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-022 Prior Year Finding Number: 2021-021 Compliance Requirement: Special Tests and Provisions – EBT Card Security Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.551, 10.561 Award #: 4VI400408 Award Year: 10/01/20 – 09/30/21 10/01/21 – 09/30/22 Government Department/Agency: Department of Human Services (DHS) Criteria – CFR Section 200.303, Internal Controls, Section (a) states DHS must establish and maintain effective internal control over federal awards that provides reasonable assurance that DHS is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its EBT Card Security process. Per 7 CFR Section 274.8(b)(3), System Security, as an addition to or component of the Security Program required of Automated Data Processing (ADP) Systems, the State or Territory agency shall ensure that a certain electronic benefits transfer (EBT) security requirements are established. As such, DHS is required to maintain adequate security over, and documentation/records for EBT cards, to prevent their theft, embezzlement, loss damage, destruction, unauthorized transfer, negotiation, or use. Condition – DHS contracted with Fidelity National Information Service (FIS) for the issuance and security of the EBT cards; however, it is DHS’ ultimate responsibility to ensure the contractor has controls in place to maintain adequate security over, and documentation/records of EBT cards. We sampled 8 out of 24 monthly card reconciliations and found one (1) reconciliation with differences between new/replacements issued cards status report and the actual new/replacements cards issued. Specifically, we identified differences of 10 new cards and 6 replacement cards issued. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The reconciliations sampled reported 535 new cards and 1,436 replacement cards issued. Effect – Without adequate internal controls to ensure compliance with EBT card security requirements, there is an increased risk that the inventory of EBT cards will not be properly maintained and accounted for which can lead to noncompliance with laws, regulations, and the provision of the grant agreement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure adequate safeguarding and documentation of EBT cards. Recommendation - We recommend that DHS strengthen formal policies and procedures to maintain adequate security, documentation, and records over EBT Cards to ensure internal controls over EBT cards security are operating effectively. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A Standard Operating Procedures and Procedures (SOPP) document is being developed to outline the EBT Reconciliation process. Additionally, a Director of Support Services will be hired to oversee and review all reports. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-023 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Agriculture Child Nutrition Cluster ALN: 10.555, 10.559, 10.582 Award #: 4V1300308 Award Period: 10/01/2021 – 9/30/2022 Government Department/Agency: Department of Education (VIDE) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 11 of 104 payroll disbursements and noted the following: • 11 instances where the approved timesheet for the pay period selected was not available for review. • 11 instances where VIDE did not provide support that time and effort is charged in accordance with A-87 requirements. • 4 instances where the NOPA provided did not include any evidence that the employee was approved to be federally reimbursed for the project code utilized in the payroll register. • One instance where the project code on the approved NOPA did not agree with the project code utilized on the payroll register. • 7 instances where the payroll register did not include and employee’s retirement and health insurance benefits for the pay period selected. • One instance where the employee’s pay rate in the approved NOPA provided did not agree with the pay rate in the payroll register. • One instance where the payroll register did not show any hours worked by the employee for the pay period selected. Questioned Costs – None. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2022 were $205,418. The amount sampled is $22,738 The known amount of the instances of inconsistent funding allocation is $22,738. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-024 Prior Year Finding Number: 2021-022 Compliance Requirement: Cash Management Program: U.S. Department of Agriculture Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN: 10.557 Award #: Various Award Year: Various Government Department/Agency: Department of Health (DOH) Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 60 out of 319 drawdowns and noted that all 60 drawdown requests did not contain evidence of review and approval. Questioned Costs – None. Context – This is a condition identified per review of the DOH’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $3,870,825. The amount sampled is $1,275,356. Effect – Without proper review and oversight drawdowns may not be in compliance with the CMIA Agreement and cash management compliance requirements. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation – We recommend that the DOH reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Health (DOH) will update drawdown Standard Operating Procedures (SOPs) for Fiscal Year 2025 to require signatures or initials on all supporting documents, certifying proper review. This updated procedure will be included in Federal Grants training in December 2024 and made accessible on the Business Process Improvement SharePoint site. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-025 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Agriculture Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN: 10.557 Award #: Various Award Year: Various Government Department/Agency: Department of Health (DOH) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, a non-federal entity may charge to the Federal award, 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Condition – We sampled and selected 73 out of 909 transactions and noted 32 transactions that were charged to an internal project code associated with a grant that ended on 9/30/21 but were incurred after 10/1/21. Upon further investigation, it was determined that such transactions were charged to the incorrect internal project code but were not ultimately drawn down from the 2021 grant associated with the internal project code. Such costs incurred after 10/1/21 were ultimately drawn down from a grant ending on 9/30/22. Additionally, we analyzed each open grant award and compared the Federal award to award-to-date expenditures according to the internal project codes through September 30, 2022. For the grants noted above, according to the internal project code accounting, we noted $1,355,231 of spending above the total federal award. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the period of performance compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DOH’s compliance with the specified requirements using a statistically valid sample. Total amount of expenditures charged to the program was $4,560,676. Total amount sampled is $2,951,525. The total amount of the exceptions is $157,215. Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DOH does not appear to have adequate policies and procedures in place to ensure compliance with applicable period of performance stipulations. Recommendation – We recommend that DOH strengthen its process with respect to setting up and charging expenditures between various grant awards. We also recommend that DOH enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-026 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities and Period of Performance Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-22-2, W9127P-21-2 Award Year: 10/01/2020 – 09/30/2021 10/01/2021 - 09/30/2022 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, a non-federal entity may charge to the Federal award, 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Condition – We sampled and selected 60 out of 597 payroll transactions and noted the following: • Eleven (11) instances where the employees’ payroll costs were charged to prior year grant projects that had not been extended or approved. • One (1) instance where there was no evidence of approval of an employee’s timesheet. • Seven (7) instances where the timesheet for the pay period selected was not provided. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles and period of performance compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program during fiscal year 2022 were $1,812,537 and the total amount of our sample was $252,320. The known amount of the exceptions amounted to $97,989. Effect – OTAG is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – OTAG does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and the required period of performance stipulations. Recommendation – We recommend that OTAG improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. We also recommend that OTAG enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG enhanced internal controls by implementing a dual timesheet system manual and electronic to verify employee hours. Updated policies ensure payroll process validation, supported by an Employee Relations Coordinator. The Director of Administration certifies, and the Agency Head approves payroll activities based on cost principles. OTAG is refining the grant review process for performance periods. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-027 Prior Year Finding Number: N/A Compliance Requirement: Cash Management and Reporting Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-22-2, W9127P-21-2 Award Year: 10/01/2020 – 09/30/2021 10/01/2021 - 09/30/2022 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria – U.S. Department of the Treasury (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as amended (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations requires state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assistance Listing that meet the funding threshold for a major federal assistance program under the CMIA. Treasury-State Agreements also specify the terms and conditions under which an interest liability would be incurred. Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. SF-270, Request for Advance or Reimbursement Report, is required to be filed in connection with cash drawdowns. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We were unable to verify the completeness of the SF-270 (cash management and reporting) population. As a result, we were unable to test compliance and internal controls over compliance related to the cash management and reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements and general compliance principles. Effect – OTAG is not in compliance with the stated provisions. Inaccurate information may have been reported to the Federal government in the absence of required reconciliations and reviews. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation - We recommend that OTAG reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG could not complete the SF-270 report for Fiscal Year 2022. However, it developed a Policies and Procedures Manual for FY2023 and hired a Reimbursement Specialist to ensure separation of duties in financial reporting. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-028 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-22-2, W9127P-21-2 Award Year: 10/01/2020 – 09/30/2021 10/01/2021 - 09/30/2022 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria – According to the Master Cooperative Agreement Section 303, Cost Sharing, cost sharing requirements are found in a grantees individual Cooperative Agreements. The Government has various cost-sharing requirements within their Cooperative Agreements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – OTAG was unable to readily exhibit and provide its computation of the matching calculation or provide evidence that it was monitoring compliance with said requirement. Therefore, we were unable to determine if the matching requirement has been met or if the expenditures being claimed towards the matching requirement are allowable activities/costs. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the matching compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements and general compliance principles. Effect – OTAG is not in compliance with the stated provisions. Cause – OTAG does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Recommendation – We recommend that OTAG deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the matching requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG updated their policies and procedures manual to include tracking match fulfillment for each expenditure. The master cooperative agreements, through appendices, identifies cost share and requirements for management functions. Procedures are updated annually to reflect any changes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-029 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-22-2, W9127P-21-2 Award Year: 10/01/2020 – 09/30/2021 10/01/2021 - 09/30/2022 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria – National Guard Bureau O&M cooperative agreements (CA) are funded with one-year appropriations. By policy, only state costs obligated during the period of the federal fiscal year or period of performance identified in the CA are reimbursable. (National Guard Regulation (NGR) 5-1, chapters 3 and 11) The recipient shall not request reimbursement for any expenditure it made before the date that all required parties execute the Master Cooperative Agreement (MCA) unless the United States Property & Fiscal Officer (USPFO) expressly authorizes expenditures made during the funding period, but prior to the date of final signature, the parties may also agree on a specific start or effective date (NGR 5-1, Chapter 11). Within 90 days after the end of the federal fiscal year or upon termination of the CA, whichever is earlier, the recipient shall promptly deliver to the USPFO a final accounting of all funding and disbursements under the agreement for the fiscal year (NGR 5-1, Chapter 11). If unliquidated claims and undisbursed obligations arising from the recipient’s performance of the CA will remain 90 days after the close of the federal fiscal year, the recipient shall provide a detailed listing of uncleared obligations and a projected timetable for their liquidation and disbursement no later than 31 December. The USPFO shall then set an appropriate new timetable for the recipient to submit its final accounting (NGR 5-1, Chapter 11). Costs incurred in a federal fiscal year, which are not disclosed by the recipient within 90 days of the end of the federal fiscal year, except costs associated with unliquidated claims and undisbursed obligations arising from the recipient’s performance of the CA that the recipient has reported, shall not be eligible for reimbursement by NGB. The USPFO may extend the 90-day limit for good cause shown (NGR 5-1, Chapter 11). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We sampled and selected 126 out of 600 transactions and noted the following: • Five (5) instances where transactions were charged to the incorrect grant award. • Forty-four (44) instances where the transaction was paid outside the liquidation period. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles and period of performance compliance requirements. . Questioned Costs – $416,938. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements using a statistically valid sample. The total amount expenditures subject to sampling were $1,301,606 and the total amount of our sample was $858,928. The known amount of the exceptions amounted to $416,938. Effect – OTAG is not in compliance in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – OTAG did not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation – We recommend that OTAG strengthen its processes with respect to setting up and charging expenditures between various grant awards. We also recommend that OTAG enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG updated policies and procedures to manage pre-award costs, scope of work, and vendor payouts, ensuring compliance with the 90-day closeout process. They are training new personnel and actively monitoring implementation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-030 Prior Year Finding Number: 2021-025 Compliance Requirement: Cash Management Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria – US Department of the Treasury (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as amended (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations requires state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assistance Listing that meet the funding threshold for a major federal assistance program under the CMIA. The CMIA agreement for this program stipulates a reimbursement method with 7-day clearance. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 12 out of 59 drawdowns and noted 1 instance where the drawdown was made in advance and did not adhere to the reimbursement method in the CMIA Agreement. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the cash management compliance requirements. This includes 9 instances where the journal entry to record the cash receipt was reviewed and approved by unauthorized individuals. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Total fiscal year 2022 drawdown requests were $7,577,962. Total amount sampled is $5,547,527. The amount of the drawdown made in advance is $741,450. Effect – The Government is not in compliance with the stated provisions. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation - We recommend that the Government reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures to ensure compliance with stated provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government of the Virgin Islands (GVI) is enacting reforms to enhance financial accountability and internal controls. An Executive Order directs CFOs of the Government agencies to report to the Department of Finance, streamlining oversight. Introduction of new Public Finance Policy is an important step to standardize procedures, ensuring compliance with Cash Management regulations to maintain transparency and minimize financial risks. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-031 Prior Year Finding Number: 2021-026 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for the Government. DPP was unable to provide an accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2022. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements. Equipment purchased in 2022 totaled $3,007,762. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation – We recommend that DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Asset Management Division (AMD) adheres to Federal equipment guidelines. Assets are tagged, and records are created using the Tyler Munis Resource Planning system (ERP). In 2022, AMD inventoried four agencies, ensuring compliance with Federal regulations. The completed Standard Operation Policies and Procedures (SOPP) are pending approval, crucial for enhancing internal controls. Training sessions for fixed assets employees are planned, and additional staff will be needed to support the initiative effectively. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-032 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Government Department/Agency: Various Criteria – When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Per Procurement Manual, User Agencies are required to submit a written justification letter to he Government’s Department of Property and Procurement (DPP), which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition - In our review of 11 out of 77 procurement transactions, we noted 5 procurement transactions did not contain sufficient supporting documentation to validate adherence to procurement policy. One procurement did not contain a justification letter for emergency purchases. Four procurements did not include the following: • Contract file documents showing the significant history of the procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis of contract price. • The procurement provides full and open competition. • Documentation in support of the rationale to limit competition in those cases where competition was limited and ascertain if the limitation was justified. • Cost or price analysis in connection with procurement action, including contract modifications and that this analysis supported the procurement action. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the procurement compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of DPP’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $8,984,016. Total amount sampled was $3,455,217. The known amount of exceptions is $2,424,927. Effect – DPP could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – DPP does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Government updated its procurement laws and issued revised manuals, along with position-specific Standard Operating Procedures. Processes to enforce internal controls and ensure adherence to procurement laws have been established and are regularly reinforced. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-033 Prior Year Finding Number: 2021-027 Compliance Requirement: Reporting Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 14 out of 134 financial and performance reports and noted the following: • 5 financial reports and 5 performance reports were not available for review. • 2 financial reports and 2 performance reports where sufficient supporting documentation were not available to validate that the respective financial information agreed with the underlying records. • 1 financial report and 1 performance progress report where the report was reviewed by an individual other than authorized reviewer. • 1 performance report that was submitted 305 days late. Additionally, the Government did not submit FFATA reports where subawards were made for more than $30,000 for fiscal year 2022. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Effect – The Government is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the Government does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that Government reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government plans a high-level review of internal control policies and closely monitoring reports for completeness, accuracy, timeliness, and consistency with Cognizant Agency guidelines. An analyst will be assigned to track reporting schedules, oversee grant activity, and manage document storage, ensuring timely submission of all required reports for each grant award. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-034 Prior Year Finding Number: 2021-028 Compliance Requirement: Activities Allowed or Unallowed Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Government Department/Agency: Department of Labor (VIDOL) Criteria – In accordance with the Uniform Guidance in 2 CFR Section Part 200, a State or Territory must adopt its own written fiscal and administrative requirements for expending and accounting for all funds, which are consistent with the provisions of Uniform Guidance and extend such policies to all sub-recipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions, costs are reasonable and necessary for operating these programs, and funds are not used for general expenses required to carry out other responsibilities of a State or Territory or its sub-recipients. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – VIDOL was unable to provide reconciled accounting information relating to the majority of the Unemployment Insurance Trust Fund accounts. As such, we are unable to conclude on the fiscal and administrative requirements with respect to expending and accounting for all funds related to the Unemployment Insurance program. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the above referenced compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements. Effect – Accounting tasks, such as periodic reconciliations, play a key role in proving the accuracy of accounting data and information included in various interim financial statements and/or Federal reports. A lack of timely preparation of complete and accurate reconciliations results in the absence of adequate control over both cash receipts and disbursements. Cause – VIDOL does not appear to have adequate policies and procedures in an effort to adequately administer the expending and accounting for all funds. Recommendation – We recommend that VIDOL improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for all funds. In order to prevent significant errors in the financial records as well as prevent possible irregularities, including fraud, to exist and continue without notice, we recommend that all accounts, accruals, and reconciliations be reviewed on a periodic basis. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL acknowledges the auditor's finding regarding balance discrepancies with the general ledger, attributed to an incomplete file for audit. To prevent future issues, VIDOL updated the report writer for balance queries and issued a proposal for a contractor to install a Trust Fund accounting system. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-035 Prior Year Finding Number: 2021-029 Compliance Requirement: Eligibility Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Government Department/Agency: Department of Labor (VIDOL) Criteria – Public Law 112-96 Sec. 2101 requires that as a condition of eligibility for regular compensation, a claimant must be able to work, available to work, legally authorized to work in the United States and actively seeking work. Claimants must meet other conditions of eligibility for Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC) and Federal Pandemic Unemployment Compensation (FPUC). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 60 out of 19,227 unemployment claim files and noted the following: • 7 instances where VIDOL was not able to provide evidence that the claimant met the criteria for participating in the UI program but had received benefits during the year. • 1 instance where VIDOL was not able to provide evidence of UI interviewer eligibility assessment. • 3 instances where VIDOL was not able to provide evidence that the claimant is legally authorized to work in the United States. Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate claims charged to the program. Questioned Costs – $34,076. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Total amount of unemployment claims charged to the program during fiscal year were $36,406,202. Total amount sampled is $187,107. The known amount of the exceptions is $34,076. Effect – Noncompliance with program requirements could result in disallowances of costs and participants could be receiving benefits that they are not entitled to receive. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of the data in its claimant files. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper maintenance and retention of complete program files and confirming that only eligible participants are receiving benefits they are entitled to. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The agency is reviewing retention policies and training staff on systematic record-keeping. In 3rd Qtr. of FY2025, an electronic record-keeping system for claims files will be launched, enhancing record retention. VIDOL staff will collaborate with USDOL for technical assistance and data validation to ensure eligibility and record maintenance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-036 Prior Year Finding Number: 2021-030 Compliance Requirement: Reporting Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Government Department/Agency: Department of Labor (VIDOL) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with the program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 28 out of 100 financial, performance and special reports required to be submitted. We noted the following: • 3 reports (2 ETA-9050 and 1 ETA-9052) did not have any supporting information available to review. • 1 report (ETA-9052) did not contain evidence of review and approval. • 8 reports (2 ETA-9050, 2 ETA-9052 and 4 ETA-9055) where information reported did not agree with the underlying records. Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate reports submitted to the Federal government. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Effect - VIDOL is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VIDOL does not appear to have adequate control over maintenance of the underlying documentation used in preparing various report. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by the appropriate official who would ensure that information reported is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL received a federal grant from USDOL to update and redesign the UI reporting and accounting system. This grant aims to rebuild the reporting structure for complete, accurate, and timely processes. VIDOL has begun preparing the scope of works for the projects, with completion anticipated by 4th Qtr. of FY2026. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-037 Prior Year Finding Number: 2021-031 Compliance Requirement: Special Tests and Provisions – Employer Experience Rating Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Government Department/Agency: Department of Labor (VIDOL) Criteria – Per 2 CFR section 200.303(a), a nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Certain benefits accrue to states and employers as a result of the state having a federally approved experience-rated UI tax system. All states currently have an approved system. For the purpose of proper administration of the system, the SWA maintains accounts, or subsidiary ledgers, on state UI taxes received or due from individual employers, and the UI benefits charged to the employer. The employer’s “experience” with the unemployment of former employees is the dominant factor in the SWA computation of the employer’s annual state UI tax rate. The computation of the employer’s annual tax rate is based on state UI law (26 USC 3303). Condition – We tested 60 of 5,381 employer tax remittances and found the employer tax rate to be accurate and applied appropriately in all instances. However, we were unable to determine if the population subject to testing is complete. We found the total taxes collected by employer according to VIDOL systems does not reconcile to the total taxes collected in the general ledger of the Government of the Virgin Islands. Out of total taxes collected by employer of $19,203,630, we found a variance of $177,714 to the General Ledger. Further, it appears internal controls were not designed to ensure compliance with the employer experience rating compliance requirement. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s population completeness over the compliance requirements of the program. Effect - VIDOL did not comply with the employer experience rating compliance requirements of the program. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure compliance with applicable requirements, and maintenance of underlying documentation. Recommendation – We recommend that VIDOL improve its existing internal controls and procedures over maintenance of appropriate documentation to ensure compliance with Federal regulations related to employer experience rating. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL acknowledges the auditor's finding regarding balance discrepancies with the general ledger, attributed to an incomplete file for audit. To prevent future issues, VIDOL updated the report writer for balance queries and issued a proposal for a contractor to install a Trust Fund accounting system. This system aims to correct accounting deficiencies, improve operations, and ensure accurate account balances. It will facilitate accrual, month-end, and year-end system closes, with trained personnel managing postings and ledger balances. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-038 Prior Year Finding Number: 2021-033 Compliance Requirement: Special Tests and Provisions – UI Reemployment Programs (WPRS and RESEA) Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Government Department/Agency: Department of Labor (VIDOL) Criteria – The UI program serves as one of the principal “gateways” to the workforce system. It is often the first workforce program accessed by individuals who need workforce services. The WPRS and RESEA programs service as UI’s primary programs that facilitate the reemployment needs of UI claimants. RESEA is authorized by Section 306 of the Social Security Act and builds on the success of both WPRS and RESEA’s predecessor, the former UI Reemployment and Eligibility Assessment (REA) program. RESEA uses an evidence-based integrated approach that combines an eligibility assessment for continuing UI eligibility and the provision of reemployment services. RESEA is a voluntary program and under certain circumstances may be designed to also satisfy WPRS requirements. Operating guidance for the RESEA program is updated annually. UIPL 7-19 provides RESEA operating guidance for FY 2019. Per 2 CFR section 200.303(a), a nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition – During our testing of VIDOL’s compliance with UI Reemployment Programs, we found VIDOL did not submit the 9129 Quarterly RESEA reports. Further, it appears controls are not designed to ensure the timely and proper submission of required reports. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements. Effect – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Cause – VIDOL does not appear to have adequate control over maintenance of the underlying documentation used in preparing various report. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by the appropriate official who would ensure that information reported is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL is implementing a RESEA case management system for reporting and program services, currently in the configuration phase. This system will serve as the official system for documenting all services provided to RESEA claimants participating in the program. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-039 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Treasury COVID-19 - Coronavirus Relief Fund ALN: 21.019 Award #: N/A Award Period: 03/01/2020 – 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria – The CARES Act provides that payments from the Coronavirus Relief Fund (CRF) may only be used to cover costs that were incurred during the period that begins on March 1, 2020 and ends on December 31, 2021. All such obligations would need to be liquidated by September 30, 2022. (Section 601(d)(3) of the Social Security Act (42 U.S.C. 801(d)(3)), as added by section 5001 of the CARES Act and as amended by section 1001 of Division N of the Consolidated Appropriations Act, 2021) In “Revision to Guidance Regarding When a Cost is Considered Incurred, December 14, 2021” Treasury revised the guidance to provide that a cost associated with a necessary expenditure incurred due to the public health emergency shall be considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. Treasury defines obligation for this purpose consistently with the Uniform Guidance definition in 2 C.F.R. 200.1 as an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – During our testing of 12 expenditures sampled of a population of 53 we found 3 expenditures that were not incurred within the period of performance. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirements. Questioned Costs – $45,300. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll disbursements totaled $5,277,012. The total amount sampled was $4,636,495. Effect – OMB is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – OMB does not appear to have adequate policies and procedures in place to ensure compliance with the period of performance compliance requirements. Recommendation – We recommend that OMB strengthen its process with respect to incurring and charging expenditures. We also recommend that OMB enhance its review process to properly determine the activities of the grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Office of Management and Budget will collaborate with the Department of Finance to implement control measures designed to prevent the approval of transactions beyond the designated period of performance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-040 Prior Year Finding Number: 2021-035 Compliance Requirement: Reporting Program: U.S. Department of Treasury COVID-19 - Coronavirus Relief Fund ALN: 21.019 Award #: N/A Award Period: 03/01/2020 – 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria – Each prime recipient of Coronavirus Relief Funds shall provide a quarterly Financial Progress Report that contains COVID-19 related costs incurred during the covered period (the period beginning on March 1, 2020; and ending on December 31, 2021) to Treasury Office of Inspector General. Each prime recipient shall report this quarterly information mentioned above into the GrantSolutions portal. The prime recipient’s quarterly Financial Progress Report submissions should be supported by the data in the prime recipient’s accounting system. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 3 out of the 5 quarterly reports submitted during the fiscal year and noted that OMB was unable to furnish underlying financial records to determine whether the 3 quarterly reports submitted were complete and accurate. Additionally, all 3 reports were not submitted in a timely manner, ranging from 7 to 14 days late. Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate reports submitted to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Effect – Inaccurate reporting of financial information to the federal government can result in the use of inaccurate data by the federal government when making programmatic decisions. Cause – It appears that internal controls, including management review of federal reports and underlying documentation were not properly designed. Recommendation – We recommend that OMB reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. An analyst will be designated to track reporting schedules, oversee grant activity, and store documents. This analyst will regularly monitor each grant award's reporting schedule to ensure timely submission of all required reports. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-041 Prior Year Finding Number: 2021-036 Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Treasury COVID-19 - Coronavirus Relief Fund ALN: 21.019 Award #: N/A Award Period: 03/01/2020 – 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria – A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed two sub-awards made during 2022 and found that OMB did not evaluate the risks or monitor the two subrecipients. