Mary M Knight School District No. 311

Mary M. Knight School District No. 311 September 1, 2021 through August 31, 2022 2022-001 The District?s internal controls were inadequate for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 10.553 ? School Breakfast Program 10.555 ? National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Description of Condition The District participates in the Child Nutrition Program, which includes the National School Lunch Program and the School Breakfast Program. These programs provide free or reduced-price meals to low-income students. During the 2021?22 school year, the District received $139,458 to administer these programs. Federal regulations require recipients to establish and follow internal controls that ensure compliance with procurement requirements. These controls include understanding award requirements and monitoring the effectiveness of established controls. State and federal requirements allow local entities to bypass normal procurement laws through a process commonly referred to as ?piggybacking.? This process allows entities to purchase goods and services using contracts awarded by another government or group of governments via an interlocal agreement or cooperative. To comply with piggybacking law, the entity must enter into this interlocal agreement before it purchases goods or services from another entity?s contract. If the District uses such an agreement, federal regulations require it to confirm the awarding entity followed all procurement laws and regulations applicable to the District when selecting the contractor. In order to make a valid piggybacking transaction, the District must purchase goods or services from the contractor that was awarded the contract through the original entity?s procurement process. Our audit found the District did not have adequate internal controls for ensuring compliance with federal procurement requirements. Specifically, the District used program funds to procure $65,614 in food items from two vendors. District officials claimed to have used the piggybacking method, but they could not demonstrate the District used piggybacked contracts for these purchases. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The District has experienced turnover in staff positions responsible for ensuring compliance with procurement requirements under the Child Nutrition Program. Current staff also did not know the District must maintain documentation to demonstrate it used a master agreement to procure items at the established prices. Effect of Condition Without effective internal controls that ensure the District followed piggybacking procedures, the District cannot ensure it allowed for full and open competition. Further, the District cannot demonstrate it complied with applicable federal procurement requirements when purchasing items with program funds. Recommendation We recommend the District strengthen internal controls that ensure compliance with federal procurement requirements. This should include maintaining documentation that demonstrates the District?s use of piggybacked contracts. We also recommend the District provide training to staff responsible for the procurement process, including piggybacking purchases. District?s Response The Mary M. Knight School District used a purchasing cooperative for procuring food supplies from two vendors. Mary M. Knight School District used this and other cooperative purchasing groups under RCW 39.34 for the stated purpose of ?public benefit? to procure goods and services at a low or reduced cost to public schools. Our assumption was that by using this cooperative purchasing contract we were meeting the procurement guidelines. Due to staff turnover the District was not able to locate information referencing the Cooperative in our purchase order process or documentation that pricing was being checked regularly. Auditor?s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures and maintaining records sufficient to detail the history of procurement. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities.

Mary M. Knight School District No. 311 September 1, 2021 through August 31, 2022 2022-002 The District did not have adequate internal controls for ensuring compliance with wage rate requirements. Assistance Listing Number and Title: 84.425, COVID-19 Education Stabilization Fund Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425U-0138260 COVID-19, 84.425U-0120375 Known Questioned Cost Amount: $0 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for, and respond to the COVID-19 pandemic. In fiscal year 2022, the District spent $359,405 of its ESF awards, all of which was from the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). Federal regulations require award recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Under federal wage rate requirements, also known as the Davis-Bacon Act, contractors and subcontractors that work on projects financed with more than $2,000 of federal money must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. For construction contracts subject to these wage rate requirements, the District must include a provision that the contractor and subcontractor comply with those requirements and the Department of Labor?s regulations. This includes a requirement for the contractor and its subcontractors to submit to the District weekly, for each week in which any contract work is performed, certified payroll reports. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition During the 2021?22 school year, the District spent $306,979 from its ESSER III award to pay a contractor and its subcontractors to install a portable and modular building system. This project was part of the District?s school facility capital improvement efforts to prevent the spread of COVID-19. Our audit found the District did not have adequate internal controls for ensuring compliance with federal prevailing wage requirements. Specifically, the District did not collect weekly certified payroll reports from the contractor and its subcontractors to confirm they paid laborers proper prevailing wages. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition The District relied on the contractor and subcontractors to submit weekly certified payrolls to the website for the Washington State Department of Labor and Industries (L&I). Although staff said they checked that weekly certified payrolls were uploaded to the L&I system before the District paid the contractor and subcontractors, the District did not document this process. Further, staff did not know the District needed to obtain all certified payroll reports each week from the contractor and subcontractors. Effect of Condition Without adequate internal controls that ensure it collects all weekly certified payroll reports, the District cannot demonstrate it complied with federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and subcontractors did not pay prevailing wage rates to laborers working on the contract. Recommendation We recommend the District develop internal controls that ensure compliance with federal wage rate requirements. This should include implementing effective monitoring processes to collect and review all weekly certified payroll reports timely from contractors and subcontractors. District?s Response The Mary M. Knight School District purchased the Portable Classroom in 2021 utilizing a purchasing cooperative. In the cooperative contract awarded to the contractor in May 2019 (and subsequent years 2020, 2021, 2022), the terms and conditions of the contract stated that the contractor ?will be compliant with WA State Labor & Industries regulations?. The Mary M. Knight School District?s assumption was that with this award by the cooperative, the contractor would be required to pay ?prevailing wage? as part of the cooperative contract as stated. The Mary M. Knight School District did withhold retainage in the agreement. The Mary M. Knight School District did check with L&I on the final completion that the contractor did complete and attest to prevailing wage laws in WA before releasing the retainage. The Mary M. Knight School District agrees that it did not request weekly certified payroll or weekly submission on the part of the contractor of prevailing wage verification. Auditor?s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 29 CFR, Section 3.3 ? Weekly statement with respect to payment of wages, and Section 3.4 ? Submission of weekly statements and the preservation and inspection of weekly payroll records, establish requirements for contractor or subcontractor submission of weekly certified payroll reports.