SER-JOBS FOR PROGRESS OF THE TEXAS GULF COAST, INC.

2025-001 Compliance and Internal Controls over Reporting (Significant Deficiency) Assistance Listing Number 17.259 – Workplace Innovation and Opportunity Act Cluster / WIOA Youth Activities 2024-2025 Funding U.S. Department of Labor Passed through Texas Workforce Commission / Houston Galveston Area Council Contract No. 206-25 Criteria: Under 2 CFR Section 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, per the Subrecipient Contract Scope of Work 13.1, a monthly report to the Board and H-GAC contract liaison is due by the 10th of each month. Monthly reports are required to be submitted to the grantor to properly track grant progress, which allows the grantor to determine if further action is needed to fulfill the purpose of the grant. Condition: Monthly reports for October 2024, December 2024 and May 2025 were not submitted timely. SER-Jobs’ established controls over the reporting process did not work effectively to detect and/or correct non-compliance over the reporting process. Cause: Monthly reports were submitted late due to delays in accounting period close, which delayed the submission process to include the financial information in the required reports. Effect: Failure to submit the required reports as stipulated in the scope of work by the grantor may constitute a breach of contract and potential loss of funding. Questioned Costs: None. Perspective: 3 out of the 4 reports selected for our testing were not submitted timely. Repeat Finding: No Recommendation: Ser-Jobs should establish procedures to ensure that controls related to reporting are consistently implemented which should include prompt completion of the accounting period close to allow for timely submissions. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.

Corrective Action: An unnecessary step in the process was removed . Previously, program staff waited for funder confirmation approving the billing report before attaching a screenshot and submitting the executive summary. The process has been updated, so screenshots are submitted without waiting for funder approval. In addition, the accounting department will shift its closing date 1 day prior to the funder's executive summary reporting deadline. Responsible Parties: Chief Program Officer & Chief Financial Officer Date to be Corrected: 03/31/2026 If the U.S. Department of Labor has any questions regarding this plan, please contact Liliana Rambo, CEO, 713.773.6000 x 117.

ASSISTANCE LISTING 11.307 - ECONOMIC ADJUSTMENT ASSISTANCE DIRECT AWARD FROM U.S. DEPARTMENT OF COMMERCE GRANT AWARD NUMBERS: 08-79-05298; 113048 FINDING NO. 2022-001: NON-COMPLIANCE AND SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER NONCOMPLIANCE WITH REPORTING REQUIREMENTS Condition: SER-Jobs did not submit its quarterly program progress reports and semi-annual financial report (SF-425) within the timelines specified in the criteria section below. For instance, quarterly program progress reports for the quarters ended December 2021 and June 2022 were submitted on March 1, 2022, and September 13, 2022, respectively, whereas the semi-annual financial report (SF-425) for the period ended September 30, 2021 was submitted on November 11, 2021. Criteria: Per the terms and conditions of the grant agreement, quarterly program progress reports and semi-annual financial report (SF-425) are required to be submitted within 30 days of the end of each quarter or semi-annual period, as applicable. Cause: Management executed the grant agreement in October 2019 but first utilized other funding sources in the initial years to fund construction activities for the workforce training center for which Economic Adjustment Assistance (EAA) grant was awarded. The third-party project manager hired by management to prepare all reports was entirely focused on providing all required reports to those other funding sources. Per management, project staff turnover at the grantor agency due to the COVID-19 pandemic also created difficulties to maintain contact during this period. As funding from the EAA was used for construction activities, in later part of 2021 fiscal year, management became more focused on provision of reports required under the grant agreement. Perspective Information: For testing reporting compliance, we selected two (2) quarterly program progress reports out of the four (4) quarterly reports that were submitted during the fiscal year 2022. A single semi-annual report was due in fiscal year 2022. Questioned Costs: None noted. Effect or Potential Effect: SER-Jobs is not in compliance with the terms and conditions of the grant award document. Identification of Repeat Finding: Not applicable since this is a new finding. Recommendation: We recommend that SER-Jobs strengthen its oversight over preparation and submission of the required reports under EAA grant agreement and establish adequate procedures to ensure timely submission of all reports within the expected timelines specified in the grant agreement. Views of Responsible Officials: Management does not disagree with this finding. See management?s corrective action plan on page 33.