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements and general compliance principles. The total amount of expenditures passed through to subrecipients in fiscal year 2022 were $4,500,000. Effect – OMB is not in compliance with the stated provisions. Failure to properly monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the programs objectives. Cause – OMB does not have internal controls in place to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that OMB implement policies, procedures, and controls to ensure subrecipients are monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OMB will establish a robust framework featuring detailed monitoring procedures, regular compliance checks, and comprehensive oversight mechanisms to ensure subrecipients adhere to federal requirements. This framework aims to promote accountability, proper use of federal funds, mitigate risks, enhance transparency, and ensure subrecipients effectively fulfill their obligations under federal statutes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-042 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities and Procurement and Suspension and Debarment Program: U.S. Department of the Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively), Treasury’s Interim Final Rule and Final Rule at 31 CFR sections 35.7 and 35.8. The following activities are not permitted under CSLFRF: • Offset a reduction in net tax revenue (applicable to states and territories) • Deposits into pension funds (applicable to all recipients except Tribes) • Debt service or replenishing financial reserves (e.g., “rainy day funds”) (applicable to all recipients) • Satisfaction of settlements and judgements (applicable to all recipients) • Programs, services, or capital expenditures that include a term or condition that undermines efforts to stop the spread of COVID-19 (applicable to all recipients) Recipients may use payments from CSLFRF to: • Support public health expenditures, by funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff; • Address negative economic impacts caused by the public health emergency, including economic harms to workers, households, small businesses, impacted industries, and the public sector; • Replace lost public sector revenue to provide government services; recipients may use this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic. • Provide premium pay for essential workers, offering additional support to those who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors; and, • Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and to expand access to broadband internet. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In mid-2024, an inquiry was conducted by the United States Department of Justice (“DOJ”) into potential criminal activity associated with three individuals, each of whom were senior GVI officials working in their respective capacities as Director / Commissioner of the U.S. Virgin Islands Office of Management and Budget, Virgin Islands Police Department and Department of Sports, Parks, and Recreation. As of January 2025, the DOJ filed formal indictments against the these now former USVI officials (collectively the “Indicted Individuals”). The DOJ alleged that the Indicted Individuals were involved in activities associated with bribery, specifically providing, or attempting to provide, accelerated approval of contracts and payments on invoices to a vendor, Mon Ethos Pro Support, LLC. The court cases are on-going. In 2022, Mon Ethos Pro Support, LLC was paid $52,290 from Coronavirus State and Local Fiscal Recovery Funds, which are considered questioned costs. Further, internal controls over compliance do not appear to be operating effectively to ensure compliance with the allowable activities and procurement compliance requirements. Questioned Costs – $52,290 Context – This is a condition identified per review of current events and specific transactions related to the vendor identified in the DOJ indictment. Effect – Fraudulent transactions associated with a Federal program can lead to an assessment of penalties, claw back of federal funds and termination of awards. Further, an ineffective control system related to procuring of vendors and submission of allowable costs that could ultimately lead to disallowed costs for the major programs. Cause – OMB does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and procurement standards. Specifically, there appears to be a lack of monitoring controls and an appropriate level of review and approval of transactions prior to charging costs to a federal program. Recommendation – We recommend that OMB evaluate its policies and procedures to ensure appropriate internal controls in order to comply with federal regulations relating to the procurement of goods and services and review current records retention policies. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A comprehensive corrective action plan has been implemented to strengthen grant management and compliance. Key personnel have been hired, including a Grants Administrator and an external accounting firm, to provide oversight and expertise. The Government has developed detailed policies and procedures to ensure compliance with federal regulations, including internal controls for subrecipient vetting, documentation, monitoring of expenditures, and clear communication regarding non-compliance. Efforts are underway to finalize overarching policies, such as a Fraud, Waste, and Abuse policy with a whistleblower process. Robust internal controls have been established, including regular financial reviews, segregation of duties, and staff training. Additionally, a monitoring and evaluation framework has been set up through the OMB Compliance Unit, supported by an Audit Committee, to assess and improve the effectiveness of controls. Regular training sessions are provided to all staff involved in grant management to ensure they understand and adhere to compliance requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-043 Prior Year Finding Number: 2021-038 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – Recipients may use award funds to enter into contracts to procure goods and services necessary to implement one or more of the eligible purposes outlined in sections 602(c) and 603(c) of the Act and Treasury’s Interim Final Rule and Final Rule. As such, recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance. Specifically, a state must follow the same policies and procedures it uses for procurements from its non-federal funds and comply with 2 CFR sections 200.321, 200.322, and 200.323. States must also ensure that every contract includes the applicable contract clauses required by 2 CFR section 200.327. Per Procurement Manual, User Agencies are required to submit a written justification letter to DPP, which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source, and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. As such, please provide the justification letter for these three Task Order Contracts. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) is primarily responsible for procurement transactions. In our review of 9 out of 86 procurement transactions, we noted 3 transactions where there was no written justification letter for task order contracts. Further, internal controls over compliance do not appear to be operating effectively to ensure compliance with the procurement compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Total amount of the procurement transactions was $17,487,469. Total amount of the samples was $5,699,575. The known amount of the exceptions is $3,530,516. Effect – OMB could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – OMB does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that OMB and DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government updated its procurement laws and issued revised procurement manuals, along with issuing position-specific Standard Operating Procedures. Processes for enforcing Internal controls and adherence to procurement laws have been established and are regularly reinforced. In early 2025, the Government-wide training reinforced expectations for full and open competition. User Agencies now access GVIBUY for informal solicitations in the eProcurement system, with ongoing training to prioritize competition and enhance oversight by the Department of Property and Procurement. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-044 Prior Year Finding Number: 2021-039 Compliance Requirement: Reporting Program: U.S. Department of the Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – There are three types of reporting requirements for the CSLFRF program: Interim Report: Provide initial overview of status and uses of funding. The interim report will include a recipient’s expenditures through July 31, 2021 by category and at the summary level. The reporting requirements vary by type of recipient, the total allocation amount, and the date which the recipient first received its allocation. This is a one-time report. Project and Expenditure Report: Report on financial data, projects funded, expenditures, and contracts and subawards over $50,000, and other information. Project and Expenditure Reports are due on a regular, recurring basis after the Interim Reports. The reporting frequency and deadlines vary by type of recipient and total allocation amount. Recovery Plan Performance Report: The Recovery Plan Performance Report (the “Recovery Plan”) will provide information on the projects that large recipients are undertaking with program funding and how they plan to ensure program outcomes are achieved in an effective, efficient, and equitable manner. It will include key performance indicators identified by the recipient and some mandatory indicators identified by Treasury. The Recovery Plan will be posted on the website of the recipient as well as provided to Treasury. In addition, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 3 out of 4 reports submitted during the fiscal year, we noted 3 reports did not contain evidence of review and approval prior to submission and the financial and other information did not agree with underlying records. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Effect – OMB is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, OMB does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that OMB reevaluates its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. Starting in 2024, OMB has implemented a reporting approval memo, signed by the OMB Director, to confirm the review and approval of Treasury reports. OMB has enhanced the collection and storage of supporting financial information for all projects in quarterly reports, ensuring necessary support is available upon request as of FY23. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-045 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We obtained a list of subrecipients from OMB and found that the list identified internal Government of the Virgin Islands (GVI) departments and offices as subrecipients. The list of subrecipients also included an external entity whose federal expenditures are part of the GVI Schedule of Expenditures of Federal Awards. As a result, the listing of subrecipients was amended to exclude 23 projects totaling $23,559,959. Using the amended listing of subrecipients, we selected 12 of 18 subrecipients and found the following: • 3 projects which OMB did not verify if the entity underwent a single audit as required by 2 CFR part 200, subpart F. • 1 project which OMB did not complete their monitoring workbook during the fiscal year • 5 projects in which there was no evidence the monitoring workbook was reviewed by the ARPA Grants Administrator. • 6 projects where entities were identified as subrecipients but were ultimately considered to be beneficiaries of SLFRF funds and not subrecipients. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements or proper identification of subrecipients. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2022 were $56,490,165. The total amount of our sample totaled $46,452,928. Effect – OMB is not in compliance with the stated provisions. Failure to properly identify and monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the programs objectives. Cause – OMB does not have internal controls in place to properly identify and monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that OMB implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. Starting FY25, OMB will identify and monitor federal awarding agencies, requesting single audit results for applicable recipients and including them in monitoring reviews. For revenue replacement projects, Treasury's Final Rule FAQ (13.14) states that these funds do not create subrecipient relationships, thus exempting them from the Single Audit Act due to the absence of a federal program or purpose. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-046 Prior Year Finding Number: 2021-041 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The VIDE maintains an equipment listing for fixed assets purchased with federal funding. VIDE was unable to provide complete property records which met the stated requirements. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Question Costs – None. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping or equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE will enhance their asset tracking system, maintaining centralized records with detailed asset information, including description, serial number, acquisition details, and federal participation. The Procurement Division will conduct quarterly inventory audits and reconciliations to ensure alignment with actual inventory, promptly resolving discrepancies. The Fixed Asset Director will establish protocols for regular communication among Programs/Divisions responsible for asset management, requiring monthly status reports to ensure data accuracy and timely updates. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-047 Prior Year Finding Number: 2021-042 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Education Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Further, in accordance with the Uniform Guidance in 2 CFR Section 200.306, a State may not reduce the amount of State financial support for special education and related services for children with disabilities (or State financial support otherwise made available because of the excess costs of educating those children) below the amount of State financial support provided for the preceding fiscal year. The Secretary reduces the allocation of funds under 20 USC 1411 for any fiscal year following the fiscal year in which the State fails to comply with this requirement by the amount by which the State failed to meet the requirement. Additionally, an LEA can use not more than 15 percent of the amount of federal Part B funds the LEA receives for any fiscal year (less any amount by which it reduces its expenditures under 20 USC 1413(a)(2)(C)) (see III.G.2.1.b.(6) in this section), in combination with other funds, to develop and implement, early intervening services for children in kindergarten through grade 12 who have not been identified under IDEA but need additional academic and behavioral support to succeed in the general education environment (20 USC 1413(f); 34 CFR section 300.226). Condition – We reviewed the level of effort calculations and noted the following: • At the Local Education Agency (LEA) level, we noted that although the two LEAs appeared to meet the required financial support thresholds on the per child basis based on the level of effort compliance requirement, we were unable to verify the number of students for each LEA. • At the State Education Agency (SEA) level, we were unable to review documentation that included the approval /certification of the amounts in the Maintenance of Financial support at the State Education level. In addition, although the calculation shows that VIDE met the Maintenance of Effort at the State level, we were unable to review documentation that would allow us to verify the number of students served in the current year. We reviewed the earmarking documentation and noted the following: • At the State Education Agency (SEA) level, for the ARP grant and non-ARP grant, we were unable to verify the total numbers of students and the number of students in poverty. We were therefore unable to confirm that the allocation of the remaining funds to the LEA agreed with the relative numbers of children living in poverty. • At the Local Education Agency (LEA) level, we were unable to review documentation that the LEA did not use more than 15% of the amount of federal Part B funds to develop and implement early intervening services for children in kindergarten through grade 12 who have not been identified under IDEA but need additional academic and behavioral support to succeed in the general education environment. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the level of effort and earmarking compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements. Effect – VIDE is not in compliance with the stated provisions. Without adequate internal controls to ensure compliance with level of effort requirements and earmarking, there is an increased risk that level of effort and earmarking requirements will not be properly applied, and funding could be jeopardized. Cause – VIDE did not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of the requirements. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to federal regulations relating to the level of effort and earmarking requirements at the SEA and LEA levels by deploying resources that are given the responsibility to ensure periodic monitoring and compliance of the level of effort and earmarking requirements. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE acknowledges need to enhance monitoring and internal controls. VIDE will establish a team for quarterly reviews of documentation, report issues, and recommend corrective actions. The IDEA State Office will set procedures for verifying accuracy of data reported by LEAs. Comprehensive staff training will ensure understanding of new policies and procedures. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2022-048 Prior Year Finding Number: 2021-043 Compliance Requirement: Cash Management Program: U.S. Department of Education Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Further, the U.S. Department of Education (DOE) imposed specific conditions on grant awards provided to the U.S. Virgin Islands. VIDE is required to draw down funds and provide any applicable matching funds to the Agent within 24 hours of receipt of the written notice from the Third-Party Fiduciary Agent (TPFA). Condition – We reviewed 24 out of 204 drawdowns and noted the following: • 2 drawdowns were not performed within the required 24 hours after receipt of the request from the TPFA as required by the DOE. In addition, the drawdown reconciliation for one of these sample was not provided so we were unable to confirm that it was properly reviewed and approved; • 2 drawdowns were missing required documentation. Further, we noted that the internal controls are not designed at a level of precision that would prevent or detect and correct noncompliance. Question Costs – None. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements using a statistically valid sample. Total amount of cash drawdowns for the program was $16,413,229. Total amount sampled is $5,764,930. The known amount of the exception is $38,540. Effect – VIDE is not in compliance with the stated provisions. Payment to vendors could be delayed when cash drawdowns are not completed in a timely manner. Cause – It appears that policies and procedures, including timely submission of drawdown requests, were not functioning as intended. Further, the Government did not appear to exercise due diligence in requesting Federal funds consistent with the U.S. Department of Education imposed specific conditions and its actual cash needs. Recommendation – We recommend that VIDE comply with the specific conditions imposed by the U.S. Department of Education and request Federal funds consistent with the specific conditions imposed for this program. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE will reinforce the procedure to complete drawdown requests within 24 hours and ensure designated individuals are trained to process requests. Weekly reconciliations of requests and disbursements will be conducted, with processes to resolve discrepancies and maintain detailed records. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2022-049 Prior Year Finding Number: 2021-044 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (ie. auditee management) establish and maintain internal control designed to ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition – The VIDE maintains an equipment listing for fixed assets purchased with federal funding. VIDE was unable to provide complete property records which met the stated requirements. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the equipment management compliance requirements. Question Costs – Not determinable. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping or equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE plans to improve management and documentation of federally funded equipment by enhancing its asset tracking system and maintaining centralized records with detailed asset information. The Procurement Division will conduct quarterly inventory audits to reconcile records with actual inventory, resolving discrepancies promptly. The Fixed Asset Director will establish communication protocols among Programs/Divisions, requiring monthly status reports to ensure data accuracy and timely updates. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2022-050 Prior Year Finding Number: 2021-045 Compliance Requirement: Reporting Program: U.S. Department of Education Consolidated Grant to the Outlying Areas, ALN: 84.403A Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Under 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities, receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – VIDE failed to submit subaward data to fulfill the Transparency Act reporting requirements for the first tier subawards of $30,000 or more. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Question Costs – None. Context – This is a condition per review of VIDE’s compliance with reporting requirements. In fiscal year 2022, VIDE passed through $1,051,727 to 10 subrecipients. Effect – VIDE is not in compliance with reporting requirements as it failed to provide evidence of identifying and reporting Transparency Act reporting requirements. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Recommendation – We recommend that VIDE should implement policies, procedures and controls that will comply with all required laws, guidelines, and requirement under the award. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE plans to address the audit finding on FFATA reporting by developing detailed reporting policies and procedures. These will include guidelines for identifying and tracking subawards, collecting required data, and setting submission timelines. Roles and responsibilities of involved personnel will be clearly defined. VIDE will enhance existing system or implement a new system for tracking subawards and provide comprehensive training to staff. Data verification and validation procedures will be strengthened, with formal processes for reviewing data accuracy before submission and regular reconciliations to ensure consistency. Mandatory training sessions will ensure all personnel understand FFATA requirements and new reporting procedures. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2022-051 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Education Consolidated Grant to the Outlying Areas, ALN: 84.403A Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – Per Compliance Supplement, a pass-through entity (PTE) must: • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: (1) the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); (2) all requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); and (3) any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). • Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). • Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled subawards to 3 out of 10 subrecipients and found no supporting documentation that VIDE verified that subrecipients expected to be audited as required by 2 CFR part 200, subpart F. Additionally, there was no evidence of award monitoring performed for 2 of the 3 subrecipients tested. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements and general compliance principles. The total amount of expenditures passed through to subrecipients in fiscal year 2022 were $1,051,727. Effect – VIDE is not in compliance with the stated provisions. Failure to properly monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the programs objectives. Cause – VIDE does not have internal controls in place to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that VIDE implement policies, procedures, and controls to ensure subrecipients are monitored in accordance with federal statutes. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is committed to strengthening controls to ensure subrecipient compliance with federal audit requirements under 2 CFR Part 200, Subpart F. This includes implementing effective measures, such as explicit reporting requirements in subrecipient agreements and providing training to internal staff on subrecipient monitoring requirements and ensure consistent implementation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-052 Prior Year Finding Number: 2021-046 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records: • Reasonable reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – For ALN 84.425A, we sampled and selected 60 out of 2,319 payroll expenditures and noted 4 timesheets were not available for review. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the activities allowed or unallowed and allowable costs/cost principles compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to program in fiscal year 2022 is $3,138,454. Total amount sampled is $98,332. The known amount of the exceptions if $7,968. Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of VIDE in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is addressing audit findings related to payroll activities by enhancing internal controls to ensure compliance with federal regulations. Key measures include improving timesheet management through electronic submission, mandatory supervisor review, and secure storage. Additionally, VIDE will strengthen rate verification processes with a standardized checklist for comparing NOPA rates with payroll system rates, requiring payroll staff to complete it at each pay cycle and maintain a discrepancy tracker. Mandatory training sessions will be conducted for employees and supervisors to ensure understanding of the new policies, covering timesheet completion, rate verification, and adherence to guidelines. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-053 Prior Year Finding Number: 2021-049 Compliance Requirement: Reporting Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – Each State or Territory must file various financial, programmatic and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Under 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). Specifically for this program, the CARES Act 15011(b)(2) requires institution receiving funds under ESF II-Governor and ESF II-SEA to submit the required quarterly reports to the Secretary at such time and manner and containing such information as the Secretary may require. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 4 out of 12 performance and special reports during the fiscal year and noted the following: • 1 quarterly performance report did not contain evidence of review and approval. • 1 annual performance report was not available for review. • 1 quarterly performance report was not submitted timely (8 days late). We also performed testing over the Transparency Act reporting requirements outlined in the criteria section above. We noted that 1 report submitted in FSRS did not contain evidence of review and approval. The results of the testing are outline in the table. See table included in the report. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB and VIDE’s compliance with the specified requirements using a statistically valid sample. 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. Cause – The internal controls established for submission of reporting requirements did not fully operate as designed causing late submission and not in compliance with reporting requirements under the Transparency Act related to the program’s subrecipients. Recommendation – We recommend that OMB and VIDE reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is addressing deficiencies in the reporting processes for the COVID-19 Education Stabilization Fund (ESF-SEA) by committing to enhance reporting practices for compliance with federal requirements. This includes implementing a structured review and approval process for all performance and special reports, ensuring they are vetted by appropriate officials. Additionally, training will be provided to all staff involved in report preparation and submission. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-054 Prior Year Finding Number: 2021-051 Compliance Requirement: Special Tests and Provisions – Participation of Private School Children Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governors I and II) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per Compliance Supplement, the State or Territory or agency receiving financial assistance under ESF-SEA I and ESF-Governor I, must provide eligible private school children and their teachers or other educational personnel with equitable services or other benefits under the program. Before an agency, consortium, or entity makes any decision that affects the opportunity of eligible private school children, teachers, and other educational personnel to participate, the agency, consortium, or entity must engage in timely and meaningful consultation with private school officials. Expenditures for services and benefits to eligible private school children and their teachers and other educational personnel must be equal on a per-pupil basis to the expenditures for participating public school children and their teachers and other educational personnel, taking into account the number and educational needs of the children, teachers and other educational personnel to be served. For the programs under ESF-SEA, ESF II-SEA, ESF-Governor, ESF II- Governor will ensure equitable services will be provided to students and teachers in non-public elementary and secondary schools in the same manner provided under section 8501 of the Elementary and Secondary Education Act (ESEA). Condition – We reviewed OMB and VIDE's compliance with the compliance participation of private school children and noted the following: • OMB did not implement a formal process for the participation of private school children compliance for FY2022. • OMB did not conduct a timely consultation with nonpublic schools. • OMB did not provide documents to support that the educational services that were planned were provided and that the allocation to nonpublic schools are equal on a per-pupil basis for public and private schools. Additionally, we sampled and selected 9 out of 29 non-public schools for VIDE and noted following: • Computation by VIDE of amount allocated to nonpublic schools did not contain evidence of review and approval. • VIDE did not provide the Affirmation of Consultation/Intent to Participate for 9 out of 29 nonpublic schools consulted. • VIDE did not provide documents to support that the educational services that were planned were provided. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the special tests and provisions requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB and VIDE’s compliance with the specified requirements. Effect – Noncompliance with program requirements could result in disallowances of costs and ineligible schools could be participating in the program. Cause – OMB and VIDE do not appear to have an effective system in place to ensure consistent and systematic review of documentation and file maintenance. Recommendation – We recommend that OMB and VIDE implement policies, procedures, and controls that will ensure equitable services are provided to eligible private school children and their teachers and other educational personnel. OMB and VIDE should also review its record retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is committed to addressing issues related to the participation of private school children in the COVID-19 Education Stabilization Fund. OMB will develop and implement formal policies and procedures to ensure compliance with federal regulations. This includes establishing guidelines and a schedule for timely consultations with nonpublic schools and collaborating with the Department of Education to ensure equitable per-pupil expenditures for both private and public school children. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-055 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governors I and II) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Non-federal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the Department of Labor regulations (29 CFR part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). Condition – We reviewed VIDE's compliance with the wage rate requirements and noted the following: • VIDE did not implement a formal process for the wage rate requirements compliance for FY2022. • We randomly selected 1 contract for classroom repair services and determined it did not indicate a provision that the contractor complies with wage rate requirements. • VIDE did not provide the certified payrolls required to be submitted by the contractor. Further, it does not appear that there are controls in place to ensure compliance with the special tests and provisions compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements. Effect – VIDE is not in compliance with the stated provisions. There is potential that contractor or subcontractors could have paid their employees less than the prevailing wage rates established by the Department of Labor. Cause –VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable wage rate requirements. Recommendation – We recommend the VIDE implement policies, procedures, and controls that will ensure adherence to Federal regulations related to wage rate requirements, and to ensure that responsible project management personnel obtain and review the required certified payroll reports for each week in which contract work is performed. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is addressing compliance gaps related to wage rate requirements under the COVID-19 Education Stabilization Fund by reviewing all contracts to ensure they include appropriate compliance language. Contract templates will be updated to mandate compliance and specify consequences for noncompliance. Additionally, VIDE will implement a system requiring contractors to submit certified payroll reports weekly, with a designated team responsible for collecting, reviewing, and retaining these reports to verify compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-056 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Health and Human Services Epidemiology and Laboratory Capacity for Infectious Disease ALN: 93.323 Award #: NU50CK000507 Award Year: 08/01/19 – 07/31/24 Government Department/Agency: Department of Health (DOH) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Control Section (a), requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principle process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records; • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – DOH was unable to reconcile the payroll expense include in the SEFA ($2,025,690) with the payroll expense in the payroll register ($1,909,128). As a result, the auditor was not able to establish the completeness of the population and was unable to perform testing procedures. Questioned Costs – None. Context – This is a condition identified per review of DOH’s compliance with the specified requirements. Cause – DOH does not appear to have adequate policies and procedures in place to review and reconcile program expenditures. Effect – Lack of proper reconciling information can result in noncompliance with laws and regulation along with loss of funding. Recommendation – We recommend that DOH improve internal controls to ensure program data is reconciled, monitored and retained in order to facilitate adherence to federal regulations and compliance requirements. Views of Responsible Official - The Government concurs with the auditor’s findings and recommendations. DOH acknowledges the auditor's finding regarding the inability to reconcile payroll expenses in the SEFA with the payroll register due to untimely payroll adjustments. To address this, DOH is training its team and ensuring staff have access to make necessary adjustments in the Government Financial Management System starting FY2024. Moving forward, DOH will enhance its SOPs by holding monthly reconciliation meetings with relevant program teams for timely adjustments and continuous monitoring. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-057 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Health and Human Services Epidemiology and Laboratory Capacity for Infectious Disease ALN: 93.323 Award #: NU50CK000507 Award Year: 08/01/19 – 07/31/24 Government Department/Agency: Department of Health (DOH) Criteria – Per 2 CFR Section 200.313, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. Further, a physical inventory of equipment should be taken at least once every two years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for the Government. DPP was unable to provide an accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2022. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DOH’s compliance with the specified requirements. Cause – DOH does not appear to have a process in place to adequately monitor property and equipment acquired with Federal funds. Effect –There is a risk that inadequate recordkeeping lead to misappropriation of assets and noncompliance with Federal regulations resulting in loss of funding. Recommendation – We recommend that DOH and DPP improve internal to ensure adherence to federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments responsible for handling managing such assets. Views of Responsible Official - The Government concurs with the auditor’s findings and recommendations. The Epidemiology Division has implemented strong procedures for managing and monitoring property and equipment in line with Property and Procurement guidelines, including meticulous inventory and employee acknowledgment of assigned items. However, DOH acknowledges the need for better coordination with Property and Procurement. To improve asset management, DOH will update the Fixed Asset SOP to mandate that each division shares its asset inventory with Property and Procurement quarterly, ensuring more accurate and current records. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-058 Prior Year Finding Number: 2021-053 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Health and Human Services Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Real property, equipment, and intangible property, that are acquired or improved with a federal award must be held in trust by the nonfederal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the nonfederal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a federal award and that use and disposition conditions apply to the property (45 CFR section 75.323 and 45 CFR section 1303 – Subpart E). Real property acquired or improved under a federal award must be used for the authorized purpose so long as it is needed for that purpose, during which time the HSA may not dispose of, replace or encumber the property without prior ACF approval (45 CFR section 75.318; 45 CFR section 75.308(c)(1)(xi)). Equipment acquired under a federal award must be used for the authorized purposes of the project during the period of performance, or until the property is no longer needed for the purposes of the project. A HSA may not dispose of, replace, or encumber title to equipment without prior ACF approval (45 CFR section 75.319; 45 CFR section 75.308(c)(1)(xi)). Property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for DHS. DPP was unable to provide complete property records which met the stated requirements. Further, no physical inventory of equipment was taken in the previous two years. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation – We recommend that DHS and DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) maintains an internal asset listing and will collaborate with the Department of Property and Procurement to ensure compliance with Federal regulations regarding equipment and its maintenance. The Office of Management and Budget is reviewing and coordinating with the leadership of both DPP and DHS to ensure that processes are updated and maintained for monitoring equipment acquired with Federal funds. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-059 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the compliance supplement, the states and territories are required to submit to the Federal administering agency, the Administration for Children and Families (ACF), the SF-429 Real Property Status Report and SF-429 A General Reporting on an annual basis 90 days after the end of the reporting period. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 3 out of 11 reports required to be submitted during the fiscal year and noted program personnel did not ensure 3 SF-429 reports were prepared and submitted to the federal grantor agency as prescribed. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – DHS is not in compliance with the stated provisions. Failure to submit required reports could result in reduction or disallowance of Federal funding. Cause – It appears that policies and procedures, including oversight over submission of required reports were not functioning as intended. Recommendation – We recommend that DHS strengthen its process with respect to ensuring proper retention, monitoring, and review of the required reports by an appropriate official. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The program is working with the Director of Asset Management and the Fiscal Analyst to incorporate SOPP language that ensures forms are completed and submitted in a timely manner. These efforts are supported by the Federal Office of Head Start Grants Office. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-060 Prior Year Finding Number: N/A Compliance Requirement: Special Test and Provision – Protection of Federal Interest in Real Property and Facilities Program: U.S. Department of Health and Human Services Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Head Start uses specific terms related to real property and facilities, which are defined at 45 CFR section 1305.2, including construction, facility, federal interest, major renovation, and modular unit. Facilities activities (purchase, construction, major renovation, subordination of a federal interest, refinancing, and disposition) are initiated through the submission of Form SF¬429 (cover sheet) and applicable attachments B (Request to Acquire, Improve or Furnish) or C (Disposition or Encumbrance Request). With written prior approval from ACF, a HSA may use Head Start funds to purchase, construct, or renovate (major) a facility, including using Head Start funds to pay ongoing purchase costs which include principal and interest on approved loans (45 CFR sections 1303.40 through 1303.44). A HSA that uses Head Start funds to purchase real property or purchase, construct, or renovate (major) a facility appurtenant to real property (either owned or leased) must record a Notice of Federal Interest (also referred to as “reversionary interest”) (45 CFR sections 1303.46). The Notice of Federal Interest must include the required language content from 45 CFR section 1303.47(a) and be properly recorded in the official real property records for the jurisdiction where the facility is or will be located. A similar Notice of Federal Interest is required for leased facilities on land the HSA does not own (45 CFR section 1303.47(b)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Based on audit procedures performed, we identified 8 of 11 facilities with major repairs that did not have evidence of the required Notice of Federal Interest. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that lack of compliance with the stated requirements can result in significant fiscal issues that may put the Head Start program they administer at risk along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with protection of Federal interest in real property and facilities. Recommendation – We recommend that DHS strengthen and improve internal controls to ensure adherence to Federal regulations related to protection of Federal interest in real property and facilities. This includes incorporating the necessary internal controls to ensure the Notice of Federal Interest is obtained when required. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The program is collaborating with the Office of Legal Counsel to incorporate SOPP language to ensure the timely completion of forms, with support and technical assistance from the Federal Office of Head Start Grants Office. All outstanding reports are scheduled for submission by the end of March 2025, and this will be addressed in quarterly monitoring meetings. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-061 Prior Year Finding Number: 2021-054 Compliance Requirement: Special Test and Provision – Program Governance Program: U.S. Department of Health and Human Services Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – A Head Start Agency (HAS) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). Head Start governing body has a legal and fiscal responsibility for the HSA. The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: • approval of all major financial expenditures of the agency; • annual approval of the operating budget of the agency; • selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and • monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – When evaluating DHS’ compliance with the above-mentioned compliance requirements we found the following: • DHS was unable to validate that they provided training and technical assistance to the governance board during the fiscal period under review. • Financial information is not shared with the governing board monthly. We observed financial information being shared quarterly. • We found no discussion by the governing board relating to monitoring of DHS’ actions to correct audit findings. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that lack of compliance with the stated requirements can result in significant fiscal issues that may put the Head Start program they administer at risk along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with program governance. Recommendation – We recommend that DHS strengthen and improve internal controls to ensure adherence to Federal regulations related to program governance training and technical assistance to governing body and policy council. There should be regular training that will enable the governing body to perform it’s legal, fiscal, and oversight responsibilities. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Governing Board transitioned to virtual meetings due to the pandemic, which pre-empted the FY22 training, and has incorporated electronic voting into its procedures. Regular trainings are now conducted to enable the governing body to effectively perform its legal, fiscal, and oversight responsibilities. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-062 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575/93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Activities allowed for CCDF Funds include the following: a. Funds may be used for child care services in the form of certificates, grants, or contracts (42 USC 9858c(c)(2)(A)). b. Funds may be used for activities that improve the quality or availability of child care services, consumer education, and parental choice (42 USC 9858e). c. Funds may be used for activities that improve access to child care services, including the use of procedures to permit enrollment of homeless children (after an initial eligibility determination) while required documentation is obtained; training and technical assistance on identifying and serving homeless children and their families; and specific outreach to homeless families (42 USC 9858c(c)(3)(B)(i)). d. Funds may be used for any other activity that the Lead Agency deems appropriate to (a) promote parental choice; (b) provide comprehensive consumer education information to help parents and the public make informed choices about child care services and promote involvement by parents and family members in the development of their children in child care settings; (c) deliver high-quality, coordinated early childhood care and education services to maximize parents’ options and support parents trying to achieve independence from public assistance; (d) improve the overall quality of child care services and programs by implementing the health, safety, licensing, training and oversight standards established in the CCDBG Act and in state law and regulations; (e) improve child care and development of participating children; and (f) increase the number and percentage of low-income children in high-quality child care settings (42 USC 9857 and 9858c(c)(3)(B)). In addition, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 82 out of 1,243 non-payroll transactions and noted 3 transactions totaling $23,502 that appear to be unallowable costs. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the allowable activities compliance requirement. Questioned Costs – $23,502. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program were $2,697,115. Total amount sampled is $907,839. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the allowable activities compliance requirement. Recommendation – We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A dedicated Fiscal Analyst has been hired and integrated into the approval workflow to ensure compliance. Furthermore, all open purchase orders are now closed at the end of the grant year to ensure compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-063 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles - Payroll Activities Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – We sampled and selected 67 out of 302 payroll transactions and in all instances found that DHS did not consistently apply funding allocation in accordance with the Notice of Personnel Action (NOPA). We found the project code approved on the NOPA did not agree to the project code used on the payroll register. However, in all instances we found the employee’s actual time and effort was appropriately charged to the CCDF program. Thus, internal controls were not operating at a level of precision to ensure compliance with the allowable costs compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program were $820,305. Total amount sampled was $202,805. Effect – Failure to properly update an employee’s NOPA can result time and effort charged to the incorrect project code resulting in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles. Recommendation – We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Division of Human Resources is updating the Notice of Personnel Actions to include the necessary Project code at the start of each fiscal year. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-064 Prior Year Finding Number:N/A Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – DHS must have in place procedures for documenting and verifying eligibility in accordance with the Federal requirements, as well as the specific eligibility requirements selected by the Territory in its approved Plan. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The CCDF program appears to have policies and procedures in place for eligibility determinations and child care provider voucher preparation and distribution. However, DHS was unable to provide a complete listing of child care provider voucher distributions that includes relevant information to test eligibility of recipients. As a result, it appears DHS did not perform a reconciliation of the benefits paid to eligible participants and the expenditures recorded in the general ledger. Further, internal controls were not operating at a level of precision to ensure compliance with the eligibility compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements and general compliance principles. Approximately $1.5 million was expended for child care vouchers. Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Cause – It appears that policies and procedures, including review over eligibility transactions, were not functioning as intended. Recommendation - We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations.   Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) has introduced a checklist as an additional internal control measure to ensure compliance with Federal requirements for review of provider enrollment applications by the provider relations staff. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-065 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – The annual appropriations law for CCDF Discretionary Funds (Assistance Listing 93.575), the CARES Act (Pub. L. No. 116-136), and the CRRSA Act (Pub. L. No. 116-260) all specify that funds shall be used to supplement, not supplant State general revenue funds for child care assistance for low-income families. Funds appropriated by the ARP Act (Pub. L. No. 117-2) shall be used to supplement and not supplant other federal, state, and local public funds expended to provide child care services for eligible individuals. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We discussed with management the process to ensure compliance with the level of effort requirement noting they do not appear to have adequate policies and procedures to monitor and ensure compliance with level of effort requirements. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Effect – DHS is not in compliance with the stated provisions. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic monitoring of the requirements. Recommendation - We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. According to Federal regulations and the instructions provided for completing the 696 reports, earmarking is assessed with the final report submission, not the intermediate report. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-066 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – A non-federal entity may charge to the Federal award 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – To track spending on individual federal awards, DHS establishes project codes within the general ledger. Creation and close down of project codes are subject to a review and approval process. The purpose is to ensure accuracy of the period of performance associated with project codes and expenditures are coded to the correct grants for period of performance. During our testing of period of performance, we found all 2 project codes subject to testing did not contain evidence of review and approval during creation of the project. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. Spending on the projects totaled $822,355. Effect – Failure to properly review and approve project codes can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure adherence to their system of internal controls. Recommendation – We recommend that DHS strengthen its system of internal controls to ensure all projects contain evidence of approval when established. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A dedicated Fiscal Analyst has been hired and integrated into the approval workflow to ensure compliance. Additionally, all open purchase orders are now closed at the end of the grant year to ensure compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-067 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Pursuant to CCDF regulations at 45 CFR 98.65(g), and as part of the terms and conditions of the grant award, States and Territories are required to complete and submit a quarterly financial status report (ACF-696). The form must be submitted quarterly (reports are due 30 days after the end of the quarter). States must submit quarterly reports for each federal fiscal year until all funds are expended or when the liquidation period expires. Since CCDF funds are awarded each federal fiscal year, a Lead Agency might submit multiple separate quarterly ACF-696 forms for multiple overlapping grant award years simultaneously. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 6 reports of 36 reports expected to be filed during the fiscal year. During our testing, we found the following: • 3 financial reports had not been submitted in a timely manner, ranging from 222 to 227 days late. • 3 financial reports that did not appear to be submitted as required. • 6 financial reports where we could not determine if the amounts reported were complete and accurate. Further, internal controls were not operating at a level of precision to ensure compliance with the reporting compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, DHS does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A Federal Grants Financial Analyst for CCDF program has been onboarded, tasked with ensuring the accuracy and submission of financial reports. Internal controls have been established, requiring final review and approval by a supervisor. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-068 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Health and Safety Requirements Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – As part of their CCDF plans, Lead Agencies must certify that procedures are in effect (e.g., monitoring and enforcement) to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers (unless they meet an exception, e.g., family members who are caregivers or individuals who object to immunization on certain grounds) serving children who receive subsidies meet requirements pertaining to health and safety. These requirements must address 11 specific areas—including first aid and CPR, safe sleeping practices, and administration of medication—and child care workers must be trained in these areas (42 USC 9858c(c)(2)(I); 45 CFR section 98.41). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS was unable to provide a list of child care providers serving children who receives subsidies. Thus, we were unable to select a sample to determine if DHS verified and documented that child care providers meet requirements pertaining to health and safety. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Effect – DHS in not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the health and safety requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS remains in compliance with this finding from previous audit years, the untimely submission led to the issue in current year. To address this, a shared file will be established to ensure that the necessary information for each year is readily available for audit purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-069 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Fraud Detection and Repayment Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Lead Agencies shall recover childcare payments that are the result of fraud. These payments shall be recovered from the party responsible for committing the fraud (45 CFR section 98.60). The Lead Agency must correctly identify and report fraud and take steps to recover payment. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While DHS has a procedure for identifying and recovering payments resulting from fraud, via its internal audit process, it was unable to evidence that such audit(s) had been conducted during the fiscal year. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud that may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance with fraud detection and repayment requirements throughout the fiscal year. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review.   Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. An internal audit process is actively utilized, involving the exchange of caseloads between workers. Eligibility and subsidy determinations are cross-checked by different workers according to federally and locally established policies. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-070 Prior Year Finding Number: 2021-055 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles - Payroll Activities Program: U.S. Department of Health and Human Services Child Support Enforcement ALN: 93.563 Award #: 2001VICSES, 2101VICES, 2201VICSES Award Year: 10/01/2019 - 09/30/2020 10/01/2020 - 09/30/2021 10/01/2021 - 09/30/2022 Government Department/Agency: Department of Justice (DOJ) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 60 out of 1,527 payroll transactions, we noted 38 timesheets did not contain evidence of review and approval of the respective employee’s supervisor. Questioned Costs – None. Context – This is a condition identified per review of the DOJ’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program were $3,457,487. Total amount sampled is $154,186. The known amount of the exceptions is $102,505. Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DOJ does not appear to have adequate policies and procedures in place to ensure internal controls are consistently and diligently applied. Recommendation – We recommend that DOJ improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The DOJ will ensure that each timesheet is approved by the respective employee’s supervisor before being forwarded to the DOF Payroll Division for processing. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-071 Prior Year Finding Number: 2021-056 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services Social Services Block Grant ALN: 93.667 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We sampled and selected 60 of 1,458 payroll transactions and noted 2 timesheets where hours worked were not reflected correctly on the payroll register. While non-compliance was not found, controls did not appear to be operating at a level of precision to ensure accuracy of the payroll register. We also sampled 60 of 362 non-payroll transactions and noted 1 instance where the invoice did not have evidence of approval by authorized personnel. Questioned Costs – Not determinable. Context – This is a condition identified per review of compliance with the specified requirements using a statistically valid sample. Total amount of payroll expenditures charged to the program in fiscal year 2022 were $3,814,841. Total amount sampled is $180,651. The known amount of the exceptions is $4,945. Total amount of non-payroll expenditures charged to the program in fiscal year 2022 were $1,919,342. Total amount sampled is $956,768. The known amount of the exception is $45,063. Effect - Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that DHS improve internal controls to ensure adherence to federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll and non-payroll expenditures. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Stats Timeforce system has been implemented, automating the time and attendance process and eliminating manual variances. Employees use a fingerprint to log their time, which, once vetted and approved, is sent to the Department of Finance for check processing. This automated process aligns with the ERP cost center listed on the employee's Notice of Personnel Action. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-072 Prior Year Finding Number: 2021-057 Compliance Requirement: Period of Performance Program: U.S. Department of Health and Human Services Social Services Block Grant ALN: 93.667 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Additionally, the Uniform Guidance in 2 CFR Section 200.344(b), states that unless the federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial 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. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition - We sampled and selected 24 out of 164 expenditures and found 7 expenditures that were charged to the grant during the liquidation period and incurred outside the period of availability. Such expenditures totaled $4,152. Further, outside of our sample, we found six expenditures that were charged to a grant after the liquidation period. Additionally, internal controls do not appear to be operating at a level of precision to ensure grant expenditures are charged to the correct grant and within the allowable period of performance. Questioned Costs – $6,934 Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Total amount of expenditures subject to sampling were $183,568. Total amount sampled is $35,873. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation – We recommend that DHS strengthen its process with respect to charging expenditures between various grant awards. We also recommend that DHS enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. As part of the close-out process, all open purchase orders are now submitted to the Department of Finance for closure. The grant close-out process has been shifted to the OMB to ensure the grant is no longer available for transaction entries or liquidations. Additionally, a dedicated Fiscal Analyst is being integrated into the workflow to ensure compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-073 Prior Year Finding Number: 2021-058 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Social Services Block Grant ALN: 93.667 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the compliance Supplement, the states and territories are required to submit to the Federal administering agency, the Office of Community Services (OCS), SF-425 ‘Federal Financial Report’ and an annual ‘Post Expenditure Report’ (42 USC 1397e) no later than six months following the close of the fiscal year. Further, in accordance with OCS SSBG Supplemental Terms and Conditions, SSBG is required to submit an interim and final SF-425 report covering Year 1 and the entire 2-year of the project period, 90 days following Year 1 (FFY 1) and 90 days following the end of Year 2 (FFY 2), respectively. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition - We sampled and selected 2 out of 4 financial (SF-425) and special (Post-Expenditure) reports and noted the following: • 1 financial report was not available for review. • For 1 special report, we noted no evidence of the date the report was prepared, reviewed, and submitted to the Federal grantor. Additionally, we were not able to agree the key line item of the report to the underlying records. Additionally, internal controls do not appear to be operating at a level of precision to ensure federal reports are prepared accurately, reviewed and submitted timely, and maintained for inspection. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect - DHS is not in compliance with the stated provisions. Failure to submit required reports could result in reduction or disallowance of Federal funding. Cause – It appears that policies and procedures, including oversight over submission of required reports were not functioning as intended. Recommendation – We recommend that DHS strengthen its process with respect to ensuring proper retention, monitoring, and review of the required reports by an appropriate official. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. Currently, there is a collaboration with Federal Partners to consolidate reporting in the Payment Management System portal, as there is no single report for the SSBG as required. Report requests are currently inconsistent with one consolidated grant. Additionally, pre and post expenditures are submitted through the portal, accompanied by a submission log. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-074 Prior Year Finding Number: 2021-061 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria –2 CFR Section 200.403, Factors Affecting Allowability of Costs, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under federal awards: a. Be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. b. Conform to any limitations or exclusions set forth in these principles or in the federal award as to types or amounts of cost items. c. Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity. d. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. e. Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f. Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g. Be adequately documented.” Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition – In the prior year, BDO noted one instance where DHS paid a monthly fee for a trailer to store excess furniture and other administrative items. It was determined that the Medicaid staff no longer needed the trailer. The amount charged to the Medicaid program in fiscal year 2022 related to trailer totals $4,870. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – $4,870. Context - This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause - DHS does not have adequate policies and procedures in place to ensure that expenses are reviewed and approved to ensure reasonability and necessity. Recommendation – We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. This was an isolated occurrence during the transition of the MAP program from one building to another. Since the equipment could not be used at the new location, it was stored for future use. The Director of Asset Management now oversees the storage of inventory to prevent similar occurrences in the future. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-075 Prior Year Finding Number: 2021-062 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – Plan and eligibility requirements must comply with various Federal requirements. The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with the State Plan under Title XIX of the Social Security Act, Section 4.7, Maintenance of Records, the Medicaid agency maintains or supervises the maintenance of records necessary for the proper and efficient operation of the plan, including records regarding applications, determination of eligibility, the provisions of medical assistance, and administrative costs, statistical, fiscal and other records necessary for reporting and accountability. Condition – In our review of 60 out of 2,047 participant case files, we noted the following: • For 4 participants, there was no documentation in the case file supporting the verification of income or resource requirements. • For 1 participant, there was no evidence that the social security number was verified. • For 16 participants, it does not appear the application was processed timely. • For all 60 participants, there was no evidence that a review and approval of the eligibility determination had been performed. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of the data in its participant case files. Recommendation – We recommend that DHS perform regular reviews of the data in its participant case files to ensure accuracy and completeness and confirming that only eligible participants are receiving the entitled benefits. Additional levels of review by a supervisor or manager can provide more timely quality assurance oversight over the eligibility process. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS staff will collaborate with the PMO, hired to assist with the Public Health Emergency Unwind, to establish Standard Operating Policies and Procedures (SOPPs) for certification and recertification processes. DHS is in the process of hiring a Program Integrity Director and Medical Eligibility Quality Control (MEQC) staff, who will be responsible for reviewing completed case files. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-076 Prior Year Finding Number: 2021-063 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. In accordance with the Compliance Supplement, the State or Territory is required to submit CMS-64, Quarterly Statement of Expenditures for the Medicaid Assistance Program, thirty days after the end of the quarter. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 2 out of the 4 quarterly CMS-64 reports submitted during the fiscal year and noted the following: • 2 reports did not contain evidence of review or approval. • 1 report had not been submitted in a timely manner (44 days late). Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. As Medicaid staffing shortages are addressed, reports are submitted for review via email. To ensure access for audit purposes, the Department has implemented a shared folder where copies of approval emails and any time extension requests are stored, since the submission portal does not allow for attachments. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-077 Prior Year Finding Number: 2021-064 Compliance Requirement: Special Tests and Provisions - Utilization Control and Program Integrity Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – The state plan must provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, the state must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials (42 CFR parts 455, 456, and 1002). Credible allegations of provider fraud must be referred to the state MFCU or an appropriate law enforcement agency in states with no certified MFCU (42 CFR Part 455.21). The SMA must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. The agency must have procedures for the ongoing post-payment review, on a sample basis, of the need for, and the quality and timeliness of, Medicaid services. The SMA may conduct this review directly or may contract with an independent entity (42 CFR 456.5, 456.22 and 456.23). In addition, the SMA as required per Section 1902(a)(68) – [42 USC 1396a(a)(68)] False Claims Education must ensure that providers and contractors receiving or making payments of at least $5 million annually under a state’s Medicaid program have (a) established written policies for all employees (including management) about the Federal False Claims Act, whistleblower protections, administrative remedies, and any pertinent state laws and rules; (b) included as part of these policies detailed provisions regarding detecting and preventing fraud, waste, and abuse; and (c) included in any employee handbook a discussion of the False Claims Act, whistleblower protections, administrative remedies, and pertinent state laws and rules. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Upon investigation, DHS was not able to provide evidence of compliance with the above referenced compliance requirements. Specifically, we found the following: • No evidence of a method of determining criteria for identifying suspected fraud cases. • No evidence of a method for investigating these cases. • No evidence of procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials. Further, we noted DHS had not provided evidence of established and used written criteria for evaluating the appropriateness and quality of Medicaid services, including procedures for the ongoing post-payment review. Additionally, DHS did not provide evidence they ensure that providers and contractors receiving or making payments of at least $5 million annually under a state’s Medicaid program have (a) established written policies for all employees (including management) about the Federal False Claims Act, whistleblower protections, administrative remedies, and any pertinent state laws and rules; (b) included as part of these policies detailed provisions regarding detecting and preventing fraud, waste, and abuse; and (c) included in any employee handbook a discussion of the False Claims Act, whistleblower protections, administrative remedies, and pertinent state laws and rules. Finally, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud which may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately, with no methodology of properly identifying or tracking the amounts. Cause – DHS does not appear to have an effective system in place to address the program’s requirements. Recommendation – DHS should reconsider whether it would like to be directly responsible for Utilization Control and Program Integrity, or if the use of a QIO would better suit current needs. Once this is decided, DHS should take the necessary steps to ensure compliance with this requirement. The written procedures should reflect the actual actions to be taken. In the event a QIO is used, DHS should be involved throughout, so that it is aware of the program’s vulnerabilities and has the opportunity to make the necessary changes for improvement in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS has onboarded a Director of Program Integrity who will be responsible for establishing the Quality Control Unit, which will collaborate with the Medical Eligibility Quality Control (MFCU) on behalf of the Medicaid Program. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-078 Prior Year Finding Number: 2021-065 Compliance Requirement: Special Tests and Provisions - Inpatient Hospital and Long-Term Care Facility Audits Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – The SMA pays for inpatient hospital services and long-term care facility services through the use of rates that are economic and efficient and are in accordance with the state plan. To the extent the state pays reconciled costs, the SMA must provide for the filing of uniform cost reports for each participating provider in order to establish payment rates. The SMA must provide for the periodic audits of financial and statistical records of participating providers. The specific audit requirements will be established by the state plan (42 CFR 447.253). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS provides Medicaid services to eligible Territory residents through inpatient hospitals and long-term care facilities. These hospitals and facilities include various Territory agencies and third-party service providers. The costs incurred by these facilities are summarized in a cost report that is submitted to DHS. DHS awarded a contract in August 2017 for the audit of these cost reports; however, we noted that DHS had not received any audited cost reports for fiscal year 2022. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – Without timely audits of the cost reports, DHS has no assurance that the costs incurred by the medical facilities are actual costs incurred. Further, the difference between costs submitted for reimbursement and the costs actually reimbursed result in the use of local, rather than Federal, dollars to fund Medicaid expenditures. Cause – DHS does not appear to have adequate policies and procedures in place for the provision of audited cost reports of its participating providers. Recommendation – We recommend that DHS evaluate and develop policies and procedures to obtain and audit the cost reports. This will allow DHS to reduce the time between the Medicaid expenditures being incurred and the ultimate reimbursement from the Federal government. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS is currently in the process of drafting the solicitation for bids on the project to address all outstanding periods. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-079 Prior Year Finding Number: 2021-066 Compliance Requirement: Special Tests and Provisions – ADP Risk Analysis and System Security Review Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – SMAs must establish and maintain a program for conducting periodic risk analyses to ensure that appropriate and cost-effective safeguards are incorporated into new and existing systems. SMAs must perform risk analyses whenever significant system changes occur. SMAs shall review the ADP system security installations involved in the administration of HHS programs on a biennial basis. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures, and personnel practices. The SMA shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR 95.621). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS did not perform the required ADP Risk Analysis and System Security Review for the systems that support the Medicaid Program. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - The absence of policies to ensure these analyses and reviews are performed may lead to physical and data security issues and noncompliance with program requirements. Further, DHS’ risk of incomplete or inaccurate data processing, or worse, the risk of fraud, increases. Cause – DHS’ records do not permit a determination as to the sufficiency of the design and operation of key controls surrounding the environment in which the Medicaid claims reside. Recommendation - We recommend that management should perform and review a risk analysis and system security review for all systems that support the Medicaid program. All issues should be addressed by management. If management becomes aware that such a report will not be available, we recommend that management conduct its own review. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS had secured a commitment from a vendor who was unable to perform the required services. Currently, DHS is working through the procurement process with DPP to identify a new vendor to perform the mandated services. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-080 Prior Year Finding Number: 2021-069 Compliance Requirement: Special Tests and Provisions – Medicaid National Correct Coding Initiative Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria - States or Territories are required to incorporate six National Correct Coding Initiative (NCCI) methodologies into the state Medicaid Programs pursuant to requirements of Section 6507 of the Affordable Care Act (section 1903(r) of the Social Security Act). The purpose of the NCCI Program is to promote correct coding, prevent coding errors, prevent code manipulation, reduce improper payments and reduce the paid claims improper payment rate. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS did not provide documentation to verify that the quarterly NCCI edit files were uploaded timely. In addition, DHS did not have the required signed Confidentiality Agreements in place as required by Technical Guidance Manual, sections 7.1.1 and 7.1.2 during fiscal year 2022. Further, it does not appear that DHS has internal controls in place to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context - This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - DHS is not in compliance with regulations for the Medicaid National Correct Coding Initiative. Cause - DHS did not establish internal controls to ensure that the NCCI methodologies were incorporated into the Medicaid program or that the required signed Confidentiality Agreements were in place. Recommendation - We recommend that DHS establish internal controls to ensure compliance with the requirements of the Medicaid National Correct Coding Initiative and incorporate the NCCI methodologies into the state Medicaid program. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. Although DHS indicated that documentation supporting the download and incorporation of NCCI methodologies was available for review and that the MMIS has these methodologies built into the system, OMB recommends that DHS implement internal controls to ensure the NCCI methodologies are consistently incorporated into the Medicaid Program. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-081 Prior Year Finding Number: 2021-072 Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award #: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR Award Periods: 09/20/2017 – 09/07/2026 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, the Territorial agreement between VITEMA and FEMA dictates that all performance reports must be submitted within 30 days of the end of each quarter. Further, under 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 8 out of the 67 reports submitted during the fiscal year and noted that 6 financial reports and 2 performance reports did not have supporting documentation to reconcile the amounts reported to the appropriate financial and non-financial records of VITEMA. We further noted that Project Close Out Reports for D4335 (22 reports) and D4340 (25 reports) were not submitted within 180 days of project completion. Finally, we selected 8 projects with first-tier subawards greater than $30,000 and found that none had submitted FFATA reports.   The results of the testing performed over Transparency Act are outlined in the table. See the table included in the report. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Effect – VITEMA is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VITEMA does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A formalized process for the preparation and submission of financial and performance reports is now established, with clearly defined roles and responsibilities. The Disaster Program Financial Specialist is tasked with preparing the reports quarterly and submitting them to the Territorial Public Assistance Officer for review. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-082 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Homeland Security Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award #: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR Award Periods: 09/20/2017 – 09/07/2026 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria – A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency).   Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 8 of 25 subrecipients and found the following: • 5 instances where we were unable to obtain subrecipient agreements. • 8 instances where we were unable to obtain Quarterly Progress Reports. • 3 instances with no Certification Letter of Completion of Work and Disaster Response and Recovery Final Inspection Report. • 8 instances with no supporting documentation that VITEMA verified that subrecipients expected to be audited as required by 2 CFR part 200, subpart F. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements or proper identification of subrecipients. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2022 were $205,714,063. The total amount of our sample totaled $190,927,885. Effect – VITEMA is not in compliance with the stated provisions. Failure to properly identify and monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the programs objectives. Cause – VITEMA does not have internal controls in place to properly identify and monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that VITEMA implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The formal process for completing and retaining Subrecipient Agreements is now operational to ensure compliance with programmatic obligations. As the Recipient, the Territory is responsible for notifying the Subrecipient when federal funds are obligated and providing them with a subrecipient agreement outlining the program's terms and conditions. The Disaster Program Financial Specialist is responsible for ensuring that the subrecipient agreement is signed by both the Applicant and the Governor's Authorized Representative and provided to the Territorial Public Assistance Officer. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-083 Prior Year Finding Number: 2021-074 Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Hazard Mitigation Grant Program ALN: 97.039 Award #: FEMA-4335-DR, FEMA-4340-DR-VI Award Periods: 09/20/2017 – 09/30/2027 09/07/2017 – 11/30/2025 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, the Territorial agreement between VITEMA and FEMA dictates that all performance reports must be submitted within 30 days of the end of each quarter. Further, under 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 8 out of the 16 reports submitted during the fiscal year and noted the following: • 2 performance reports did not agree to the underlying records. • 1 performance report had not been submitted in a timely manner (10 days late). • 3 performance reports submitted did not contain evidence of review and approval. • 3 financial reports did not contain evidence of review and approval. • 3 financial Reports did not have sufficient supporting documentation to validate accounting records agree with the reports. • FFATA reports had not been prepared and submitted. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Effect – VITEMA is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VITEMA does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A process for the preparation and submission of financial and performance reports will be formalized, with clear roles and responsibilities outlined. The Disaster Program Account Supervisors will be responsible for preparing the reports on a quarterly basis and submitting them to the Territorial Hazard Mitigation Officer for review. The review process will include thorough reconciliation between the reports and supporting data, such as accounting records. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-019 Prior Year Finding Number: N/A Compliance Requirement: Allowable Cost/Cost Principles – Payroll Activities Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster (SNAP) ALN #: 10.551, 10.561 Award #: 4VI400408 Award Year: 10/01/19 – 09/30/20 10/01/20 – 09/30/21 Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of 1,757 payroll disbursements and noted the following: • 21 instances where DHS did not consistently apply funding allocation in accordance with the Notice of Personnel Action (NOPA). • 9 instances where hours that should have been charged 100% to federal funds were split 50/50 (local/federal) and 12 instances in which hours that should have been split 50/50 were charged 100% federal funds. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2021 were $3,026,031. The amount sampled is $115,905. The known amount of the instances of inconsistent funding allocation is $3,136. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – DHS does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that DHS reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-020 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster (SNAP) ALN #: 10.551, 10.561 Award #: 4VI400408 Award Year: 10/01/19 – 09/30/20 10/01/20 – 09/30/21 Government Department/Agency: Department of Human Services (DHS) Criteria – CFR Section 200.303, Internal Controls, (a) states DHS must establish and maintain effective internal control over federal awards that provides reasonable assurance that DHS is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its matching process. Condition – During the fiscal year, it appears that management's internal controls over matching compliance was not functioning as intended. DHS was unable to readily exhibit and provide its computation of the matching calculation or evidence that it was monitoring compliance with said requirement. Questioned Costs – Not determinable. Context – This is a condition identified per preview of DHS’s compliance with the specified requirements and general compliance principles. Effect – DHS is not in compliance with the stated provisions. Without adequate internal controls to ensure compliance with matching requirements, there is an increased risk that matching will not be properly applied and funding could be jeopardized. Cause – DHS does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the matching requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-021 Prior Year Finding Number: 2020-019 Compliance Requirement: Special Tests and Provisions – EBT Card Security Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster (SNAP) ALN #: 10.551, 10.561 Award #: 4VI400408 Award Year: 10/01/19 – 09/30/20 10/01/20 – 09/30/21 Government Department/Agency: Department of Human Services (DHS) Criteria – CFR Section 200.303, Internal Controls, Section (a) states DHS must establish and maintain effective internal control over federal awards that provides reasonable assurance that DHS is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its EBT Card Security process. Per 7 CFR Section 274.8(b)(3), System Security, as an addition to or component of the Security Program required of Automated Data Processing (ADP) Systems, the State or Territory agency shall ensure that a certain electronic benefits transfer (EBT) security requirements are established. As such, DHS is required to maintain adequate security over, and documentation/records for EBT cards, to prevent their theft, embezzlement, loss damage, destruction, unauthorized transfer, negotiation, or use. Condition – DHS contracted with Fidelity National Information Service (FIS) for the issuance and security of the EBT cards; however, it is DHS’ ultimate responsibility to ensure the contractor has controls in place to maintain adequate security over, and documentation/records of EBT cards. We sampled 8 out of 24 monthly card reconciliation and noted the following: • 3 instances where we noted variances between new/replacements issued cards status report and the actual new/replacements cards issued. • 1 instance did not contain evidence of review and approval by authorized personnel. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – Without adequate internal controls to ensure compliance with EBT card security requirements, there is an increased risk that the inventory of EBT cards will not be properly maintained and accounted for which can lead to noncompliance with laws, regulations, and the provision of the grant agreement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure adequate safeguarding and documentation of EBT cards. Recommendation - We recommend that DHS strengthen formal policies and procedures to maintain adequate security, documentation, and records over EBT Cards to ensure internal controls over EBT cards security are operating effectively. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-022 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Department of Agriculture Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN #: 10.557 Award #: Various Award Year: Various Government Department/Agency: Department of Health (DOH) Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 48 out of 338 drawdowns and noted that all 48 drawdown requests did not contain evidence of review and approval. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the cash management compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of the DOH’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $3,733,754 for fiscal year 2021. The amount sampled is $763,038. Effect – DOH is not in compliance with the stated provisions. Inaccurate information may have been reported to the Federal government in the absence of required reconciliations and reviews. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation – We recommend that the DOH reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-023 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Commerce Bipartisan Budget Act of 2018 ALN #: 11.022 Award #: NA19NOS0220008, NA19NOS0220001, NA19NMF0220004 Award Year: 10/01/2018 – 09/30/2023 04/01/2019 – 03/31/2021 08/01/2019 – 07/31/2024 Government Department/Agency: Department of Planning and Natural Resources (DPNR) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records: •Reasonable reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – We sampled and selected 8 out of 76 payroll expenditures and noted the following: • 1 instance where employee hours reported in timesheet did not agree with the payroll register. • 1 employee had their salaries charged to a grant project that was not authorized in accordance with the Notice of Personnel Action (NOPA). • 1 instance where an adjustment to correct the payroll expenditure was not made in the current fiscal year. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program during fiscal year 2021 were $22,188. Total amount sampled is $2,389. The known amount of the exception is $584. Effect – DPNR is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DPNR does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that DPNR improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-024 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Commerce Bipartisan Budget Act of 2018 ALN #: 11.022 Award #: NA19NOS0220008, NA19NOS0220001, NA19NMF0220004 Award Year: 10/01/2018 – 09/30/2023 04/01/2019 – 03/31/2021 08/01/2019 – 07/31/2024 Government Department/Agency: Department of Planning and Natural Resources (DPNR) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 8 out of 21 reports submitted during fiscal year and noted the following: • 3 reports were prepared and reviewed by the same personnel. •2 reports have not been submitted in a timely manner. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the reporting requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of the DPNR’s compliance with the specified requirements using a statistically valid sample. Effect – DNPR is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Recommendation – We recommend that DPNR reevaluate its policies and procedures to ensure proper monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-025 Prior Year Finding Number: 2020-025 Compliance Requirement: Cash Management Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN #: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Further, the grant awards imposes drawdown requirements whereby grant recipients are required to drawdown funds on a reimbursement basis. Condition – We reviewed 14 out of 43 drawdowns and noted 2 instances where reimbursement request for drawdown was made before the Government paid for the expenditure. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the cash management compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Total fiscal year 2021 drawdown requests were $3,163,945. Total amount sampled is $2,272,740. The known amount of the exceptions is $540,100. Effect – The Government is not in compliance with the stated provisions. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation - We recommend that the Government reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures to ensure compliance with stated provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-026 Prior Year Finding Number: 2020-026 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN #: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for the Government. DPP was unable to provide an accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2021. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of the Government’s compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation – We recommend that DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-027 Prior Year Finding Number: 2020-027 Compliance Requirement: Reporting Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN #: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 18 out of 92 financial and performance reports and noted the following: • 2 financial reports and 9 performance reports were not available for review. • 3 financial reports where sufficient supporting documentation were not available to validate that the respective financial information agreed with the underlying records. Additionally, the Government did not submit FFATA reports, 2 financial reports, and 2 performance reports for fiscal year 2021. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Effect – The Government is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the Government does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that Government reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-028 Prior Year Finding Number: 2020-028 Compliance Requirement: Activities Allowed or Unallowed Program: U.S. Department of Labor Unemployment Insurance ALN #: 17.225 Award #: Various Award Period: 10/01/2017 – 12/31/2023 Government Department/Agency: Department of Labor (VIDOL) Criteria – In accordance with the Uniform Guidance in 2 CFR Section Part 200, a State or Territory must adopt its own written fiscal and administrative requirements for expending and accounting for all funds, which are consistent with the provisions of Uniform Guidance and extend such policies to all sub-recipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions, costs are reasonable and necessary for operating these programs, and funds are not used for general expenses required to carry out other responsibilities of a State or Territory or its sub-recipients. Condition – VIDOL was unable to provide reconciled accounting information relating to the majority of the Unemployment Insurance Trust Fund accounts. As such, we are unable to conclude on the fiscal and administrative requirements with respect to expending and accounting for all funds related to the Unemployment Insurance program. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements. Effect – Accounting tasks, such as periodic reconciliations, play a key role in proving the accuracy of accounting data and information included in various interim financial statements and/or Federal reports. A lack of timely preparation of complete and accurate reconciliations results in the absence of adequate control over both cash receipts and disbursements. Cause – VIDOL does not appear to have adequate policies and procedures in an effort to adequately administer the expending and accounting for all funds. Recommendation – We recommend that VIDOL improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for all funds. In order to prevent significant errors in the financial records as well as prevent possible irregularities, including fraud, to exist and continue without notice, we recommend that all accounts, accruals, and reconciliations be reviewed on a periodic basis. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-029 Prior Year Finding Number: N/A Compliance Requirement: Eligibility Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: 10/01/2017 – 12/31/2023 Government Department/Agency: Department of Labor (VIDOL) Criteria – Public Law 112-96 Sec. 2101 requires that as a condition of eligibility for regular compensation, a claimant must be able to work, available to work, legally authorized to work in the United States and actively seeking work. Claimants must meet other conditions of eligibility for Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC) and Federal Pandemic Unemployment Compensation (FPUC). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 60 out of 79,222 unemployment claim files and noted the following: • 40 transactions where the documentation that the claimant met the criteria for participating in the program were not available for review. • 2 transactions were erroneously charged to the program. Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate claims charged to the program. Questioned Costs – Not determinable. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Total amount of unemployment claims charged to the program during fiscal year were $149,559,544. Total amount sampled is $201,280. The known amount of the exceptions is $154,055. Effect – Noncompliance with program requirements could result in disallowances of costs and participants could be receiving benefits that they are not entitled to receive. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of the data in its claimant files. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper maintenance and retention of complete program files and confirming that only eligible participants are receiving benefits they are entitled to. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-030 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: 10/01/2017 – 12/31/2023 Government Department/Agency: Department of Labor (VIDOL) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with the program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 28 out of 136 financial, performance and special reports required to be submitted in order to test compliance with the various reporting requirements. We noted the following: • 16 reports where supporting documentation were not available for review. • 3 reports where financial information reported did not agree with the underlying records. Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate reports submitted to the Federal government. Questioned Costs – Not determinable. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Effect - VIDOL is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VIDOL does not appear to have adequate control over maintenance of the underlying documentation used in preparing various report. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by the appropriate official who would ensure that information reported is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-031 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Employer Experience Rating Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: 10/01/2017 – 12/31/2023 Government Department/Agency: Department of Labor (VIDOL) Criteria – Per 2 CFR section 200.303(a), a nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Certain benefits accrue to states and employers as a result of the state having a federally approved experience-rated UI tax system. All states currently have an approved system. For the purpose of proper administration of the system, the SWA maintains accounts, or subsidiary ledgers, on state UI taxes received or due from individual employers, and the UI benefits charged to the employer. The employer’s “experience” with the unemployment of former employees is the dominant factor in the SWA computation of the employer’s annual state UI tax rate. The computation of the employer’s annual tax rate is based on state UI law (26 USC 3303). Condition – We sampled and selected 40 out of 5,591 tax collections related to the employer experience rating and noted the following: • For 9 instances, supporting documentation were not available to verify the taxes paid. • For 1 instance, supporting documentation was not available to verify the tax calculation for the period. • For 2 instances, supporting documentation were not available to provide evidence of compliance or control over compliance with program requirements. • For 2 instances, supporting documentation were not available for the tax rate charged to employers. • For 2 instances, the tax rate calculated by the system did not agree with the approved Annual Rate Notice sent to the employer. Questioned Costs – Not determinable. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Total amount of the tax collections amounted to $17,872,443. Total amount sampled is $355,345. The known amount of the exceptions is $110,499. Effect - VIDOL did not comply with the employer experience rating compliance requirements of the program. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure compliance with applicable requirements, and maintenance of underlying documentation. Recommendation – We recommend that VIDOL improve its existing internal controls and procedures over maintenance of appropriate documentation to ensure compliance with Federal regulations related to employer experience rating. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-032 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Match with IRS 940 FUTA Tax Form Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: 10/01/2017 – 12/31/2023 Government Department/Agency: Department of Labor (VIDOL) Criteria – Per 2 CFR section 200.303(a), a nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per compliance supplement, States are required to annually certify for each taxpayer the total amount of contributions required to be paid under the state law for the calendar year and the amounts and dates of such payments in order for the taxpayer to be allowed the credit against the FUTA tax (26 CFR sections 31.3302(a)-3(a)). In order to accomplish this certification, states annually perform a match of employer tax payments with credit claimed for these payments on the employer’s IRS 940 FUTA tax form. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 40 out of 5,591 tax collections related to the FUTA match and noted the following: • For 9 instances, supporting documentation were not available to verify the taxes paid. As such the FUTA match requirement could not be verified for these taxpayers. • For 1 instance, supporting documentation was not available to verify the tax calculation for the period. As such, the FUTA match requirement could not be verified for this taxpayer. • For 2 instances, supporting documentation were not available to provide evidence of compliance or control over compliance with program requirements. • For 2 instances, the tax rate calculated by the system did not agree with the approved Annual Rate Notice sent to the employer and as such the FUTA match could not be verified for these taxpayers. Questioned Costs – Not determinable. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Total amount of the tax collections amounted to $17,872,443. Total sampled amount is $355,345. The known amount of the exceptions is $102,659. Effect - VIDOL did not comply with the match with IRS 940 FUTA tax form compliance requirements of the program. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure compliance with applicable requirements, and maintenance of underlying documentation. Recommendation – We recommend that VIDOL improve its existing internal controls and procedures over maintenance of appropriate documentation to ensure compliance with Federal regulations related to match with IRS 940 FUTA Tax form. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-033 Prior Year Finding Number: 2020-029 Compliance Requirement: Special Tests and Provisions – UI Reemployment Programs (WPRS and RESEA) Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: 10/01/2017 – 12/31/2023 Government Department/Agency: Department of Labor (VIDOL) Criteria – The UI program serves as one of the principal “gateways” to the workforce system. It is often the first workforce program accessed by individuals who need workforce services. The WPRS and RESEA programs service as UI’s primary programs that facilitate the reemployment needs of UI claimants. RESEA is authorized by Section 306 of the Social Security Act and builds on the success of both WPRS and RESEA’s predecessor, the former UI Reemployment and Eligibility Assessment (REA) program. RESEA uses an evidence-based integrated approach that combines an eligibility assessment for continuing UI eligibility and the provision of reemployment services. RESEA is a voluntary program and under certain circumstances may be designed to also satisfy WPRS requirements. Operating guidance for the RESEA program is updated annually. UIPL 7-19 provides RESEA operating guidance for FY 2019. Per 2 CFR section 200.303(a), a nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition – VIDOL was unable to provide reconciling information related to the completeness of the RESEA cases of UI claimants as the program was suspended for a period in the fiscal year due to the COVID-19 pandemic. However, VIDOL was unable to provide documentation of the approval from the U.S. Department of Labor for the suspension of the program. Questioned Costs – Not determinable. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements. Effect – VIDOL was unable to demonstrate that the information put together for UI Reemployment programs was complete. Lack of proper reconciling information can result in noncompliance with laws and regulations along with loss of funding. In addition, suspension of the program without proper approval may have resulted in denying services for UI claimants who are most likely to exhaust their benefits and need reemployment assistance to return to work. Cause – VIDOL does not appear to have adequate policies and procedures in place to review and reconcile program data, and to ensure maintenance of related documentation. Recommendation – We recommend that VIDOL improve internal controls to ensure program data is properly reconciled, monitored and retained in order to facilitate adherence to related Federal regulations and compliance requirements. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-034 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of Transportation Highway Planning and Construction Cluster ALN: 20.205 Award #: Territorial Highway Program Implementation and Stewardship Agreement Award Period: 10/01/2016 – 9/30/2025 Government Department/Agency: Department of Public Works (DPW) Criteria – Recipients of Federal awards must have adequate policies and controls in place to ensure that the procedures are properly documented in the entity’s files, provide full and open competition supported by a cost or price analysis, provide a vendor debarment or suspension certification, provide for retention of files, and that supporting documentation corroborate compliance with these requirements. In addition, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) is primarily responsible for procurement transactions. In our review of 6 out of 54 procurement transactions, we noted 1 transaction where supporting documentation was not available for review. Further, internal controls over compliance do not appear to be operating effectively to ensure compliance with the procurement compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DPW’s compliance with the specified requirements using a statistically valid sample. Total amount of the procurement transactions was $10,238,647. Total sampled amount is $2,336,319. The known amount of the exception is $7,991. Effect – DPW could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – DPW does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that DPW and DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-035 Prior Year Finding Number: 2020-031 Compliance Requirement: Reporting Program: U.S. Department of Treasury COVID-19 - Coronavirus Relief Fund ALN: 21.019 Award #: N/A Award Period: 03/02/2020 – 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria – Each prime recipient of the Fund shall provide a quarterly Financial Progress Report that contains COVID-19 related costs incurred during the covered period (the period beginning on March 1, 2020; and ending on December 31, 2021) to Treasury OIG. Each prime recipient shall report this quarterly information mentioned above into the GrantSolutions portal. The prime recipient’s quarterly Financial Progress Report submissions should be supported by the data in the prime recipient’s accounting system. The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 2 out of the 4 quarterly reports submitted during the fiscal year and noted that OMB was unable to furnish underlying financial records to determine whether the 2 quarterly reports submitted were complete and accurate. Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate reports submitted to the Federal government. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Effect – Inaccurate reporting of financial information to the federal government can result in the use of inaccurate data by the federal government when making programmatic decisions. Cause – It appears that internal controls, including management review of federal reports and underlying documentation were not properly designed. Recommendation – We recommend that OMB reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-036 Prior Year Finding Number: 2020-032 Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Treasury COVID-19 - Coronavirus Relief Fund ALN: 21.019 Award #: N/A Award Period: 03/02/2020 – 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria – Per Compliance Supplement, a pass-through entity (PTE) must: • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: (1) the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); (2) all requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); and (3) any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). • Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). • Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – OMB did not implement a formal subrecipient monitoring process for fiscal year 2021. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB’s compliance with the specified requirements and general compliance principles. The total amount of expenditures passed through to subrecipients in fiscal year 2021 were $29,330,350. Effect – OMB is not in compliance with the stated provisions. Failure to properly monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the programs objectives. Cause – OMB does not have internal controls in place to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that OMB implement policies, procedures, and controls to ensure subrecipients are monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-037 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of the Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, Factors Affecting Allowability of Costs, “Except where otherwise authorized by statute, costs must meet the following general criteria to be allowable under federal awards: a. Be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. b. Conform to any limitations or exclusions set forth in these principles or in the federal award as to types or amounts of cost items. c. Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity. d. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. e. Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f. Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g. Be adequately documented.” Condition – During our testing of 12 out of 39 disbursements, we noted 1 instance where the expenditure was not recorded in the proper accounting period. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program in fiscal year 2021 were $8,051,618. Total amount sampled is $7,895,080. The known amount of the exception is $244,548. Effect – Failure to support and record expenditures in proper period can result in noncompliance with laws and regulations along with loss of funding. Cause – OMB does not appear to have adequate internal controls in place to ensure compliance with required cost principles such as maintenance of records and recording in proper period. Recommendation – We recommend that OMB improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-038 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – Recipients of Federal awards must have adequate policies and controls in place to ensure that the procedures are properly documented in the entity’s files, provide full and open competition supported by a cost or price analysis, provide a vendor debarment or suspension certification, provide for retention of files, and that supporting documentation corroborate compliance with these requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) is primarily responsible for procurement transactions. In our review of 9 out of 32 procurement transactions, we noted the following: • 1 procurement transaction did not contain sufficient supporting documentation to validate adherence to the procurement policy. • 1 procurement transaction where supporting documentation was not available for review. Further, internal controls over compliance do not appear to be operating effectively to ensure compliance with the procurement compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $3,031,443. Total amount sampled is $2,927,922. The known amount of the exceptions is $2,624,511. Effect – OMB could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – OMB does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents.   Recommendation – We recommend that OMB and DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-039 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of the Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – Each State or Territory must file various financial, programmatic and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. In addition, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 3 out of 3 reports submitted during the fiscal year, we noted the following: • 2 reports did not contain evidence of review and approval prior to submission. • 1 report where the proof of submission was not available for review. • 1 report had not been submitted in a timely manner. • 2 reports where the applicable accounts had not been included in the reports. • 2 reports where the financial and other information did not agree with underlying records. • 1 report includes information relating to subrecipient which was not required to be reported. • 1 report where the sub-award information required to be presented was not included. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Effect – OMB is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, OMB does not have adequate control over maintenance of the underlying documentation used in preparing various reports.   Recommendation – We recommend that OMB reevaluates its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-040 Prior Year Finding Number: 2020-036 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Environmental Protection Agency Drinking Water State Revolving Fund Cluster ALN: 66.468 Award #: Various Award Period: Various Government Department/Agency: Department of Planning and Natural Resources (DPNR) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records: • Reasonable reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – We sampled and selected 8 out of 79 payroll transactions and noted all selections did not have the correct and/or complete project numbers in the Notice of Personnel Action (NOPA) forms. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the allowable costs/cost principles requirements. Questioned Costs – Not determinable. Context - This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2021 were $118,901. Total amount sampled and the known amount of the exceptions is $13,524. Effect - DPNR is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause - DPNR does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that DPNR improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of their salaries and wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should be monitored, retained, and approved by a responsible official of DPNR in a timely manner. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report