Finding No. 2022-001 - NON-COMPLIANCE AND SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER NONCOMPLIANCE WITH REPORTING REQUIREMENTS Planned Corrective Action: SER-Jobs is currently current and in compliance with the reporting requirements under the EAA grant agreement. In addition to becoming compliant, SER-Job's procedures, related to the submission of all grant reports, have been modified. This modification includes setting an internal deadline of completion of at least 10 days prior to the funder required submission deadline. Also, there will be tasks reminders placed on all management and staff calendars, upon awarding of funds and throughout the funding term, of all reporting requirements. Anticipated Completion Date: March 1, 2023 SER-Jobs Contact Person Responsible for Corrective Action: Mr. Gerald Eaton, CFO

ASSISTANCE LISTING 11.307 - ECONOMIC ADJUSTMENT ASSISTANCE DIRECT AWARD FROM U.S. DEPARTMENT OF COMMERCE GRANT AWARD NUMBERS: 08-79-05298; 113048 FINDING NO. 2022-002: NON-COMPLIANCE AND SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER NONCOMPLIANCE WITH REPORTING REQUIREMENTS. Condition: SER-Jobs, as a direct recipient of the Economic Adjustment Assistance (EAA) grant, did not comply with the reporting requirements under 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. SER-Jobs did not register with the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) and did not report contractual payments of $30,000 or more made from use of federal funds provided under EAA grant. Criteria: Under the Transparency Act codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards and subcontracts of $30,000 or more to the FSRS. Cause: Program compliance manager was not aware of the reporting requirements under the Transparency Act. Perspective Information: SER-Jobs executed the grant agreement with U.S. Department of Commerce in October 2019. Per management, the terms of the grant agreement did not clearly indicate compliance with the reporting requirements under the Transparency Act and came to know about this requirement during the audit. Questioned Costs: None noted. Effect or Potential Effect: SER-Jobs is not in compliance with the requirements of the Transparency Act. Identification of Repeat Finding: Not applicable since this is a new finding. Recommendation: We recommend that SER-Jobs register with FSRS and report subaward data through FSRS to comply with the requirements of the Transparency Act. Views of Responsible Officials: Management does not disagree with this finding. See management?s corrective action plan on page 33.

Finding No. 2022-002 - NON-COMPLIANCE AND SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER NONCOMPLIANCE WITH REPORTING REQUIREMENTS Planned Corrective Action: SER-Jobs has registered with Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) and reported the subaward data through FSRS and is now in compliance with the requirements of the Federal Funding Accountability and Transparency Act requirements. In addition to becoming compliant, SER-Job's procedures, related to the submission of all reporting requirements, including supplemental requirements not required or collected by the awarding agency, have been expanded to include seeking additional guidance from external sources, such as our external auditors. These external sources, will possess the knowledge and expertise to assure that SER-Jobs follows all reporting requirements, including supplemental requirements originally unknown to SER-Jobs and not communicated by the awarding agency. Anticipated Completion Date: March 1, 2023 SER-Jobs Contact Person Responsible for Corrective Action: Mr. Gerald Eaton, CFO

Finding Reference No. 2021-001 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Passed Through: Texas General Land Office Passed Through: City of Houston, Texas Community Development Grants/State?s Program & Non-Entitlement Grants in Hawaii ? CFDA 14.228 Grant Award Numbers: 19-147-001-B489 Type of Finding: Reporting Non-compliance and Significant Deficiency in Internal Control Questioned Costs: None Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Condition: During our review of SER's compliance with grant reporting requirements, we noted that quarterly program and financial report for quarter ended September 30, 2020 was due October 20, 2020, but was not submitted until July 15, 2021. Criteria: In accordance with the terms of the grant agreement with the City of Houston, quarterly program and financial report is due by the 20th day of the calendar month following the end of each quarter. Cause: SER?s procedures related to the preparation and submission of grant reports were not sufficient to ensure that these reports were submitted by the due date. Effect: A required compliance for the program was not met. Recommendation: We recommend that SER establish procedures to ensure that reports are submitted in accordance with the provisions of the contract agreements. Views of Responsible Officials and Planned Corrective Actions: See management?s corrective action plan on page 30.

MANAGEMENT?S CORRECTIVE ACTION PLAN Finding 2021-001 Planned Corrective Action SER's procedures related the preparation and submission of grant reports have been revised. The new process, which formerly resided in the Development department, is under the supervision of the newly created Quality Assurance department. This new department was created to assure that SER is and remains compliant in all aspects of all contracts and that processes are in place, periodically reviewed and sufficient to assure that SER's processes and procedures are sufficient to be and remain compliant with all contractual obligations. Anticipated Completion Date March 04, 2022 Responsible Contact Person Sandra Achury ? Director Quality Assurance