Finding Number: 2021-041 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Special Education Cluster (IDEA) ALN: 84.027A Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Condition – The VIDE maintains an equipment listing for fixed assets purchased with federal funding. VIDE was unable to provide complete property records which met the stated requirements. Questioned Costs – Not determinable. Context - This is a condition identified per review of VIDE’s compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause - VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-042 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Education Special Education Cluster (IDEA) ALN #: 84.027A Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Further, in accordance with the Uniform Guidance in 2 CFR Section 200.306, a State may not reduce the amount of State financial support for special education and related services for children with disabilities (or State financial support otherwise made available because of the excess costs of educating those children) below the amount of State financial support provided for the preceding fiscal year. The Secretary reduces the allocation of funds under 20 USC 1411 for any fiscal year following the fiscal year in which the State fails to comply with this requirement by the amount by which the State failed to meet the requirement. Condition – We reviewed the level of effort calculations and noted the following: • At the Local Education Agency (LEA) level, we noted that 1 out of 2 LEAs did not meet the required financial support thresholds for dollar amount or per child basis based on the level of effort compliance requirement. • The internal controls identified at the State Education Agency (SEA) and LEA did not appear to be operating at a level of precision to ensure compliance with the level of effort compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements. Effect – VIDE is not in compliance with the stated provisions. Without adequate internal controls to ensure compliance with level of effort requirements, there is an increased risk that level of effort requirements will not be properly applied, and funding could be jeopardized. Cause – VIDE did not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of the requirements. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to federal regulations relating to the level of effort requirements at the SEA and LEA levels by deploying resources that are given the responsibility to ensure periodic monitoring and compliance of the level of effort requirements. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2021-043 Prior Year Finding Number N/A Compliance Requirement: Cash Management Program: U.S. Department of Education Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: S403A170004, S938A180004, S938A190004, S403A200004 Award Period: 07/01/2017 - 09/30/2020 07/01/2018 - 09/30/2021 07/01/2019 - 09/30/2022 07/01/2020 - 09/30/2021 Government Department/Agency: Department of Education (VIDE) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Further, the U.S Department of Education (DOE) imposed specific conditions on grant awards provided to the U.S. Virgin Islands. VIDE is required to draw down funds and provide any applicable matching funds to the Agent within 24 hours of receipt of the written notice from the Third-Party Fiduciary Agent (TPFA). Condition – We reviewed 21 out of 199 drawdowns and noted 1 drawdown was not performed within the required 24 hours after receipt of the request from the TPFA as required by the DOE. Questioned Costs – Not determinable. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements using a statistically valid sample. Total amount of cash drawdowns for the program was $16,391,894. Total amount sampled is $2,945,660. The known amount of the exception is $16,636. Effect – VIDE is not in compliance with the stated provisions. Payment to vendors could be delayed when cash drawdowns are not completed in a timely manner. Cause – It appears that policies and procedures, including timely submission of drawdown requests, were not functioning as intended. Further, the Government did not appear to exercise due diligence in requesting Federal funds consistent with the U.S. Department of Education imposed specific conditions and its actual cash needs. Recommendation – We recommend that VIDE comply with the specific conditions imposed by the U.S. Department of Education and request Federal funds consistent with the specific conditions imposed for this program. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-044 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: S403A170004, S938A180004, S938A190004, S403A200004 Award Period: 07/01/2017 - 09/30/2020 07/01/2018 - 09/30/2021 07/01/2019 - 09/30/2022 07/01/2020 - 09/30/2021 Government Department/Agency: Department of Education (VIDE) Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Condition – The VIDE maintains an equipment listing for fixed assets purchased with federal funding. VIDE was unable to provide complete property records which met the stated requirements. Questioned Costs – Not determinable. Context - This is a condition identified per review of VIDE’s compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping or equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause - VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-045 Prior Year Finding Number: 2020-038 Compliance Requirement: Reporting Program: U.S. Department of Education Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: S403A170004, S938A180004, S938A190004, S403A200004 Award Period: 07/01/2017 - 09/30/2020 07/01/2018 - 09/30/2021 07/01/2019 - 09/30/2022 07/01/2020 - 09/30/2021 Government Department/Agency: Department of Education (VIDE) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Under 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – VIDE failed to submit subaward data to fulfill the FFATA reporting requirements for the first tier subawards of $30,000 or more. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with reporting requirements. Effect – VIDE is not in compliance with the reporting requirements as it failed to provide evidence of identifying and reporting FFATA reporting requirements. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Recommendation – We recommend that VIDE should implement policies, procedures and controls that will compliance with all the required laws, guidelines and requirement under the award. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-046 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2021 01/13/2021 - 09/30/2022 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2021 01/13/2021 - 09/30/2022 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records: • Reasonable reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – For ALN 84.425A, we sampled and selected 60 out of 429 payroll expenditures and noted the following: • 10 instances where Personnel Activity Report were not available for review. • 2 instances where timesheets were not available for review. • 1 instance where Notice of Personnel Action (NOPA)/Notice of Per Diem (NOPD) was not available for review. • 5 instances where NOPA/NOPD did not have the correct and/or complete project numbers. • 1 instance where project number per NOPA did not match the project number per payroll register. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the activities allowed or unallowed and allowable costs/cost principles compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to program in fiscal year 2021 is $604,233. Total amount sampled is $108,318. The known amount of the exceptions is $25,510. Effect – VIDE is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of VIDE in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-047 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2021 01/13/2021 - 09/30/2022 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2021 01/13/2021 - 09/30/2022 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Further, the U.S Department of Education imposed specific conditions on grant awards awarded to the U.S. Virgin Islands and/or its agencies (Virgin Islands). DOE is required to draw down funds and provide any applicable matching funds to the Agent within 24 hours of receipt of the written notice from the Third-Party Fiduciary Agent (TPFA). Condition – For ALN 84.425H, we sampled and selected 5 out of 6 drawdowns and noted the following: • 5 instances where drawdowns did not include evidence of review and approval. • 2 instances where the supporting documentation were not available for review. • 3 instances where OMB did not provide supporting documentation to ascertain if they are following specific conditions of the U.S. Department of Education. • 1 instance where we were not able to validate the receipt of funds. Additionally, we noted cash drawdown of $457,331 where the drawdown was requested before the actual expenditures were incurred. For ALN 84.425A, we sampled and selected 9 out of 59 drawdowns and noted 8 instances where the bank reconciliations did not include evidence of review and approval. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the cash management compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB and VIDE’s compliance with the specified requirements using a statistically valid sample. Total fiscal year 2021 drawdown requests were $18,552,225. Effect – OMB and VIDE are not in compliance with the stated provisions. Failure to properly review and support drawdown requests can result in noncompliance with laws and regulations along with loss of funding. Cause – OMB and VIDE do not appear to have adequate policies and procedures in place to ensure compliance with the applicable principles and maintenance of underlying documentation. Recommendation – We recommend that OMB and VIDE deploy resources that are given the responsibility to ensure periodic review, monitoring, and compliance throughout the fiscal year. Further, we recommend that OMB and VIDE improve its internal controls to ensure adherence to its current retention policies. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-048 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2021 01/13/2021 - 09/30/2022 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2021 01/13/2021 - 09/30/2022 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition – The VIDE maintains an equipment listing for fixed assets purchased with federal funding. VIDE was unable to provide complete property records which met the stated requirements. Finally, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the equipment management compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB and VIDE’s compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – VIDE does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation – We recommend that VIDE improve controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-049 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2021 01/13/2021 - 09/30/2022 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2021 01/13/2021 - 09/30/2022 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – Each State or Territory must file various financial, programmatic and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Under 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). Specifically for this program, the CARES Act 15011(b)(2) requires institution receiving funds under ESF II-Governor and ESF II-SEA to submit the required quarterly reports to the Secretary at such time and manner and containing such information as the Secretary may require. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 4 out of 6 performance and special reports during the fiscal year and noted the following: • 1 performance report did not contain evidence of review and approval as well as did not contain the information required per grant agreement. • 1 performance report was not submitted timely.   Additionally, the OMB and VIDE did not submit 6 performance reports for the fiscal year 2021. We also performed testing over the Transparency Act reporting requirements outlined in the criteria section above. We noted that 2 reports submitted in FSRS did not contain evidence of review and approval. The results of the testing are outlined in the table. See the table included in the report. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB and VIDE’s compliance with the specified requirements and general compliance principles. 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. Cause – The internal controls established for submission of reporting requirements did not fully operate as designed causing late submission and not in compliance with reporting requirements under the Transparency Act related to the program’s subrecipients. Recommendation – We recommend that OMB and VIDE reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-050 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2021 01/13/2021 - 09/30/2022 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2021 01/13/2021 - 09/30/2022 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – In accordance with the Uniform Guidance Section 200.332(b), 200.332(d), and 200.332(f), Requirements for Pass-Through Entities, pass-through entities must evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. Pass-through entities must also monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) reviewing financial and performance reports required by the pass-through entity; (2) following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means; and (3) issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity. Additionally, pass-through entities must verify that every subrecipient is audited as required by Subpart F – Audit Requirements when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in Section 200.501. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed one sub-award made by pass-through entity and OMB failed to provide the evidence of monitoring and review of sub-grantee to ensure effective management of sub-awards. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB’s compliance with the specified requirements and general compliance principles. The total amount of expenditures passed through to subrecipients in fiscal year 2021 were $2,500,000. Effect – OMB is not in compliance with the stated provisions. Failure to properly monitor subrecipients can result in noncompliance with laws and regulations along with loss of funding. Cause – It appears that OMB does not have adequate policies and procedures in place to monitor subrecipients to ensure they are following applicable federal regulations including expending federal awards for allowable expenditures. Recommendation – We recommend that OMB implement policies, procedures, and controls that will ensure subrecipient monitoring is performed. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-051 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Participation of Private School Children Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2021 01/13/2021 - 09/30/2022 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governors I and II) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2021 01/13/2021 - 09/30/2022 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per Compliance Supplement, the State or Territory or agency receiving financial assistance under ESF-SEA I and ESF-Governor I, must provide eligible private school children and their teachers or other educational personnel with equitable services or other benefits under the program. Before an agency, consortium, or entity makes any decision that affects the opportunity of eligible private school children, teachers, and other educational personnel to participate, the agency, consortium, or entity must engage in timely and meaningful consultation with private school officials. Expenditures for services and benefits to eligible private school children and their teachers and other educational personnel must be equal on a per-pupil basis to the expenditures for participating public school children and their teachers and other educational personnel, taking into account the number and educational needs of the children, teachers and other educational personnel to be served. For the programs under ESF-SEA, ESF II-SEA, ESF-Governor, ESF II- Governor will ensure equitable services will be provided to students and teachers in non-public elementary and secondary schools in the same manner provided under section 8501 of the Elementary and Secondary Education Act (ESEA). Condition – We reviewed OMB and VIDE's compliance with the compliance participation of private school children and noted the following: • OMB did not implement a formal process for the participation of private school children compliance for FY2021. • OMB did not conduct a timely consultation with nonpublic schools. • OMB did not provide documents to support that the educational services that were planned were provided and that the allocation to nonpublic schools are equal on a per-pupil basis for public and private schools. • Computation by VIDE of amount allocated to nonpublic schools did not contain evidence of review and approval. • VIDE did not provide the Affirmation of Consultation/Intent to Participate for 9 out of 29 nonpublic schools consulted. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the special tests and provisions requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB and VIDE’s compliance with the specified requirements. Effect – Noncompliance with program requirements could result in disallowances of costs and ineligible schools could be participating in the program. Cause – OMB and VIDE do not appear to have an effective system in place to ensure consistent and systematic review of documentation and file maintenance. Recommendation – We recommend that OMB and VIDE implement policies, procedures, and controls that will ensure equitable services are provided to eligible private school children and their teachers and other educational personnel. OMB and VIDE should also review its record retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-052 Prior Year Finding Number: 2020-040 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Health and Human Services Head Start Cluster ALN #: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Control, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records; • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – We sampled and selected 60 of 3,297 payroll transactions and noted that 2 employees’ timesheet was not available for review. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Total amount of payroll expenditures charged to the program during fiscal year 2021 were $8,323,089. Total amount sampled is $198,322. Total known amount of the exceptions is $6,498. Effect - DHS is not in compliance with the stated provisions. Failure to maintain supporting documentation can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that DHS improve internal controls to ensure adherence to federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work solely on a multiple activities or cost objectives, distribution of their salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of DHS in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-053 Prior Year Finding Number: 2020-041 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Health and Human Services Head Start Cluster ALN #: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for DHS. DPP was unable to provide complete property records which met the stated requirements. Further, no physical inventory of equipment was taken in fiscal year 2021. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation – We recommend that DHS and DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-054 Prior Year Finding Number: N/A Compliance Requirement: Special Test and Provision – Program Governance Program: U.S. Department of Health and Human Services Head Start Cluster ALN #: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Per Compliance Supplement, Head Start governing body has a legal and fiscal responsibility for the HAS. The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: • approval of all major financial expenditures of the agency; • annual approval of the operating budget of the agency; • selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and • monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Condition – DHS was unable to validate that they provided training and technical assistance to the governance board during the fiscal period under review. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that lack of compliance with the stated requirements can result in significant fiscal issues that may put the Head Start program they administer at risk along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with program governance. Recommendation – We recommend that DHS strengthen and improve internal controls to ensure adherence to Federal regulations related to program governance training and technical assistance to governing body and policy council. There should be regular training that will enable the governing body to perform it’s legal, fiscal, and oversight responsibilities. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-055 Prior Year Finding Number: 2020-042 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Health and Human Services Child Support Enforcement ALN #: 93.563 Award #: Various Award Year: Various Government Department/Agency: Department of Justice (DOJ) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records; • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – In our review of 60 out of 1,161 payroll transactions, we noted the following: • 24 instances where the employees’ hours reported in the payroll register did not agree to the timesheets. • 3 instances where retirement benefit was not included in the calculation of net pay. • 3 instances where retirement benefits deducted were less than the amount that should be deducted based on approved salary. • 1 instance where profile of resigned employee was not updated/removed from the payroll resulting to inappropriate calculation of health benefits for the resigned employee. • 2 timesheets were not available for review. Further, we noted that the internal controls are not designed at a level of precision that would prevent or detect and correct material noncompliance. Questioned Costs – Not determinable. Context – This is a condition identified per review of the DOJ’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program in fiscal year 2021 were $2,792,086. Total amount sampled is $159,204. The known amount of the exceptions is $14,924. Effect – DOJ is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DOJ does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that DOJ improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of DOJ in a timely manner. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-056 Prior Year Finding Number: 2020-051 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Health and Human Services Social Services Block Grant ALN #: 93.667 Award #: 1901VISOSR, 2001VISOSR, 2101VISOSR Award Year: 10/01/18 – 09/30/20 10/01/19 – 09/30/21 10/01/20 – 09/30/22 Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We sampled and selected 60 of 1,305 payroll transactions and noted 2 timesheets did not contain evidence of review and approval. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Total amount of payroll expenditures charged to the program in fiscal year 2021 were $3,533,047. Total amount sampled is $173,276. The known amount of the exceptions is $6,890. Effect - Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that DHS improve internal controls to ensure adherence to federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work solely on a multiple activities or cost objectives, a distribution of their salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of DHS in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-057 Prior Year Finding Number: 2020-053 Compliance Requirement: Period of Performance Program: U.S. Department of Health and Human Services Social Services Block Grant ALN #: 93.667 Award #: 1901VISOSR, 2001VISOSR, 2101VISOSR Award Year: 10/01/18 – 09/30/20 10/01/19 – 09/30/21 10/01/20 – 09/30/22 Government Department/Agency: Department of Human Services (DHS) Criteria – 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Additionally, the Uniform Guidance in 2 CFR Section 200.344(b), states that unless the federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial 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. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition - We sampled and selected 135 out of 375 and noted 105 expenditures were incurred outside the period of performance and did not contain written approval of the federal awarding agency. Additionally, internal controls do not appear to be operating at a level of precision to ensure grant expenditures are charged to the correct grant and within the allowable period of performance. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Total amount of expenditures charged to the program in fiscal year 2021 were $599,622. Total amount sampled is $113,909. The known amount of the exceptions is $108,757. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation – We recommend that DHS strengthen its process with respect to setting up and charging expenditures between various grant awards. We also recommend that DHS enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-058 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Social Services Block Grant ALN #: 93.667 Award #: 1901VISOSR, 2001VISOSR, 2101VISOSR Award Year: 10/01/18 – 09/30/20 10/01/19 – 09/30/21 10/01/20 – 09/30/22 Government Department/Agency: Department of Human Services (DHS) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Most specifically for the program, in accordance with the compliance Supplement, the states and territories are required to submit to the Federal administering agency, the Office of Community Services (OCS), SF-425 ‘Federal Financial Report’ and an annual ‘Post Expenditure Report’ no later than six months following the close of the fiscal year. Further, in accordance with OCS SSSGB Supplemental Terms and Conditions, SSBG is required to submit an interim and final SF-425 report covering Year 1 and the entire 2-year of the project period, 90 days following Year 1 (FFY 1) and 90 days following the end of Year 2 (FFY 2), respectively. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition - We sampled and selected 2 out of 2 reports required to be submitted during the fiscal year and noted no evidence of the date the reports were prepared, reviewed, and submitted to the Federal grantor. In addition, we were not able to agree all the data in the report to the underlying records. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect - DHS is not in compliance with the stated provisions. Failure to submit required reports could result in reduction or disallowance of Federal funding. Cause – It appears that policies and procedures, including oversight over submission of required reports were not functioning as intended.   Recommendation – We recommend that DHS strengthen its process with respect to ensuring proper retention, monitoring, and review of the required reports by an appropriate official who would ensure preparation of reports, information used is complete, accurate, reviewed, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-059 Prior Year Finding Number: 2020-054 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Children’s Health Insurance Program ALN: 93.767 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the Compliance Supplement, the State or Territory is required to submit CMS-64, Quarterly Statement of Expenditures for the Medicaid Assistance Program, thirty days after the end of the quarter. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 2 out of the 4 quarterly CMS-64 reports submitted during the fiscal year and noted the following: • 1 report did not contain evidence of review or approval. • 2 reports had not been submitted in a timely manner. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended.   Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-060 Prior Year Finding Number: 2020-055 Compliance Requirement: Special Tests and Provisions – Provider Eligibility Program: U.S. Department of Health and Human Services Children’s Health Insurance Program ALN: 93.767 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – In order to receive CHIP payments, CHIP providers must: (1) be licensed in accordance with federal, state, and local laws and regulations to participate in the CHIP program (42 CFR 457.900); (2) screened and enrolled in accordance with 42 CFR Part 455, Subpart E (sections 455.400 through 455.470); and make certain disclosures to the state (42 CFR 457.990(a), cross referencing 455.107). CHIP managed care network providers are subject to the same disclosure, screening, enrollment, and termination requirements that apply to Medicaid fee-for-service providers in accordance with 42 CFR Part 438, Subpart H. The Agency’s control for this requirement is for the commissioners of both DHS and the Department of Property and Procurement (DPP) approve the Medicaid Provider Agreement. Effective April 09, 2021, the signature of DPP Commissioner’s signature is no longer required. Condition – We sampled and selected 60 out of 114 providers receiving payments during the fiscal year and noted 1 provider agreement had not been approved by the Commissioners of DHS and DPP prior to April 09, 2021. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause - DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of documentation. Recommendation - We recommend that DHS perform regular reviews of the data in its files to ensure accuracy and completeness. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-061 Prior Year Finding Number: 2020-057 Compliance Requirement: Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, Factors Affecting Allowability of Costs, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under federal awards: a. Be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. b. Conform to any limitations or exclusions set forth in these principles or in the federal award as to types or amounts of cost items. c. Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity. d. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. e. Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f. Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g. Be adequately documented.”   Condition – We sampled and selected 60 out of 1,696 non-payroll transactions and noted 1 instance where DHS paid a monthly fee for a trailer to store excess furniture and other administrative items that the Medicaid staff no longer needed. Questioned Costs – Not determinable. Context - This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause - DHS does not have adequate policies and procedures in place to ensure that expenses are reviewed and approved to ensure reasonability and necessity. Recommendation – We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-062 Prior Year Finding Number: 2020-058 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – Plan and eligibility requirements must comply with various Federal requirements. The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with the State Plan under Title XIX of the Social Security Act, Section 4.7, Maintenance of Records, the Medicaid agency maintains or supervises the maintenance of records necessary for the proper and efficient operation of the plan, including records regarding applications, determination of eligibility, the provisions of medical assistance, and administrative costs, statistical, fiscal and other records necessary for reporting and accountability. Condition – In our review of 60 out of 1,723 participant case files, we noted the following: • For 1 participant, there was no evidence of a completed application. • For 6 participants, there was no documentation in the case file supporting the verification of income or resource requirements. • For 6 participants, there was no evidence that the social security number was verified. • For 3 participants, there was no evidence that citizenship was verified and no support for a qualified alien. • For all 60 participants, there was no evidence that a review and approval of the eligibility determination had been performed. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of the data in its participant case files. Recommendation – We recommend that DHS perform regular reviews of the data in its participant case files to ensure accuracy and completeness and confirming that only eligible participants are receiving the entitled benefits. Additional levels of review by a supervisor or manager can provide more timely quality assurance oversight over the eligibility process. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-063 Prior Year Finding Number: 2020-060 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. In accordance with the Compliance Supplement, the State or Territory is required to submit CMS-64, Quarterly Statement of Expenditures for the Medicaid Assistance Program, thirty days after the end of the quarter. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 2 out of the 4 quarterly CMS-64 reports submitted during the fiscal year and noted the following: • 1 report did not contain evidence of review or approval. • 2 reports had not been submitted in a timely manner. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended.   Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-064 Prior Year Finding Number: 2020-061 Compliance Requirement: Special Tests and Provisions - Utilization Control and Program Integrity Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – The State or Territory plan must provide methods and procedures to safeguard against unnecessary utilization of care and services, including long-term care institutions. The State or Territory must have: (1) methods or criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring suspected fraud cases to law enforcement officials (42 CFR parts 455, 456, and 1002). Suspected fraud should be referred to the State or Territory Medicaid Fraud Control Unit (42 CFR part 1007). The State or Territory Medicaid agency must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. The agency must have procedures for the ongoing post-payment review, on a sample basis, of the need for and the quality and timeliness of Medicaid services. The State or Territory Medicaid agency may conduct this review directly or may contract with a quality improvement organization (QIO). Condition – DHS does not have the necessary controls or procedures to safeguard against unnecessary utilization of care and services and to identify, investigate, and refer suspected fraud cases. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud which may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately, with no methodology of properly identifying or tracking the amounts. Cause – DHS does not appear to have an effective system in place to address the program’s requirements. Recommendation – DHS should reconsider whether it would like to be directly responsible for Utilization Control and Program Integrity, or if the use of a QIO would better suit current needs. Once this is decided, DHS should take the necessary steps to ensure compliance with this requirement. The written procedures should reflect the actual actions to be taken. In the event a QIO is used, DHS should be involved throughout, so that it is aware of the program’s vulnerabilities and has the opportunity to make the necessary changes for improvement in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-065 Prior Year Finding Number: 2020-062 Compliance Requirement: Special Tests and Provisions - Inpatient Hospital and Long-Term Care Facility Audits Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – The State or Territory Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers. The State or Territory Medicaid agency must provide for the filing of uniform cost reports for each participating provider. These cost reports are used to establish payment rates. The State or Territory Medicaid agency must provide for the periodic audits of financial and statistical records of participating providers. The specific audit requirements will be established by the State or Territory Plan (42 CFR section 447.253). Condition – DHS provides Medicaid services to eligible Territory residents through inpatient hospitals and long-term care facilities. These hospitals and facilities include various Territory agencies and third party service providers. The costs incurred by these facilities are summarized in a cost report that is submitted to DHS. DHS awarded a contract in August 2017 for the audit of these cost reports; however, we noted that DHS had not received any audited cost reports for fiscal year 2021. Questioned Costs - Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – Without timely audits of the cost reports, DHS has no assurance that the costs incurred by the medical facilities are actual costs incurred. Further, the difference between costs submitted for reimbursement and the costs actually reimbursed result in the use of local, rather than Federal, dollars to fund Medicaid expenditures. Cause – DHS does not appear to have adequate policies and procedures in place for the provision of audited cost reports of its participating providers. Recommendation – We recommend that DHS evaluate and develop policies and procedures to obtain and audit the cost reports. This will allow DHS to reduce the time between the Medicaid expenditures being incurred and the ultimate reimbursement from the Federal government. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-066 Prior Year Finding Number: 2020-063 Compliance Requirement: Special Tests and Provisions – ADP Risk Analysis and System Security Review Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – State or Territory agencies must establish and maintain a program for conducting periodic risk analyses to ensure that appropriate, cost effective safeguards are incorporated into new and existing systems. State or Territory agencies must perform risk analyses whenever significant system changes occur. State or Territory agencies shall review the ADP system security of installations involved in the administration of HHS programs on a biennial basis. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures and personnel practices. The State or Territory agency shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR section 95.621). Condition – DHS did not perform the required ADP Risk Analysis and System Security Review for the systems that support the Medicaid Program. Questioned Costs - Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - The absence of policies to ensure these analyses and reviews are performed may lead to physical and data security issues and noncompliance with program requirements. Further, DHS’ risk of incomplete or inaccurate data processing, or worse, the risk of fraud, increases. Cause – DHS’ records do not permit a determination as to the sufficiency of the design and operation of key controls surrounding the environment in which the Medicaid claims reside. Recommendation - We recommend that management should perform and review a risk analysis and system security review for all systems that support the Medicaid program. All issues should be addressed by management. If management becomes aware that such a report will not be available, we recommend that management conduct its own review. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-067 Prior Year Finding Number: 2020-064 Compliance Requirement: Special Tests and Provisions – Provider Eligibility Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – In order to receive Medicaid payments, providers must: (1) be licensed in accordance with federal, state, and local laws and regulations to participate in the Medicaid program (42 CFR sections 431.107 and 447.10; and Section 1902(a)(9) of the Social Security Act (42 USC 1396a(a)(9)); (2) screened and enrolled in accordance with 42 CFR Part 455, Subpart E (sections 455.400 through 455.470); and make certain disclosures to the state (42 CFR Part 455, Subpart B, sections 455.100 through 455.106). Medicaid managed care network providers are subject to the same disclosure, screening, enrollment, and termination requirements that apply to Medicaid fee-for-service providers in accordance with 42 CFR Part 438, Subpart H. States must also follow guidance issued in the Medicaid Provider Enrollment Compendium (MPEC) at https://www.medicaid.gov/sites/default/files/2019-12/mpec-7242018.pdf to enroll providers into their Medicaid programs. The Agency’s control for this requirement is for the commissioners of both DHS and the Department of Property and Procurement (DPP) approve the Medicaid Provider Agreement. Effective April 09, 2021, the signature of DPP Commissioner’s signature is no longer required. Condition – We sampled and selected 60 out of 114 providers receiving payments during the fiscal year and noted 1 provider agreement had not been approved by the Commissioners of DHS and DPP prior to April 09, 2021. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause - DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of documentation. Recommendation - We recommend that DHS perform regular reviews of the data in its files to ensure accuracy and completeness. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-068 Prior Year Finding Number: 2020-065 Compliance Requirement: Special Tests and Provisions - Medicaid Fraud Control Unit Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – The Medicaid Fraud Control Unit (MFCU) is required to submit the SF-425, Federal Financial Report. As per the requirements, the: • Quarterly expenditure reports are due 30 days after the end of each quarter. • All final expenditure reports are due 90 days after the end date of the project period of performance. • If the grantee will be unable to submit the financial expenditure report by the due date, the grantee must request an extension. Condition - We reviewed 3 out of the 5 reports submitted during the fiscal year and noted the following: • 3 reports did not contain evidence of review and approval prior to submission. • 3 reports had not been submitted in a timely manner. Questioned Costs - Not determinable. Context - This is a condition identified per review of DHS and DOJ’s compliance with the specified requirements using a statistically valid sample. Effect - DHS and DOJ are not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the DHS and DOJ do not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that DHS and DOJ reevaluate their policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-069 Prior Year Finding Number: 2020-068 Compliance Requirement: Special Tests and Provisions – Medicaid National Correct Coding Initiative Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria - States or Territories are required to incorporate six National Correct Coding Initiative (NCCI) methodologies into the state Medicaid Programs pursuant to requirements of Section 6507 of the Affordable Care Act (section 1903(r) of the Social Security Act). The purpose of the NCCI Program is to promote correct coding, prevent coding errors, prevent code manipulation, reduce improper payments and reduce the paid claims improper payment rate. Condition – DHS did not have internal controls in place to ensure that the required NCCI methodologies were downloaded. Also, DHS did not provide documentation to verify that the quarterly NCCI edit files were uploaded timely in the system. In addition, DHS did not have the required signed Confidentiality Agreements in place as required by Technical Guidance Manual, sections 7.1.1 and 7.1.2 during fiscal year 2021. Questioned Costs – Not determinable. Context - This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - DHS is not in compliance with regulations for the Medicaid National Correct Coding Initiative. Cause - DHS did not establish internal controls to ensure that the NCCI methodologies were incorporated into the Medicaid program or that the required signed Confidentiality Agreements were in place. Recommendation - We recommend that DHS establish internal controls to ensure compliance with the requirements of the Medicaid National Correct Coding Initiative and incorporate the NCCI methodologies into the state Medicaid program. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-071 Prior Year Finding Number: 2020-069 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Homeland Security Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN #: 97.036 Award #: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR Award Periods: 09/20/2017 – 09/07/2025 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria – In accordance with the requirements of the grant agreement(s), the program is required to provide matching funds through cash, third-party in-kind services, materials, or any combination thereof. The Government is required to provide (a) 10% matching funds for most Permanent work project(s); and (b) 10% match for all emergency work completed after the first 180 days after declaration unless a waiver has been granted. Condition – VITEMA did not meet the stipulated matching requirements during the fiscal year, nor did it obtain a corresponding waiver. Questioned Costs – Not determinable. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements. Effect – VITEMA is not in compliance with the stated provisions. Cause – VITEMA does not appear to have adequate policies and procedures in place to ensure a consistent and systematic monitoring of the requirements. Recommendation – We recommend that VITEMA deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-072 Prior Year Finding Number: 2020-070 Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN #: 97.036 Award #: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR Award Periods: 09/20/2017 – 09/07/2025 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, the Territorial agreement between VITEMA and FEMA dictates that all performance reports must be submitted within 30 days of the end of each quarter. Further, under 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 24 out of the 181 reports submitted during the fiscal year and noted the following: • 6 performance and 5 FFATA reports did not agree to the underlying records. • 4 performance reports and 1 financial report had not been submitted in a timely manner. • 11 FFATA reports were not submitted during the fiscal year. • 16 FFATA reports did not contain evidence of review, approval, and submission.   The results of the testing performed over Transparency Act are outlined in the table below. See the table included in report. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Effect – VITEMA is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VITEMA does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-073 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Homeland Security Hazard Mitigation Grant Program ALN #: 97.039 Award #: FEMA-4335-DR, FEMA-4340-DR-VI Award Periods: 09/20/2017 – 09/07/2025 09/07/2017 – 09/16/2025 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria – A non-federal entity may charge to the Federal award 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-federal entity must liquidate all financial obligations incurred under the Federal award no 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. Condition – We noted 1 non-payroll transaction amounting to $33,006 was charged to a grant award which the period of performance had ended. There was no grant extension or approval received from the Federal Awarding Agency. Questioned Costs – $33,006. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements and general compliance principles. Effect – VITEMA is not in compliance with the stated provisions. Cause- VITEMA did not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation – We recommend that VITEMA strengthen its processes with respect to setting up and charging expenditures between various grant awards. We also recommend that VITEMA enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-074 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Hazard Mitigation Grant Program ALN #: 97.039 Award #: FEMA-4335-DR, FEMA-4340-DR-VI Award Periods: 09/20/2017 – 09/07/2025 09/07/2017 – 09/16/2025 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, the Territorial agreement between VITEMA and FEMA dictates that all performance reports must be submitted within 30 days of the end of each quarter. Further, under 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 8 out of the 16 reports submitted during the fiscal year and noted the following: • 2 performance reports did not agree to the underlying records. • 1 performance report had not been submitted in a timely manner. • 5 performance reports submitted did not contain evidence of review and approval. • 3 financial reports did not contain evidence of review and approval. • 3 financial Reports did not have sufficient supporting documentation to validate accounting records agree with the reports. • FFATA reports had not been prepared and submitted. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Effect – VITEMA is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VITEMA does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-075 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed – Non-Payroll Activities Program: U.S. Department of Homeland Security COVID-19 - Presidential Declared Disaster Assistance to Individuals and Households - Other Needs ALN: 97.050 Award #: 4513DRVISPLW Award Period: 08/1/2020 – 12/27/2021 Government Department/Agency: Department of Labor (VIDOL) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Payment for supplemental lost wages is authorized under the “Other Expenses” category of Other Needs Assistance (ONA), in accordance with section 408(e)(2) of the Stafford Act (42 U.S.C. Section 5174(e)(2)) and 44 C.F.R. Section 206.119(c)(6)(ii), to eligible individuals of the U.S. Virgin Islands. Condition – We sampled and selected 60 out of 8,196 supplemental lost wages transactions and noted 35 instances where VIDOL was not able to provide evidence that payments were made to eligible individuals. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Total payments made for supplemental lost wages were $7,124,100 in fiscal year 2021. Total amount sampled is $47,400. The known amount of the exceptions is $27,600. Effect – VIDOL is not in compliance with the stated provisions and payments made have been made for unallowable activities. Cause – It appears that policies and procedures, including review and approval for eligible recipients were not functioning as intended. Recommendation – We recommend that VIDOL reevaluates its policies and procedures to ensure regular reviews of data on file. This will help ensure completeness of signatories and verify that information has been reviewed and approved by the appropriate official. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-076 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Department of Homeland Security COVID-19 - Presidential Declared Disaster Assistance to Individuals and Households - Other Needs ALN: 97.050 Award #: 4513DRVISPLW Award Period: 08/1/2020 – 12/27/2021 Government Department/Agency: Department of Labor (VIDOL) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 7 out of 20 drawdowns and noted the following: • 6 drawdowns where supporting documentation were not available for review. • 1 drawdown did not contain evidence of review and approval. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the cash management compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Total fiscal year 2021 drawdown requests were $7,213,546. Total amount sampled and known amount of the exceptions is $4,940,580. Effect – VIDOL is not in compliance with the stated provisions. Inaccurate information may have been reported to the Federal government in the absence of required reconciliations and reviews. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation – We recommend that the VIDOL reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-077 Prior Year Finding Number: N/A Compliance Requirement: Eligibility Program: U.S. Department of Homeland Security COVID-19 - Presidential Declared Disaster Assistance to Individuals and Households - Other Needs ALN: 97.050 Award #: 4513DRVISPLW Award Period: 08/1/2020 – 12/27/2021 Government Department/Agency: Department of Labor (VIDOL) Criteria – Assistance from FEMA for providing supplemental payments for lost wages to eligible individuals under the ONA program is limited to a $300 per week through the week ending December 27, 2020. The term “eligible individual” means persons who provide self-certification that they are unemployed, partially unemployed, or unable or unavailable to work due to disruptions caused by COVID-19. In addition, the persons must be recipients of at least $100 for any of the following benefits, beginning back to August 1, 2020: • Unemployment compensation, including Unemployment Compensation for Federal Employees (UCFE) and Unemployment Compensation for Ex-Service members (UCX); • Pandemic Emergency Unemployment Compensation (PEUC); • Pandemic Unemployment Assistance (PUA); • Extended Benefits (EB); • Short-Time Compensation (STC); • Trade Readjustment Allowance (TRA); and • Payments under the Sefl-Employment Assistance (SEA) program. In addition, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 60 out of 8,196 claims submitted during the fiscal year, we noted 35 instances where VIDOL was unable to provide the approved self-certifications or that benefits paid were calculated correctly and in compliance with the requirements of the program. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Payments to beneficiaries were $7,124,100 in fiscal year 2021. Total amount sampled is $47,400. The known amount of the exceptions is $27,600. Effect – Noncompliance with program requirements could result in disallowances of costs and participants could be receiving benefits that they are not entitled to receive. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of the data in its claimant files. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper maintenance and retention of complete program files and confirming that only eligible participants are receiving benefits they are entitled to. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-078 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Homeland Security COVID-19 - Presidential Declared Disaster Assistance to Individuals and Households – Other Needs ALN: 97.050 Award #: 4513DRVISPLW Award Period: 08/1/2020 – 9/27/2021 Government Department/Agency: Department of Labor (VIDOL) Criteria – A non-federal entity may charge to the Federal award 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorizes an extension, a non-federal entity must liquidate all financial obligations incurred under the Federal award no 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. Condition – We sampled and selected 60 out of 8,196 transactions and noted 30 transactions where sufficient supporting documentation were not available to validate that the expenditures were incurred within the period of performance. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Total program expenditures charged to the program was $7,128,856. Total amount sampled is $47,400. The known amount of the exceptions is $23,700. Effect – VIDOL is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation – We recommend that VIDOL strengthen its processes with respect to setting up and charging expenditures between various grant awards. We also recommend that VIDOL enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-079 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Federal Emergency Management Agency COVID-19 - Presidential Declared Disaster Assistance to Individuals and Households - Other Needs ALN: 97.050 Award #: 4513DRVISPLW Award Period: 08/1/2020 – 9/27/2021 Government Department/Agency: Department of Labor (VIDOL) Criteria – Each State or Territory must file various financial, programmatic and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. In addition, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 10 out of 56 reports submitted during the fiscal year, we noted the following: • 3 reports were not available for review. • 3 reports did not contain evidence of review and approval. • 2 reports were not submitted. • 2 reports had not been submitted in a timely manner. • 2 reports where financial information did not agree with underlying records. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Effect – VIDOL is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as¬ intended. Further, the Government does not have adequate control over maintenance of the underlying documentation used in preparing various reports.   Recommendation – We recommend that VIDOL reevaluates its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2021-080 Prior Year Finding Number: 2020-071 Compliance Requirement: Data Collection Form and Single Audit Reporting Package Program: ALN # 10.551, 10.561 Supplemental Nutrition Assistance Program Cluster (SNAP) ALN # 10.557 Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN # 11.022 Bipartisan Budget Act of 2018 ALN # 15.875 Economic, Social, and Political Development of the Territories ALN # 17.225 Unemployment Insurance ALN # 20.205 Highway Planning and Construction Cluster ALN # 20.507 Federal Transit Cluster ALN # 21.019 COVID-19 - Coronavirus Relief Fund ALN # 21.023 COVID-19 - Emergency Rental Assistance Program ALN # 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN # 66.468 Drinking Water State Revolving Fund Cluster ALN # 84.027A Special Education Cluster (IDEA) ALN # 84.403A Consolidated Grant to the Outlying Areas ALN # 84.425A, 84.425H COVID-19 - Education Stabilization Fund ALN # 93.356, 93.600 Head Start Cluster ALN # 93.563 Child Support Enforcement ALN # 93.667 Social Services Block Grant ALN # 93.767 Children’s Health Insurance Program ALN # 93.775, 93.778 Medicaid Cluster ALN # 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN # 97.039 Hazard Mitigation Grant Program ALN # 97.050 COVID-19 - Presidential Declared Disaster Assistance to Individuals and Household - Other Needs Criteria – The Uniform Guidance in 2 CFR Section 200.512, Report Submission, establishes that the audit shall be completed and the data collection form and reporting package shall be submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 days after receipt of the auditor’s report or nine (9) months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. Condition – The Government did not comply with the required submission date of the data collection form and reporting package to the FAC for the fiscal year ended September 30, 2021. Questioned Costs – Not applicable. Context – This is a condition identified per review of the Government’s compliance with the specified requirements. Effect – The Government could be exposed to a reduction or elimination of funds by the Federal awarding agencies. Cause – The Government did not have controls in place to ensure that the reporting package was submitted to the FAC within the required timeframe. Recommendation – We recommend that the Government establish controls to ensure the reporting package is submitted to the FAC annually within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-019 Prior Year Finding Number: 2019-022 Compliance Requirement: Special Tests and Provisions ? EBT Card Security Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster CFDA #: 10.551,10.561 Award #: IVI400408, 4VI400408 Award Year: 10/01/2018 ? 09/30/2019 10/01/2019 ? 09/30/2020 Government Department/Agency: Department of Human Services (DHS) Criteria - Per 7 CFR Section 274.8(b)(3), System Security, as an addition to or component of the Security Program required of Automated Data Processing (ADP) systems, the State or Territory agency shall ensure that the certain electronic benefits transfer (EBT) security requirements are established. As such, DHS is required to maintain adequate security over, and documentation/records for EBT cards, to prevent their theft, embezzlement, loss damage, destruction, unauthorized transfer, negotiation, or use. Condition ? DHS contracted with Fidelity National Information Service (FIS) for the issuance and security of the EBT cards; however, it is DHS?s ultimate responsibility to ensure the contractor has controls in place to maintain adequate security over, and documentation/records of EBT cards. We sampled and selected 8 out of 24 monthly card reconciliations and in 4 instances, we noted variances between new/replacements issued cards status report and the actual new/replacements cards issued. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. Effect ? Without adequate internal controls to ensure compliance with EBT card security requirements, there is an increased risk that the inventory of EBT cards will not be properly maintained and accounted for. Cause ? DHS does not have adequate policies and procedures in place to ensure adequate safeguarding and documentation of EBT cards. Recommendation - We recommend that DHS implement formal policies and procedures to maintain adequate security over, and documentation and records for EBT Cards. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-020 Prior Year Finding Number: 2019-025 Compliance Requirement: Allowable Costs/Cost Principles ? Payroll Activities; Period of Performance Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects CFDA #: 12.401 Award #: W9127P-15-2-1000, W9127P-20-2-1000 Award Year: 10/01/2017 - 09/30/2020 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, a non-federal entity may charge to the Federal award, 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Condition ? We sampled and selected 60 out of 554 payroll transactions and noted 5 instances where the employees? payroll costs were charged to prior year grant projects that had not been extended or approved. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of OTAG?s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program during fiscal year 2020 were $1,238,058. The known amount of the 5 instances amounted to $12,338. Effect ? OTAG is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? OTAG does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and the required period of performance stipulations. Recommendation ? We recommend that OTAG improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. We also recommend that OTAG enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-021 Prior Year Finding Number: 2019-026 Compliance Requirement: Cash Management Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects CFDA #: 12.401 Award #: W9127P-15-2-1000, W9127P-20-2-1000 Award Year: 10/01/2017 - 09/30/2020 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition ? OTAG did not perform a reconciliation of the Federal cash drawdown transactions and cash receipts recorded in the ERP system. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of OTAG?s compliance with the specified requirements and general compliance principles. Effect ? OTAG is not in compliance with the stated provisions. Inaccurate information may have been reported to the Federal government in the absence of required reconciliations and reviews. Cause ? It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation - We recommend that OTAG reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-022 Prior Year Finding Number: 2019-027 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects CFDA #: 12.401 Award #: W9127P-15-2-1000, W9127P-20-2-1000 Award Year: 10/01/2017 - 09/30/2020 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria ? In accordance with the Uniform Guidance in 2 CFR section 200.306, Cost Sharing or Matching, and the requirements of the grant agreements, the program is required to contribute matching funds through cash, in-kind contributions, and/or other non-cash support. Condition ? OTAG was unable to readily exhibit and provide its computation of the matching calculation or provide evidence that it was monitoring compliance with said requirement. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of OTAG?s compliance with the specified requirements and general compliance principles. Effect ? OTAG is not in compliance with the stated provisions. Cause ? OTAG does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Recommendation ? We recommend that OTAG deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the matching requirement throughout the fiscal year. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-023 Prior Year Finding Number: 2019-028 Compliance Requirement: Period of Performance Program: Government Department/Agency: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects CFDA #: 12.401 Award #: W9127P-15-2-1000, W9127P-20-2-1000 Award Year: 10/01/2017 - 09/30/2020 Office of the Adjutant General (OTAG) Criteria ? A non-federal entity may charge to the Federal award 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-federal entity must liquidate all financial obligations incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Condition ? We noted that payroll costs amounting to $192,238 were charged to a grant award whose period of performance had lapsed. There was no grant extension provided. Questioned Costs ? $192,238. Context ? This is a condition identified per review of OTAG?s compliance with the specified requirements and general compliance principles. Effect ? OTAG is not in compliance in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? OTAG did not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation ? We recommend that OTAG strengthen its processes with respect to setting up and charging expenditures between various grant awards. We also recommend that OTAG enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-024 Prior Year Finding Number: 2019-029 Compliance Requirement: Reporting Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects CFDA #: 12.401 Award #: W9127P-15-2-1000, W9127P-20-2-1000 Award Year: 10/01/2017 - 09/30/2020 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria ? Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Condition ? As part of its reporting requirements, OTAG is required to submit the SF-270, Request for Advance or Reimbursement Report to the Federal grantor to facilitate cash drawdown requests for reimbursement. We noted that OTAG did not perform a reconciliation of the Federal cash drawdown reports and the cash receipts recorded in the ERP system to verify completeness of the cash drawdown reports. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of OTAG?s compliance with the specified requirements and general compliance principles. Effect ? OTAG is not compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause ? It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, OTAG does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation ? We recommend that OTAG reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-025 Prior Year Finding Number: 2019-030 Compliance Requirement: Cash Management Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories CFDA #: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition ? We reviewed 6 out of 61 drawdowns and noted the following: ? 1 drawdown request did not have the necessary evidence of review and approval prior to submission. ? 2 drawdowns were not in accordance with the provisions of the Territory?s Cash Management Improvement Act (CMIA) agreement. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Government?s compliance with the specified requirements using a statistically valid sample and with the provisions of the CMIA agreement. Total fiscal year 2020 drawdown requests were $4,728,625. Effect ? The Government is not in compliance with the stated provisions. Inaccurate information may have been reported to the Federal government in the absence of required reconciliations and reviews. Cause ? It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Further, the Government did not appear to exercise due diligence in requesting Federal funds consistent with the CMIA agreement and its actual cash needs. Recommendation - We recommend that the Government reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. We also recommend that Government comply with the provisions of CMIA agreement and request Federal funds consistent with the CMIA agreement funding techniques and clearance patterns for this program or consider applying for an exemption from the CMIA agreement. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-026 Prior Year Finding Number: 2019-031 Compliance Requirement: Equipment/ Real Property Management Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories CFDA #: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria ? Per 2 CFR section 200.313, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Condition ? The Government?s Department of Property and Procurement (DPP) maintains the equipment register for the Government. DPP was unable to provide complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2020. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Government?s compliance with the specified requirements. Effect ? There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause ? The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation ? We recommend that DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-027 Prior Year Finding Number: 2019-032 Compliance Requirement: Reporting Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories CFDA #: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria ? Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Condition ? During our review of the SF-425, Federal Financial Report, we selected 9 out of 41 submissions and noted the following: ? 2 reports were not available for review. ? 6 reports where sufficient supporting documentation was not available to validate that the respective financial information agreed with the underlying records. ? 1 report had not been submitted in a timely manner. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Government?s compliance with the specified requirements using a statistically valid sample. Effect ? The Government is not compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause ? It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the Government does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation ? We recommend the Government reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-028 Prior Year Finding Number: 2019-033 Compliance Requirement: Activities Allowed or Unallowed Program: U.S. Department of Labor Unemployment Insurance CFDA #: 17.225 Award #: Various Award Period: 10/01/2016 ? 12/31/2022 Government Department/Agency: Department of Labor (VIDOL) Criteria ? In accordance with the Uniform Guidance in 2 CFR Section Part 200, a State or Territory must adopt its own written fiscal and administrative requirements for expending and accounting for all funds, which are consistent with the provisions of Uniform Guidance and extend such policies to all sub-recipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions, costs are reasonable and necessary for operating these programs, and funds are not used for general expenses required to carry out other responsibilities of a State or Territory or its sub-recipients. Condition ? VIDOL was unable to provide reconciled accounting information relating to the majority of the Unemployment Insurance Trust Fund accounts. As such, we are unable to conclude on the fiscal and administrative requirements with respect to expending and accounting for all funds related to the Unemployment Insurance program. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of VIDOL?s compliance with the specified requirements. Effect ? Accounting tasks, such as periodic reconciliations, play a key role in proving the accuracy of accounting data and information included in various interim financial statements and/or Federal reports. A lack of timely preparation of complete and accurate reconciliations results in the absence of adequate control over both cash receipts and disbursements. Cause ? VIDOL does not appear to have adequate policies and procedures in an effort to adequately administer the expending and accounting for all funds. Recommendation ? We recommend that VIDOL improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for all funds. In order to prevent significant errors in the financial records as well as prevent possible irregularities, including fraud, to exist and continue without notice, we recommend that all accounts, accruals, and reconciliations be reviewed on a periodic basis. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-029 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions: UI Reemployment Programs: RESEA Program: U.S. Department of Labor Unemployment Insurance CFDA #: 17.225 Award #: Various Award Period: 10/01/2016 ? 12/31/2022 Government Department/Agency: Department of Labor (VIDOL) Criteria ? The UI program serves as one of the principal ?gateways? to the workforce system. It is often the first workforce program accessed by individuals who need workforce services. The WPRS and RESEA programs serve as UI?s primary programs that facilitate the reemployment needs of UI claimants. RESEA is authorized by Section 306 of the Social Security Act and builds on the success of both WPRS and RESEA?s predecessor, the former UI Reemployment and Eligibility Assessment (REA) program. RESEA uses an evidence-based integrated approach that combines an eligibility assessment for continuing UI eligibility and the provision of reemployment services. RESEA is a voluntary program and under certain circumstances may be designed to also satisfy WPRS requirements. Operating guidance for the RESEA program is updated annually. UIPL 7-19 provides RESEA operating Guidance for FY 2019. Per 2 CFR section 200.303(a), a nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply with the guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control-Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Condition ? VIDOL suspended the RESEA program for the third and fourth quarters of fiscal year 2020 during the COVID-19 pandemic. However, VIDOL was unable to provide approval from the U.S. Department of Labor for the suspension of the program during the period. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of VIDOL?s compliance with the specified requirements. Effect ? Suspension of the program without proper approval may have resulted in denying services for UI claimants who are most likely to exhaust their benefits and need reemployment assistance to return to work. Cause ? VIDOL does not appear to have adequate policies and procedures in an effort to adequately administer the expending and accounting for all funds. Recommendation ? We recommend that VIDOL improve internal controls to ensure adherence to Federal regulations and obtaining proper approval before suspending a federal program. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-030 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles ? Payroll Activities Program: U.S. Department of the Treasury Coronavirus Relief Fund CFDA #: 21.019 Award #: N/A Award Period: 03/02/2020 ? 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: ? Be incorporated into the organization?s official records; ? Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and ? Support the distribution of employee salary across multiple activities or cost objectives. Condition ? We sampled and selected 60 out of 18,239 payroll expenditures and noted the following: ? 1 timesheet did not contain evidence of review and approval. ? 1 timesheet was not available for review. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of OMB?s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program in fiscal year 2020 were $11,057,737. The known amount of the transaction not available for review was $1,604. Effect ? OMB is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? OMB does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation ? We recommend that OMB improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of OMB in a timely manner. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-031 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of the Treasury Coronavirus Relief Fund CFDA #: 21.019 Award #: N/A Award Period: 03/02/2020 ? 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria ? Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Condition ? We reviewed 1 out of 2 of the quarterly reports submitted during the fiscal year and noted the report?s financial information did not agree with the underlying records. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of OMB?s compliance with the specified requirements using a statistically valid sample. Effect ? OMB is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause ? It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, OMB does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation ? We recommend that OMB reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-032 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of the Treasury Coronavirus Relief Fund CFDA #: 21.019 Award #: N/A Award Period: 03/02/2020 ? 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria ? In accordance with the Uniform Guidance Section 200.332(b), 200.332(d), and 200.332(f), Requirements for Pass-Through Entities, pass-through entities must evaluate each subrecipient?s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. Pass-through entities must also monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include; (1) reviewing financial and performance reports required by the pass-through entity; (2) following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means; and (3) issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity. Additionally, pass-through entities must verify that every subrecipient is audited as required by Subpart F ? Audit Requirements when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in Section 200.501. Condition ? OMB did not implement a formal subrecipient monitoring process for fiscal year 2020. Questioned Costs ? Not determinable. Context - This is a condition identified per review of OMB?s compliance with the specified requirements. The total amount of expenditures passed-through to subrecipients in fiscal year 2020 were $8,751,712. Effect - OMB is not in compliance with the stated provisions. Failure to properly monitor subrecipients can result in noncompliance with laws and regulations along with loss of funding. Cause - OMB does not have adequate policies and procedures in place to monitor subrecipients to ensure they are following applicable federal regulations including expending federal awards for allowable expenditures. Recommendation ? We recommend that OMB implement policies, procedures, and controls that will ensure subrecipient monitoring is performed. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-033 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program : U.S. Environmental Protection Agency Construction Grants for Wastewater Treatment Works CFDA #: 66.418 Award #: Various Government Department/Agency: Department of Public Works (DPW) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, per the grant agreement?s programmatic conditions, DPW must submit a fully executed Memorandum of Agreement (MOA) with the Virgin Islands Waste Management Authority (VIWMA), reflecting the scope of work related to projects identified in the Virgin Islands Intended Use Plan (IUP)/Project Priority List for Fiscal Year 2012. Per the grant agreement, DPW shall not request payment for project costs under this grant agreement until the required MOA document is submitted to the Environmental Protection Agency (EPA). Condition ? DPW did not submit the required MOA within 30 days from the receipt of the grant agreement. The grant award also stipulates DPW shall not request payment for project costs under this grant agreement until the required MOA document is submitted to the EPA. As such, DPW was precluded from completing any drawdowns during the fiscal year. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DPW?s compliance with the specified requirements. Effect ? DPW is not in compliance with stated provisions. The opportunity to use money for other immediate cash needs is unnecessarily delayed when reimbursement funds are not requested and drawn down timely. Cause ? It appears that policies and procedures including compliance with the grant requirements were not functioning as intended. Recommendation ? We recommend that DPW reevaluate its policies and procedures to ensure that all grant requirements are met and continue to be vigilant in following EPA?s general terms and conditions. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2020-034 Prior Year Finding Number N/A Compliance Requirement: Reporting Program U.S. Environmental Protection Agency Construction Grants for Wastewater Treatment Works CFDA #: 66.418 Award #: Various Government Department/Agency: Department of Public Works (DPW) Criteria ? Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with the program requirements. Condition ? We reviewed 6 out of the 15 reports submitted during the fiscal year and noted the following: ? 2 financial reports did not include the federal share of expenditures or the federal share of unliquidated obligations for the fiscal year. ? 1 report was not available for review. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DPW?s compliance with the specified requirements using a statistically valid sample. Effect ? DPW is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause ? It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, DPW does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation ? We recommend that DPW reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by the appropriate official who would ensure that information reported is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2020-035 Prior Year Finding Number N/A Compliance Requirement: Special Tests and Provisions ? Wage Rate Requirements Program U.S. Environmental Protection Agency Construction Grants for Wastewater Treatment Works CFDA #: 66.418 Award #: Various Government Department/Agency: Department of Public Works (DPW) Criteria ? Non-federal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the Department of Labor regulations (29 CFR part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the non-federal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). Condition ? We reviewed a construction contract with Federal awards expended during the fiscal year and noted the following: ? 3 out of 13 weekly payrolls were not reviewed by the Construction Projects Administrator. ? The dates indicated in the 2 certified weekly payrolls were prior to the date the payroll were submitted. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DPW?s compliance with the specified requirements. Effect ? DPW is not in compliance with stated provisions. There is potential that contractors or subcontractors could have paid their employees less than the prevailing wage rates established by the Department of Labor. Cause ? DPW does not appear to have adequate policies and procedures in place to ensure compliance with applicable wage rate requirements. Recommendation ? We recommend that DPW improve internal controls to ensure adherence to Federal regulations related to wage rate requirements, and to ensure that responsible project management personnel obtain and review the required certified payroll reports for each week in which contract work is performed. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-036 Prior Year Finding Number: 2019-036 Compliance Requirement: Allowable Costs/Cost Principles ? Payroll Activities Program: U.S. Environmental Protection Agency Drinking Water State Revolving Fund Cluster CFDA #: 66.468 Award #: FS98235211, FS98235212, FS98235213, FS98235214, FS98235215, FS98235216, FS98235217 Award Year: 10/1/13 - 09/30/21 10/1/14 - 09/30/21 10/1/15 - 09/30/22 10/1/16 - 09/30/23 Government Department/Agency: Department of Planning and Natural Resources (DPNR) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: ? Be incorporated into the organization?s official records; ? Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and ? Support the distribution of employee salary across multiple activities or cost objectives. Condition ? We sampled and selected 15 out of 147 payroll expenditures and noted all 15 selections did not have the correct and/or complete project numbers in the Notice of Personnel Action (NOPA) forms. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DPNR?s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program in fiscal year 2020 were $181,761. Effect - DPNR is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DPNR does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation ? We recommend that DPNR improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of their salaries and wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of DPNR in a timely manner. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2020-037 Prior Year Finding Number N/A Compliance Requirement: Period of Performance Program: Government Department/Agency: U.S. Department of Education Consolidated Grant to the Outlying Areas CFDA #: 84.403A Award #: S403A160004, S403A170004, S403A180004, S403A190004 Award Periods: 07/01/2016 ? 09/30/2019 07/01/2017 ? 09/30/2020 07/01/2018 ? 09/30/2021 07/01/2019 ? 09/30/2022 Department of Education (DOE) Criteria ? A non-federal entity may charge to the Federal award 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligations incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Condition ? We sampled and selected 33 out of 391 expenditures and noted that 9 expenditures were incurred outside the liquidation period and did not contain written approval of the Federal awarding agency. Questioned Costs ? $217,308. Context ? This is a condition identified per review of DOE?s compliance with the specified requirements using a statistically valid sample. The known amount of the 9 transactions incurred outside the liquidation period amounted to $217,308. Effect ? DOE is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DOE does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation ? We recommend that DOE strengthen its processes with respect to setting up and charging expenditures between various grant awards. We also recommend that DOE enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2020-038 Prior Year Finding Number N/A Compliance Requirement: Reporting Program: U.S. Department of Education Consolidated Grant to the Outlying Areas CFDA #: 84.403A Award #: S403A160004, S403A170004, S403A180004, S403A190004 Award Periods: 07/01/2016 ? 09/30/2019 07/01/2017 ? 09/30/2020 07/01/2018 ? 09/30/2021 07/01/2019 ? 09/30/2022 Government Department/Agency: Department of Education (DOE) Criteria ? Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282) (Transparency Act) that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements who make first tier subawards of $25,000 or more are required to register in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS) and report subaward data through FSRS. Condition ? DOE failed to submit subaward data to fulfill the FFATA reporting requirements for the first tier subawards of $25,000 or more. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DOE?s compliance with the specified requirements. Effect ? DOE is not in compliance with the stated provisions. Cause ? It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Recommendation ? We recommend that DOE reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2020-039 Prior Year Finding Number N/A Compliance Requirement: Allowable Costs/Cost Principles ? Indirect Cost Activities Program: U.S. Department of Education Immediate Aid to Restart School Operations CFDA #: 84.938A Award #: S938A180004 Award Period: 05/14/2018 ? 09/30/2021 Government Department/Agency: Department of Education (DOE) Criteria ? Actual conditions must be taken into account in selecting the base to be used in allocating the expenses in each grouping to the benefitted functions. When an allocation can be made by assignment of a cost grouping directly to the function benefitted, the allocation must be made in that manner. When the expenses in a grouping are more general in nature, the allocation should be made using a selected base which produces results that are equitable to both the Federal government and the governmental unit. Condition ? We sampled and selected 4 out of 12 months of indirect cost allocations and noted 1 month where the base amount utilized in calculating indirect costs exceeded actual expenditures recorded in the accounting system. Questioned Costs ? $280,277. Context ? This is a condition identified per review of DOE?s compliance with the specified requirements using a statistically valid sample. DOE has an approved indirect cost rate agreement of 6.7% for fiscal year 2020. The known amount of the overstated charges is $280,277. Effect ? Failure to properly review expenditures and allocations can result in noncompliance with laws and regulations along with loss of funding. Cause ? Indirect costs were not properly calculated and captured in the accounting system. Recommendation ? We recommend that DOE review and reconcile cost allocations to ensure accuracy. DOE may also consider revising its future cost allocations for any overstatements. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-040 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles ? Payroll Activities Program: U.S. Department of Health and Human Services Head Start Cluster CFDA #: 93.356, 93.600 Award #: 02CH010576-01, 02CH010576-02, 02CH10576-03, 02TD000024-01, 02TD000034-01, 02TD000111-01 Award Year: 07/01/2018 ? 06/30/2019 07/01/2019 ? 06/30/2020 07/01/2020 ? 06/30/2021 03/01/2019 ? 02/28/2021 05/01/2019 ? 04/30/2021 05/01/2020 ? 04/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: ? Be incorporated into the organization?s official records; ? Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and ? Support the distribution of employee salary across multiple activities or cost objectives. Condition ? We sampled and selected 60 out of 3,830 payroll transactions and noted the following: ? 1 timesheet did not contain evidence of review and approval. ? 1 timesheet was not available for review. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program in fiscal year 2020 were $8,269,499. Effect ? DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation ? We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of DHS in a timely manner. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-041 Prior Year Finding Number: 2019-052 Compliance Requirement: Equipment/Real Property Management Program: U.S. Department of Health and Human Services Head Start Cluster CFDA #: 93.356, 93.600 Award #: 02CH010576-01, 02CH010576-02, 02CH10576-03, 02TD000024-01, 02TD000034-01, 02TD000111-01 Award Year: 07/01/2018 ? 06/30/2019 07/01/2019 ? 06/30/2020 07/01/2020 ? 06/30/2021 03/01/2019 ? 02/28/2021 05/01/2019 ? 04/30/2021 05/01/2020 ? 04/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Condition ? The Government?s Department of Property and Procurement (DPP) maintains the equipment register for DHS. DPP was unable to provide complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2020. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements. Effect ? There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause ? The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation ? We recommend that DHS and DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-042 Prior Year Finding Number: 2019-041 Compliance Requirement: Allowable Costs/Cost Principles - Payroll Activities Program: Government Department/Agency: U.S. Department of Health and Human Services Child Support Enforcement CFDA #: 93.563 Award #: 2001VICSES, 1901VICES Award Year: 10/01/2019 ? 09/30/2020 Department of Justice (DOJ) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: ? Be incorporated into the organization?s official records; ? Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and ? Support the distribution of employee salary across multiple activities or cost objectives. Condition ? We sampled and selected 60 out of 880 payroll transactions and noted 23 transactions where the employees? hours reported in the payroll register did not agree to the supporting timesheets. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DOJ?s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program in fiscal year 2020 were $1,886,694. The known exceptions amounted to $8,732 out of the total sampled balance of $135,935. Effect ? DOJ is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DOJ does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation ? We recommend that DOJ improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of DOJ in a timely manner. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-043 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles ? Non-Payroll Activities Program: U.S. Department of Health and Human Services Child Support Enforcement CFDA #: 93.563 Award #: 2001VICSES, 1901VICES Award Year: 10/01/2019 ? 09/30/2020 Government Department/Agency: Department of Justice (DOJ) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, Factors Affecting Allowability of Costs, ?Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: a. Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b. Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amounts of cost items. c. Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity. d. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. e. Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f. Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g. Be adequately documented.? Condition ? We sampled and selected 60 out of 287 non-payroll transactions and noted 1 invoice did not contain evidence of review and approval. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DOJ?s compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program in fiscal year 2020 were $1,660,026. Effect ? DOJ is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DOJ does not have adequate policies and procedures in place to ensure compliance with the required cost principles such as review and approval of expenditures. Recommendation ? We recommend that DOJ improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. In addition, DOJ should continue to be vigilant in following internal policies over reviews and authorizations. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-044 Prior Year Finding Number: 2019-045 Compliance Requirement: Allowable Costs/Cost Principles ? Non-Payroll Activities Program: U.S. Department of Health and Human Services CCDF Cluster CFDA #: 93.575 Award #: 1701VICCDF, 1801VICCDF, 1901VICCDF Award Period: 10/01/2016 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, Factors Affecting Allowability of Costs, ?Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: a. Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b. Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amounts of cost items. c. Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity. d. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. e. Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f. Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g. Be adequately documented.? Condition ? We sampled and selected 60 out of 659 non-payroll transactions and noted 1 transaction where the amount paid did not agree to the invoice amount. Questioned Costs ? Below reporting threshold. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program in fiscal year 2020 were $1,838,975. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required cost principles such as review and approval of expenditures. Recommendation ? We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. In addition, DHS should continue to be vigilant in following internal policies over review and authorizations. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-045 Prior Year Finding Number: 2019-046 Compliance Requirement: Allowable Costs/Cost Principles - Payroll Activities Program: U.S. Department of Health and Human Services CCDF Cluster CFDA #: 93.575 Award #: 1701VICCDF, 1801VICCDF, 1901VICCDF Award Period: 10/01/2016 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: ? Be incorporated into the organization?s official records; ? Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and ? Support the distribution of employee salary across multiple activities or cost objectives. Condition ? We sampled and selected 25 out of 242 payroll transactions and noted the following: ? 1 timesheet did not contain evidence of review and approval. ? 3 timesheets were not available for review. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program in fiscal year 2020 were $609,000. Effect ? DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation ? We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of DHS in a timely manner. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-046 Prior Year Finding Number: 2019-047 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services CCDF Cluster CFDA #: 93.575 Award #: 1701VICCDF, 1801VICCDF, 1901VICCDF Award Period: 10/01/2016 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? DHS must have in place procedures for documenting and verifying eligibility in accordance with the Federal requirements, as well as the specific eligibility requirements selected by the Territory in its approved Plan. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition ? DHS did not perform a reconciliation of the benefits paid to eligible participants and the expenditures recorded in the ERP system. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements and general compliance principles. Effect ? Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Cause ? It appears that policies and procedures, including review over eligibility transactions, were not functioning as intended. Recommendation - We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-047 Prior Year Finding Number: 2019-048 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Health and Human Services CCDF Cluster CFDA #: 93.575 Award #: 1701VICCDF, 1801VICCDF, 1901VICCDF Award Period: 10/01/2016 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? In accordance with the Compliance Supplement, the State or Territory: ? May not spend on administrative costs more than five percent of total CCDF awards expended (i.e., the total of CFDAs 93.575, 93.596, and 93.489 with the exception of any Disaster Relief funds spent on construction and renovation) and any state expenditures for which Matching Funds (CFDA 93.596) are claimed (42 USC 9858c(c)(3)(C); Pub. L. 116-20; 45 CFR section 98.52). ? Quality Earmark - For fiscal years 2018 and 2019, states and territory Lead Agencies must spend on quality activities, as provided in the state/territorial plan, not less than eight percent of CCDF funds expended (i.e., the total of CFDAs 93.575, 93.596, and 93.489 with the exception of any Disaster Relief funds spent on construction and renovation) and any state expenditures for which Matching Funds (CFDA 93.596) are claimed (45 CFR section 98.53). This amount rises to nine percent for fiscal year 2020 and succeeding fiscal years. States and territory Lead Agencies must spend at least an additional three percent on quality improvement for infants and toddlers (45 CFR section 98.50(b)). ? Direct Spending Earmarks ? (1) From the aggregate amount of Discretionary funds (CFDA 93.575) and Disaster Relief funds (CFDA 93.489) provided for a year (with the exception of Disaster Relief funds used for construction or major renovation), state Lead Agencies, territory Lead Agencies, as well as those tribal Lead Agencies with allocations of at least $250,000 must reserve funds for administrative costs and the minimum amount required for quality activities. (2) From the remainder, the Lead Agency must use not less than 70 percent to fund direct services. In addition, states and territories must spend not less than 70 percent of the mandatory and Federal and state share of Matching Funds (CFDA 93.596) to meet the needs of families who: (a) receive Temporary Assistance for Needy Families (TANF) assistance; (b) are attempting through work activities to transition off TANF; and (c) are at risk of becoming dependent on TANF (45 CFR section 98.50(e) and (f)). Condition ? We noted the following spend requirements were not met or exceeded in the following instances: ? 2 out of 4 grant awards selected did not meet the 9% spend requirement for the quality earmark. ? 1 out of 4 grant awards selected did not meet the 3% spend requirement for quality improvements for infants and toddlers. ? 2 out of 4 grant awards selected did not meet the 70% spend requirement for the direct services earmark. ? 1 out of 4 grant awards selected exceeded the 5% maximum spend requirement for the administrative earmarking. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements. Effect ? DHS is not in compliance with the stated provisions. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic monitoring of the requirements. Recommendation - We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the requirements throughout the fiscal year. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-048 Prior Year Finding Number: 2019-049 Compliance Requirement: Period of Performance Program: Government Department/Agency: U.S. Department of Health and Human Services CCDF Cluster CFDA #: 93.575 Award #: 1701VICCDF, 1801VICCDF, 1901VICCDF Award Period: 10/01/2016 ? 09/30/2022 Department of Human Services (DHS) Criteria ? A non-federal entity may charge to the Federal award 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-federal entity must liquidate all financial obligations incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Condition ? We sampled and selected 2 out of 3 expenditures and noted that 2 expenditures were incurred outside the liquidation period and did not contain written approval of the Federal awarding agency. Questioned Costs ? Below reporting threshold. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. The known amount of the 2 transactions incurred outside the liquidation period amounted to $16,000. Effect ? DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation ? We recommend that DHS strengthen its processes with respect to setting up and charging expenditures between various grant awards. We also recommend that DHS enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-049 Prior Year Finding Number: 2019-050 Compliance Requirement: Special Tests and Provisions ? Health and Safety Requirements Program: U.S. Department of Health and Human Services CCDF Cluster CFDA #: 93.575 Award #: 1701VICCDF, 1801VICCDF, 1901VICCDF Award Period: 10/01/2016 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? As part of their CCDF plans, Lead Agencies must certify that procedures are in effect (e.g., monitoring and enforcement) to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers (unless they meet an exception, e.g., family members who are caregivers or individuals who object to immunization on certain grounds) serving children who receive subsidies meet requirements pertaining to health and safety. These requirements must address 11 specific areas?including first aid and CPR, safe sleeping practices, and administration of medication?and child care workers must be trained in these areas (42 USC 9858c(c)(2)(I); 45 CFR section 98.41). Condition ? During our review of 7 out of 69 providers serving children who receive subsidies, DHS was unable to provide supporting records to validate that the specified requirements had been met. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. Effect ? DHS in not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation ? We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the health and safety requirements throughout the fiscal year. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-050 Prior Year Finding Number: 2019-051 Compliance Requirement: Special Tests and Provisions ? Fraud Detection and Repayment Program: U.S. Department of Health and Human Services CCDF Cluster CFDA #: 93.575 Award #: 1701VICCDF, 1801VICCDF, 1901VICCDF Award Period: 10/01/2016 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? Lead Agencies shall recover childcare payments that are the result of fraud. These payments shall be recovered from the party responsible for committing the fraud (45 CFR section 98.60). The Lead Agency must correctly identify and report fraud and take steps to recover payment. Condition ? While DHS has a procedure for identifying and recovering payments resulting from fraud, via its internal audit process, it was unable to evidence that such audit(s) had been conducted during the fiscal year. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements. Effect ? There may be prolonged, ongoing cases of unnecessary utilization and fraud that may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation ? We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance with fraud detection and repayment requirements throughout the fiscal year. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-051 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles ? Payroll Activities Program: U.S. Department of Health and Human Services Social Services Block Grant CFDA #: 93.667 Award #: 1801VISOSR, 1901VISOSR-01, 2001VISOSR-02 Award Year: 10/01/2017 ? 09/30/2019 10/01/2018 ? 09/30/2020 10/01/2019 - 09/30/2021 Government Department/Agency: Department of Human Services (DHS) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: ? Be incorporated into the organization?s official records; ? Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and ? Support the distribution of employee salary across multiple activities or cost objectives. Condition ? We sampled and selected 60 out of 1,318 payroll transactions and noted 5 timesheets did not contain evidence of review and approval. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program in fiscal year 2020 were $3,519,434. Effect ? DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation ? We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of DHS in a timely manner. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-052 Prior Year Finding Number: 2019-053 Compliance Requirement: Cash Management Program: U.S. Department of Health and Human Services Social Services Block Grant CFDA #: 93.667 Award #: 1801VISOSR, 1901VISOSR-01, 2001VISOSR-02 Award Year: 10/01/2017 ? 09/30/2019 10/01/2018 ? 09/30/2020 10/01/2019 - 09/30/2021 Government Department/Agency: Department of Human Services (DHS) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition ? We reviewed 7 out of 17 drawdowns and noted the monthly drawdown reconciliations reports were not available for review. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. Total fiscal year 2020 drawdown requests were $2,950,040. Effect ? DHS is not in compliance with the stated provisions. Failure to properly review and support drawdown requests can result in noncompliance with laws and regulations along with loss of funding. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable principles and maintenance of underlying documentation. Recommendation - We recommend that DHS deploy resources that are given the responsibility to ensure periodic review, monitoring, and compliance throughout the fiscal year. Further, we recommend that DHS improve its internal controls to ensure adherence to its current retention policies. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-053 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: Government Department/Agency: U.S. Department of Health and Human Services Social Services Block Grant CFDA #: 93.667 Award #: 1801VISOSR, 1901VISOSR-01, 2001VISOSR-02 Award Year: 10/01/2017 ? 09/30/2019 10/01/2018 ? 09/30/2020 10/01/2019 - 09/30/2021 Department of Human Services (DHS) Criteria ? A non-federal entity may charge to the Federal award 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, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorizes an extension, a non-federal entity must liquidate all financial obligations incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Condition ? We sampled and selected 35 out of 289 expenditures and noted that 3 expenditures were incurred outside the liquidation period and did not contain written approval of the Federal awarding agency. Questioned Costs ? $46,253. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. The known amount of the 3 transactions incurred outside the liquidation period amounted to $46,253. Effect ? DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation ? We recommend that DHS strengthen its processes with respect to setting up and charging expenditures between various grant awards. We also recommend that DHS enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-054 Prior Year Finding Number: 2019-056 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Children?s Health Insurance Program CFDA #: 93.767 Award #: 1905VQ5R21, 1905VQ5021 Award Year: 10/01/2018 ? 09/30/2019 10/01/2018 ? 09/30/2020 Government Department/Agency: Department of Human Services (DHS) Criteria ? Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the Compliance Supplement, the State or Territory is required to submit the CMS-21, Quarterly Children?s Health Insurance Program Statement of Expenditures for Title XXI for the Children?s Health Insurance Program, thirty days after the end of the quarter. Condition ? We reviewed 2 out of the 4 quarterly CMS-21 reports submitted during the fiscal year and noted the following: ? Applicable accounts had not been included in the reports. ? Expenditures did not agree with the underlying records. ? Reports did not contain evidence of review or approval prior to submission. ? Reports had not been submitted in a timely manner. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. Effect ? DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause ? It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, DHS does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation ? We recommend that DHS reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-055 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions - Provider Eligibility Program: U.S. Department of Health and Human Services Children?s Health Insurance Program CFDA #: 93.767 Award #: 1905VQ5R21, 1905VQ5021 Award Year: 10/01/2018 ? 09/30/2019 10/01/2018 ? 09/30/2020 Government Department/Agency: Department of Human Services (DHS) Criteria ? In order to receive Medicaid payments, providers of medical services must be licensed in accordance with Federal, State, and local laws and regulations to participate in the Medicaid program. Moreover, in accordance with the disclosure requirements of 42 CFR 455 subpart B, Disclosure of Information by Providers and Fiscal Agents, providers that are not practitioners or a group of practitioners are required to disclose certain information when applying to participate in the Children?s Health Insurance Program. Condition ? During our review of 60 providers receiving payments during the fiscal year, we noted the following: ? 29 provider agreements had not been reviewed and approved by the provider relations staff. ? 26 provider agreements had not been approved by the Commissioners of both DHS and Department of Property and Procurement (DPP). ? 23 provider agreements were not available for review. ? 3 provider agreements did not contain the proper financial disclosure information as required by the Territory Plan. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. Effect ?Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of documentation and file maintenance. Recommendation ? We recommend that DHS perform regular reviews of the data in its files to ensure accuracy and completeness. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-056 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions ? Refunding of Federal Share of CHIP Overpayments to Providers Program: U.S. Department of Health and Human Services Children?s Health Insurance Program CFDA #: 93.767 Award #: 1905VQ5R21, 1905VQ5021 Award Year: 10/01/2018 ? 09/30/2019 10/01/2018 ? 09/30/2020 Government Department/Agency: Department of Human Services (DHS) Criteria - Regulation 42 CFR 433 Subpart F outlines the requirements that State Medicaid Agencies (SMA) are to follow related to refunding the Federal share of Medicaid overpayments made to providers. Pursuant to 1903(d)(2)(C) of the Social Security Act (the Act) (42 USC 1396b), states have up to one (1) year from the date of discovery of the overpayment to recover or attempt to recover the overpayment before the Federal share must be refunded to CMS via Form CMS-64 regardless of whether recovery is made from the provider. Federal regulations at 42 CFR 457.628 make the regulations at CFR 433.312-433.322 applicable to CHIP, for which the Federal share must be refunded to CMS via Form CMS-21. The state must credit the Federal share to CMS as outlined under 42 CFR 433.320(a)(2) either in the quarter in which the recovery is made or in the quarter in which the one-year period ends following discovery, whichever is earlier, with limited exceptions. Under 42 CFR 433.316(d), for overpayments resulting from fraud, if not collected within one year of discovery, the SMA has until 30 days after the final judgment of a judicial or administrative appeals process to return the Federal share. Condition ? The identification of overpayments to providers and required supporting documents for the timely refund of the Federal share were not available for review. Questioned Costs ? Not determinable. Context - This is a condition identified per review of DHS?s compliance with the specified requirements. Effect ? DHS is not in compliance with the stated provisions. Failure to identify provider overpayments and perform the required refunding of the Federal share can result in noncompliance with laws and regulations along with loss of funding. Cause ? DHS does not appear to have adequate policies and procedures in place to identify all overpayments to providers. Recommendation - We recommend that DHS perform regular reviews of the data in its files to ensure accuracy and completeness. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-057 Prior Year Finding Number: 2019-057 Compliance Requirement: Allowable Costs/Cost Principles ? Non-Payroll Activities Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, Factors Affecting Allowability of Costs, ?Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: a. Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b. Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amounts of cost items. c. Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity. d. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. e. Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f. Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g. Be adequately documented.? Condition ? We sampled and selected 60 out of 299 non-payroll transactions and noted 1 instance where DHS paid a monthly fee for a trailer to store excess furniture and other administrative items that the Medicaid staff no longer needed. Questioned Costs ? Below reporting threshold. Context - This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program in fiscal year 2020 were $4,693,355. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause - DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required cost principles such as review and approval of expenditures. Recommendation ? We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. In addition, DHS should continue to be vigilant in following internal policies over review and authorizations. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-058 Prior Year Finding Number: 2019-058 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? Plan and eligibility requirements must comply with various Federal requirements. The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with the State Plan under Title XIX of the Social Security Act, Section 4.7, Maintenance of Records, the Medicaid agency maintains or supervises the maintenance of records necessary for the proper and efficient operation of the plan, including records regarding applications, determination of eligibility, the provisions of medical assistance, and administrative costs, statistical, fiscal and other records necessary for reporting and accountability. Condition ? In our review of 60 out of 4,455 participant case files, we noted the following: ? For 1 participant, there was no evidence of completed applications. ? For 3 participants, the application had not been processed in a timely manner. ? For 3 participants, there was no documentation in the case file supporting the verification of income requirements. ? For 37 participants, there was no evidence that a recertification had been performed within 12 months. ? For 45 participants, there was no evidence that a review and approval of the eligibility determination had been performed. ? DHS was unable to provide 13 participant case files for our review. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. Effect ? Noncompliance with program requirements could result in disallowances of costs and participants could be receiving benefits that they are not entitled to receive. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of the data in its participant case files. Recommendation ? We recommend that DHS perform regular reviews of the data in its participant case files to ensure accuracy and completeness and confirming that only eligible participants are receiving the entitled benefits. Additional levels of review by a supervisor or manager can provide more timely quality assurance oversight over the eligibility process. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-059 Prior Year Finding Number: 2019-059 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? In accordance with the Compliance Supplement, the State or Territory is required to pay part of the costs of providing health care to the poor and part of the costs of administering the program. Different participation rates apply to medical assistance payments. There are also different Federal financial participation rates for the different types of costs incurred in administering the entitlement program, such as administration (including administration of family planning services), training, computer, and other costs (42 CFR sections 433.10 and 433.15). Condition ? We sampled and selected 2 out of 4 matching calculations from the CMS-64, Quarterly Statement of Expenditures for the Medicaid Assistance Program reports and noted that the calculations did not contain evidence of review or approval. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. Effect ? DHS is in not in compliance with the stated provisions. Cause ? DHS did not appear to exercise due diligence in following internal procedures over reviews and authorizations. Recommendation ? We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-060 Prior Year Finding Number: 2019-060 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the Compliance Supplement, the State or Territory is required to submit the CMS-64, Quarterly Statement of Expenditures for the Medicaid Assistance Program, thirty days after the end of the quarter. Condition ? We reviewed 2 out of the 4 quarterly CMS-64 reports submitted during the fiscal year and noted the following: ? Applicable accounts had not been included in the reports. ? Expenditures did not agree with the underlying records. ? Reports did not contain evidence of review or approval prior to submission. ? Reports had not been submitted in a timely manner. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. Effect ? DHS is in not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause ? It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, DHS does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation ? We recommend that DHS reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-061 Prior Year Finding Number: 2019-061 Compliance Requirement: Special Tests and Provisions - Utilization Control and Program Integrity Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? The State or Territory plan must provide methods and procedures to safeguard against unnecessary utilization of care and services, including long-term care institutions. The State or Territory must have: (1) methods or criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring suspected fraud cases to law enforcement officials (42 CFR parts 455, 456, and 1002). Suspected fraud should be referred to the State or Territory Medicaid Fraud Control Unit (42 CFR part 1007). The State or Territory Medicaid agency must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. The agency must have procedures for the ongoing post-payment review, on a sample basis, of the need for and the quality and timeliness of Medicaid services. The State or Territory Medicaid agency may conduct this review directly or may contract with a quality improvement organization (QIO). Condition ? DHS does not have the necessary controls or procedures to safeguard against unnecessary utilization of care and services and to identify, investigate, and refer suspected fraud cases. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements. Effect ? There may be prolonged, ongoing cases of unnecessary utilization and fraud which may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately, with no methodology of properly identifying or tracking the amounts. Cause ? DHS does not appear to have an effective system in place to address the program?s requirements. Recommendation ? DHS should reconsider whether it would like to be directly responsible for Utilization Control and Program Integrity, or if the use of a QIO would better suit current needs. Once this is decided, DHS should take the necessary steps to ensure compliance with this requirement. The written procedures should reflect the actual actions to be taken. In the event a QIO is used, DHS should be involved throughout, so that it is aware of the program?s vulnerabilities and has the opportunity to make the necessary changes for improvement in a timely manner. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-062 Prior Year Finding Number: 2019-062 Compliance Requirement: Special Tests and Provisions - Inpatient Hospital and Long-Term Care Facility Audits Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? The State or Territory Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers. The State or Territory Medicaid agency must provide for the filing of uniform cost reports for each participating provider. These cost reports are used to establish payment rates. The State or Territory Medicaid agency must provide for the periodic audits of financial and statistical records of participating providers. The specific audit requirements will be established by the State or Territory Plan (42 CFR section 447.253). Condition ? DHS provides Medicaid services to eligible Territory residents through inpatient hospitals and long-term care facilities. These hospitals and facilities include various Territory agencies and third-party service providers. The costs incurred by these facilities are summarized in a cost report that is submitted to DHS. DHS awarded a contract in August 2017 for the audit of these cost reports; however, we noted that DHS had not received any audited cost reports for fiscal year 2020. Questioned Costs - Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements. Effect ? Without timely audits of the cost reports, DHS has no assurance that the costs incurred by the medical facilities are actual costs incurred. Further, the difference between costs submitted for reimbursement and the costs actually reimbursed result in the use of local, rather than Federal, dollars to fund Medicaid expenditures. Cause ? DHS does not appear to have adequate policies and procedures in place for the provision of audited cost reports of its participating providers. Recommendation ? We recommend that DHS evaluate and develop policies and procedures to obtain and audit the cost reports. This will allow DHS to reduce the time between the Medicaid expenditures being incurred and the ultimate reimbursement from the Federal government. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-063 Prior Year Finding Number: 2019-063 Compliance Requirement: Special Tests and Provisions ? ADP Risk Analysis and System Security Review Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? State or Territory agencies must establish and maintain a program for conducting periodic risk analyses to ensure that appropriate, cost-effective safeguards are incorporated into new and existing systems. State or Territory agencies must perform risk analyses whenever significant system changes occur. State or Territory agencies shall review the ADP system security of installations involved in the administration of HHS programs on a biennial basis. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures and personnel practices. The State or Territory agency shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR section 95.621). Condition ? DHS did not perform the required ADP Risk Analysis and System Security Review for the Virgin Islands Benefit Eligibility System (VIBES) to support the Medicaid Program. Questioned Costs - Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements. Effect - The absence of policies to ensure these analyses and reviews are performed may lead to physical and data security issues and noncompliance with program requirements. Further, DHS?s risk of incomplete or inaccurate data processing, or worse, the risk of fraud, increases. Cause ? DHS?s records do not permit a determination as to the sufficiency of the design and operation of key controls surrounding the environment in which the Medicaid claims reside. Recommendation - We recommend that management should perform and review a risk analysis and system security review for all systems that support the Medicaid program. All issues should be addressed by management. If management becomes aware that such a report will not be available, we recommend that management conduct its own review. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-064 Prior Year Finding Number: 2019-064 Compliance Requirement: Special Tests and Provisions ? Provider Eligibility Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? In order to receive Medicaid payments, providers of medical services must be licensed in accordance with Federal, State, and local laws and regulations to participate in the Medicaid program. Moreover, in accordance with the disclosure requirements of 42 CFR 455 subpart B, Disclosure of Information by Providers and Fiscal Agents, providers that are not practitioners or a group of practitioners are required to disclose certain information when applying to participate in the Medicaid program. Condition ? During our review of 60 out of 1,143 providers receiving payments during the fiscal year, we noted the following: ? 7 provider agreements had not been reviewed and approved by the provider relations staff. ? 3 provider agreements had not been approved by the Commissioners of both DHS and Department of Property and Procurement. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS?s compliance with the specified requirements using a statistically valid sample. Effect ? DHS is not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause - DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of documentation and file maintenance. Recommendation - We recommend that DHS perform regular reviews of the data in its files to ensure accuracy and completeness. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-065 Prior Year Finding Number: 2019-065 Compliance Requirement: Special Tests and Provisions - Medicaid Fraud Control Unit Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? The Medicaid Fraud Control Unit (MFCU) is required to submit the SF-425, Federal Financial Report. As per the requirements, the: ? Quarterly expenditure reports are due 30 days after the end of each quarter. ? All final expenditure reports are due 90 days after the end date of the project period of performance. ? If the grantee will be unable to submit the financial expenditure report by the due date, the grantee must request an extension. Condition ? We reviewed 3 out of the 5 reports submitted during the fiscal year and noted the following: ? All 3 reports did not contain evidence of review and approval prior to submission. ? 1 report had not been submitted in a timely manner. ? 1 report where financial information did not agree with the underlying records. Questioned Costs - Not determinable. Context - This is a condition identified per review of DHS and DOJ?s compliance with the specified requirements using a statistically valid sample. Effect ? DHS and DOJ are not compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause - It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the DHS and DOJ do not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation ? We recommend that DHS and DOJ reevaluate their policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-066 Prior Year Finding Number: 2019-066 Compliance Requirement: Special Tests and Provisions ? Federal Financial Participation Refunds Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria - Title 42 CFR section 433.40(c), Refund of Federal Financial Participation (FFP) for Uncashed Checks states that if a check remains uncashed beyond a period of 180 days from the date it was issued (i.e., the date of the check), it will no longer be regarded as an allowable program expenditure. If the State or Territory has claimed and received FFP for the amount of the uncashed check, it must refund the amount of FFP received. DHS is required to identify cancelled and uncashed checks beyond a period of 180 days of issuance at the end of each calendar quarter and refund all FFP received for uncashed checks by adjusting the CMS-64 report, Quarterly Statement of Expenditures for the Medical Assistance Program. Condition - We noted that DHS does not have a process in place to identify cancelled or uncashed checks over 180 days after issuance and refund the corresponding FFP in a timely manner. Questioned Costs ? Not determinable. Context - This is a condition identified per review of DHS?s compliance with the specified requirements. Effect - DHS is not in compliance with regulations which result in untimely refunds of the FFP to the Federal government. There is also potential for disallowed costs that were never refunded due to checks remaining uncashed beyond a period of 180 days from the date of issuance. Cause - DHS does not have adequate policies and procedures in place to request and review the cancelled and uncashed check report on a quarterly basis as required. Recommendation - We recommend that DHS comply with the specified requirements and establish adequate policies and procedures to ensure that cancelled and uncashed checks over 180 days from the date of issuance are identified on a quarterly basis and all FFP received for uncashed checks are refunded to the Federal government in a timely manner. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-067 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions ? Refunding of Federal Share of Medicaid Overpayments to Providers Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria - Regulation 42 CFR 433 Subpart F outlines the requirements that State Medicaid Agencies (SMA) are to follow related to refunding the Federal share of Medicaid overpayments made to providers. Pursuant to 1903(d)(2)(C) of the Social Security Act (the Act) (42 USC 1396b), states have up to one (1) year from the date of discovery of the overpayment to recover or attempt to recover the overpayment before the Federal share must be refunded to CMS via Form CMS-64 regardless of whether recovery is made from the provider. Federal regulations at 42 CFR 457.628 make the regulations at CFR 433.312-433.322 applicable to CHIP, for which the Federal share must be refunded to CMS via Form CMS-21. The state must credit the Federal share to CMS as outlined under 42 CFR 433.320(a)(2) either in the quarter in which the recovery is made or in the quarter in which the one-year period ends following discovery, whichever is earlier, with limited exceptions. Under 42 CFR 433.316(d), for overpayments resulting from fraud, if not collected within one year of discovery, the SMA has until 30 days after the final judgment of a judicial or administrative appeals process to return the Federal share. Condition ? The identification of overpayments to providers and required supporting documents for the timely refund of the Federal share were not available for review. Questioned Costs ? Not determinable. Context - This is a condition identified per review of DHS?s compliance with the specified requirements. Effect ? DHS is not in compliance with the stated provisions. Failure to identify provider overpayments and perform the required refunding of the Federal share can result in noncompliance with laws and regulations along with loss of funding. Cause ? DHS does not appear to have adequate policies and procedures in place to identify all overpayments to providers. Recommendation - We recommend that DHS perform regular reviews of the data in its files to ensure accuracy and completeness. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-068 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions ? Medicaid National Correct Coding Initiative Program: U.S. Department of Health and Human Services Medicaid Cluster CFDA #: 93.775, 93.778 Award #: Various Award Period: 10/01/2015 ? 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria ? States or Territories are required to incorporate National Correct Coding Initiative (NCCI) methodologies into the state Medicaid Programs pursuant to requirements of Section 6507 of the Affordable Care Act (section 1903(r) of the Social Security Act). The purpose of the NCCI Program is to promote correct coding, prevent coding errors, prevent code manipulation, reduce improper payments and reduce the paid claims improper payment rate. Condition - DHS was unable to validate that it had downloaded and incorporated the NCCI methodologies into the state Medicaid program. Questioned Costs ? Not determinable. Context - This is a condition identified per review of DHS?s compliance with the specified requirements. Effect - DHS is not in compliance with the stated provisions. Cause ? It appears that policies and procedures to ensure that the NCCI methodologies were incorporated into the Medicaid program were not functioning as intended. Recommendation ? We recommend that DHS perform regular reviews of program data to ensure accuracy and completeness. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-069 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Homeland Security Disaster Grants - Public Assistance (Presidentially Declared Disasters) CFDA #: 97.036 Award #: FEMA-4335-DR, FEMA-4340-DR-VI Award Periods: 09/20/2017 ? 09/07/2025 09/07/2017 ? 09/16/2025 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria ? In accordance with the requirements of the grant agreement(s), the program is required to provide matching funds through cash, third-party in-kind services, materials, or any combination thereof. The Government is required to provide (a) 10% matching funds for most Permanent work project(s); and (b) 10% match for all emergency work completed after the first 180 days after declaration unless a waiver has been granted. Condition ? VITEMA did not meet the stipulated matching requirements during the fiscal year nor did it obtain a corresponding waiver. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of VITEMA?s compliance with the specified requirements. Effect ? VITEMA is not in compliance with the stated provisions. Cause ? VITEMA does not appear to have adequate policies and procedures in place to ensure a consistent and systematic monitoring of the requirements. Recommendation ? We recommend that VITEMA deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the requirements throughout the fiscal year. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-070 Prior Year Finding Number: 2019-068 Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Disaster Grants - Public Assistance (Presidentially Declared Disasters) CFDA #: 97.036 Award #: FEMA-4335-DR, FEMA-4340-DR-VI Award Periods: 09/20/2017 ? 09/07/2025 09/07/2017 ? 09/16/2025 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria ? Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, the Territorial agreement between VITEMA and FEMA dictates that all performance reports must be submitted within 30 days of the end of each quarter. Further, under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282) (Transparency Act) that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements who make first tier subawards of $25,000 or more are required to register in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS) and report subaward data through FSRS. Condition ? We reviewed 8 out of the 16 reports submitted during the fiscal year and noted the following: ? 1 performance report was not submitted. ? 3 performance reports did not agree to the underlying records. ? 2 performance reports and 1 financial report had not been submitted in a timely manner. ? FFATA reports had not been submitted. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of VITEMA?s compliance with the specified requirements using a statistically valid sample. Effect ? VITEMA is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause ? It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VITEMA does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation ? We recommend that VITEMA reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2020-071 Prior Year Finding Number: 2019-069 Compliance Requirement: Data Collection Form and Single Audit Reporting Package Program: CFDA # 10.551, 10.561 Supplemental Nutrition Assistance Program Cluster CFDA # 10.557 Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) CFDA # 12.401 National Guard Military Operations and Maintenance (O&M) Projects CFDA # 15.875 Economic, Social, and Political Development of the Territories CFDA # 17.225 Unemployment Insurance CFDA # 20.205 Highway Planning and Construction Cluster CFDA # 21.019 Coronavirus Relief Fund CFDA # 66.418 Construction Grants for Wastewater Treatment Works CFDA # 66.468 Drinking Water State Revolving Fund Cluster CFDA # 84.403A Consolidated Grant to the Outlying Areas CFDA # 84.938A Immediate Aid to Restart School Operations CFDA # 93.356, 93.600 Head Start Cluster CFDA # 93.563 Child Support Enforcement CFDA # 93.575 CCDF Cluster CFDA # 93.667 Social Services Block Grant CFDA # 93.767 Children?s Health Insurance Program CFDA # 93.775, 93.778 Medicaid Cluster CFDA # 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Criteria ? The Uniform Guidance in 2 CFR Section 200.512, Report Submission, establishes that the audit shall be completed and the data collection form and reporting package shall be submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 days after receipt of the auditor?s report or nine (9) months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. Condition ? The Government did not comply with the required submission date of the data collection form and reporting package to the FAC for the fiscal year ended September 30, 2020. Questioned Costs ? Not applicable. Context ? This is a condition identified per review of the Government?s compliance with the specified requirements. Effect ? The Government could be exposed to a reduction or elimination of funds by the Federal awarding agencies. Cause ? The Government did not have controls in place to ensure that the reporting package was submitted to the FAC within the required timeframe. Recommendation ? We recommend that the Government establish controls to ensure the reporting package is submitted to the FAC annually within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2019-019 Prior Year Finding Number: 2018-019 Compliance Requirement: Allowable Costs/Cost Principles ? Payroll Activities Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster CFDA #: 10.551,10.561 Award #: 1VI400409, 1VI400408 Award Year: 10/01/2017 ? 09/30/2018 10/01/2018 ? 09/30/2019 Government Department/Agency: Department of Human Services (DHS) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: ? Be incorporated into the organization?s official records; ? Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and ? Support the distribution of employee salary across multiple activities or cost objectives. Condition ? We sampled and selected 60 out of 1,846 payroll transactions and noted the following: ? 2 employee timesheets were not available for review. ? 2 employees had their salaries charged to a grant project that was not authorized per the Notice of Personnel Action (NOPA) form. Questioned Costs ? Below reporting threshold. Context ? This is a condition identified per review of DHS? compliance with the specified requirements using a statistically valid sample. Total amount of payroll expenditures charged to the program in fiscal year 2019 were $2,497,687. The salaries charged to a grant project that was not authorized per the NOPA form amounted to $3,826. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation ? We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of DHS in a timely manner. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2019-020 Prior Year Finding Number: 2018-023 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster CFDA #: 10.551,10.561 Award #: 1VI400409, 1VI400408 Award Year: 10/01/2017 ? 09/30/2018 10/01/2018 ? 09/30/2019 Government Department/Agency: Department of Human Services (DHS) Criteria ? In accordance with the Uniform Guidance in 2 CFR Section 200.306, Cost Sharing or Matching, and the requirements of the grant agreements, the program is required to contribute matching funds through cash, in-kind contributions, and/or other non-cash support. Condition ? We sampled and selected 60 out of 1,720 matching expenditures and noted that for 4 transactions, DHS was unable to provide supporting records. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS? compliance with the specified requirements using a statistically valid sample. The 4 transactions amounted to $34,254. Effect ? DHS is not in compliance with the stated provisions. Cause ? DHS does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Recommendation ? We recommend that DHS deploy resources that are given the responsibility to ensure periodic review, monitoring, and compliance of the match requirement throughout the fiscal year. Further, we recommend that DHS improve its internal controls to ensure adherence to its current retention policies. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2019-021 Prior Year Finding Number: 2018-025 Compliance Requirement: Procurement/Suspension and Debarment Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster CFDA #: 10.551,10.561 Award #: 1VI400409, 1VI400408 Award Year: 10/01/2017 ? 09/30/2018 10/01/2018 ? 09/30/2019 Government Department/Agency: Department of Human Services (DHS) Criteria ? Recipients of Federal awards must have adequate policies and controls in place to ensure that the procedures are properly documented in the entity?s files, provide full and open competition supported by a cost or price analysis, provide a vendor debarment or suspension certification, provide for retention of files, and that supporting documentation corroborate compliance with these requirements. Condition ? The Government?s Department of Property and Procurement (DPP) is primarily responsible for procurement transactions. In our review of 5 out of 17 procurement transactions, we noted all of the selected files did not contain sufficient supporting documents in order to verify the contractors? exclusion from the Excluded Parties List System to validate the procurement decisions made. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS? compliance with the specified requirements using a statistically valid sample. Effect ? DHS could inadvertently contract with or make sub-awards to parties that are suspended or debarred from doing business with the Federal government. Cause ? DHS does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation ? We recommend that DHS and DPP improve internal controls to ensure adherence to Federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2019-022 Prior Year Finding Number: 2018-029 Compliance Requirement: Special Tests and Provisions ? EBT Card Security Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster CFDA #: 10.551,10.561 Award #: 1VI400409, 1VI400408 Award Year: 10/01/2017 ? 09/30/2018 10/01/2018 ? 09/30/2019 Government Department/Agency: Department of Human Services (DHS) Criteria - Per 7 CFR Section 274.8(b)(3), System Security, as an addition to or component of the Security Program required of Automated Data Processing (ADP) systems, the State or Territory agency shall ensure that the certain electronic benefits transfer (EBT) security requirements are established. As such, DHS is required to maintain adequate security over, and documentation/records for EBT cards, to prevent their theft, embezzlement, loss damage, destruction, unauthorized transfer, negotiation, or use. Condition ? DHS contracted with Fidelity National Information Service (FIS) for the issuance and security of the EBT cards; however, it is DHS? ultimate responsibility to ensure the contractor has controls in place to maintain adequate security over, and documentation/records of EBT cards. We sampled and selected 8 out of 29 monthly card reconciliations and noted the following: ? For 8 EBT card reconciliations, DHS did not have a process in place for reviews and approvals. ? For 5 EBT card reconciliations, DHS did not maintain adequate records to account for the cards issued. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DHS? compliance with the specified requirements using a statistically valid sample. Effect ? Without adequate internal controls to ensure compliance with EBT card security requirements, there is an increased risk that the inventory of EBT cards will not be properly maintained and accounted for. Cause ? DHS does not have adequate policies and procedures in place to ensure adequate safeguarding and documentation of EBT cards. Recommendation - We recommend that DHS implement formal policies and procedures to maintain adequate security over, and documentation and records for EBT Cards. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2019-023 Prior Year Finding Number: 2018-036 Compliance Requirement: Equipment/Real Property Management Program: U.S. Department of Agriculture Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) CFDA #: 10.557 Award #: 1VI700708 Award Year: 10/01/2017 ? 09/30/2020 Government Department/Agency: Department of Health (DOH) Criteria ? Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Condition ? The Government?s Department of Property and Procurement (DPP) maintains the equipment register for DOH. DPP was unable to provide complete property records which met the stated requirements. Further, no physical inventory of equipment was taken in fiscal year 2019. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DOH?s compliance with the specified requirements. Effect ? There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause ? The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation ? We recommend that DPP and DOH improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2019-024 Prior Year Finding Number: 2018-037 Compliance Requirement: Procurement/Suspension and Debarment Program: U.S. Department of Agriculture Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) CFDA #: 10.557 Award #: 1VI700708 Award Year: 10/01/2017 ? 09/30/2020 Government Department/Agency: Department of Health (DOH) Criteria ? Recipients of Federal awards must have adequate policies and controls in place to ensure that the procedures are properly documented in the entity?s files, provide full and open competition supported by a cost or price analysis, provide a vendor debarment or suspension certification, provide for retention of files, and that supporting documentation corroborate compliance with these requirements. Condition ? The Government?s Department of Property and Procurement (DPP) is primarily responsible for procurement transactions. In our review of 16 out of 155 procurement transactions, we noted 6 of the selected files did not have sufficient supporting documents to evidence that vendor checks had been performed before entering into an agreement. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of DOH?s compliance with the specified requirements using a statistically valid sample. Effect ? DOH could inadvertently contract with or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause ? DOH does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation ? We recommend that DOH and DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2019-025 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles ? Payroll Activities Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects CFDA #: 12.401 Award #: W9127P-15-2-1000 Award Year: 10/01/2016 - 09/30/2019 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: ? Be incorporated into the organization?s official records; ? Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and ? Support the distribution of employee salary across multiple activities or cost objectives. Condition ? We sampled and selected 60 out of 597 payroll transactions and noted the following: ? 7 employee timesheets were not available for review. ? 1 employee timesheet had not been reviewed and approved. ? 1 employee Notice of Personnel Action (NOPA) was not available for review. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of OTAG?s compliance with the specified requirements using a statistically valid sample. Total amount of payroll expenditures charged to the program during fiscal year 2019 were $1,304,942. Effect ? OTAG is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? OTAG does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation ? We recommend that OTAG improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of OTAG in a timely manner. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2019-026 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects CFDA #: 12.401 Award #: W9127P-15-2-1000 Award Year: 10/01/2016 - 09/30/2019 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria ? The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition ? OTAG did not perform a reconciliation of the Federal cash drawdown transactions and cash receipts recorded in the ERP system. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of OTAG?s compliance with the specified requirements and general compliance principles. Effect ? OTAG is not in compliance with the stated provisions. Inaccurate information may have been reported to the Federal government in the absence of required reconciliations and reviews. Cause ? It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation - We recommend that OTAG reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2019-027 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects CFDA #: 12.401 Award #: W9127P-15-2-1000 Award Year: 10/01/2016 - 09/30/2019 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria ? In accordance with the Uniform Guidance in 2 CFR Section 200.306, Cost Sharing or Matching, and the requirements of the grant agreements, the program is required to contribute matching funds through cash, in-kind contributions, and/or other non-cash support. Condition ? We sampled and selected 60 out of 415 matching expenditures and noted the following: ? 10 transactions did not include evidence of appropriate reviews and approvals and the supporting records were not available for review. ? 1 transaction, while approved, did not have supporting records available for review. ? 2 transactions were incurred before the period of performance and did not contain written approval of the Federal awarding agency. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of OTAG?s compliance with the specified requirements using a statistically valid sample. The known amount of the 2 transactions incurred before the period of performance and utilized for the matching requirement amounted to $4,648. Effect ? OTAG is not in compliance with the stated provisions. Cause ? OTAG does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Recommendation ? We recommend that OTAG deploy resources that are given the responsibility to ensure periodic review, monitoring, and compliance of the match requirement throughout the fiscal year. Further, we recommend that OTAG improve its internal controls to ensure adherence to its current retention policies. Views of Responsible Officials ? The Government concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Government?s Corrective Action Plan attached as Appendix B to the Single Audit Report.