Sunnyside Unified School District No. 12

Finding Number: 2025‐001 Repeat Finding: No Program Name/Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.559 Federal Agency: U.S. Department of Agriculture Federal Award Number: 7AZ300AZ3 Pass‐Through Agency: Arizona Department of Education Questioned Costs: $148,525 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Allowable Costs/Cost Principles Criteria Under 2 CFR §200.303, the District is required to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the District is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.  Additionally,  2  CFR  §200.439  requires  capital  expenditures for  special  purpose  equipment  with a unit cost of $5,000 or more to have the prior written approval of the Federal awarding agency or pass‐through entity. This includes ensuring a Capital Expenditure Pre‐Approval Request Form is submitted to Arizona Department of Education (ADE) for approval prior to purchasing equipment that is not included on ADE's Food and Nutrition Service approved equipment list. Condition The District submitted a Capital Expenditure Pre‐Approval Request Form to ADE for approval prior to purchasing a capital asset not on the ADE Pre‐Approved Capital Equipment list; however, the request was denied. Cause The District purchased a capital asset after the Capital Expenditure Pre‐Approval Request Form from ADE was denied. Effect The District charged unallowable costs to the program. Context The District purchased an HVAC valued at $78,584 without an approved Capital Expenditure Pre‐Approval Request Form from ADE for an asset not on the ADE Pre‐Approved Capital Equipment list. The  questioned  costs  include  the  known  cost  of  the  capital  asset  of  $78,584,  and  the  projected  questioned costs of $69,941 based on the error rate and the untested assets. The sample was not intended to be, and was not, a statistically valid sample. Recommendation Management should review all transactions to ensure that program costs are allowable and in adherence to applicable federal requirements. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2025‐001 Program Name/Assistance Listing Title: Child Nutrition Cluster Assistance Listing Numbers: 10.553, 10.555, 10.559 Contact Person: John Oakley/Matthew Morita Anticipated Completion Date: 06/30/2026 Planned Corrective Action: Capital Expenditure requisitions for the Food Service (Fund 510) will be submitted by the Food Service department in School ERP Pro to ensure that approval is an authorized purchase. Also, each DAC’s approval queue will be updated to include funds 510‐514 which will allow the Director of Food Service to see any requisitions entered on their behalf.

Finding Number: 2025‐002 Repeat Finding: No Program Name/Assistance Listing Title: Child Nutrition Cluster Assistance Listing Numbers: 10.553, 10.555, 10.559 Federal Agency: U.S. Department of Agriculture Federal Award Number: 7AZ300AZ3 Pass‐Through Agency: Arizona Department of Education Questioned Costs: $939,352 Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Allowable Costs/Cost Principles Criteria Under 2 CFR §200.303, the District is required to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the District is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Additionally, according to the Memo SP60‐2016, Indirect Costs Guidance for State Agencies and School Food Authorities, issued by the United States Department of Agriculture (USDA), a District may recover indirect costs of services rendered to school food service at a rate not to exceed the unrestricted  indirect  cost  rate  approved  by  the  Arizona  Department  of  Education  (ADE).  The  approved indirect cost rate is subject to change each fiscal year. Condition The  District  charged  the  Child  Nutrition  Cluster  program,  reported  in  the  Food  Service  Fund,  $1,315,330 in indirect costs for the fiscal year, whereas the maximum allowable indirect costs was calculated at $375,978. Cause The District was unaware that certain costs must be excluded when determining the net expenditures that the approved unrestricted indirect cost rate is applied against. Effect The District charged unallowable costs to the program. Context When calculating indirect costs, the District did not exclude specific costs prohibited in the indirect cost calculation. As a result, the 18.00 percent indirect cost rate was applied to a net food service expenditure amount that was greater than it should have been. Therefore, the District overcharged $939,352 to the Child Nutrition Cluster program as reported in the Food Service Fund. The sample was not intended to be, and was not, a statistically valid sample. Recommendation Management  should  review  all  transactions  to  ensure  that  program  costs  are  allowable  and  in  adherence to applicable federal requirements. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2025‐002 Program Name/Assistance Listing Title: Child Nutrition Cluster Assistance Listing Numbers: 10.553, 10.555, 10.559 Contact Person: John Oakley/Matthew Morita Anticipated Completion Date: 06/30/2026 Planned  Corrective  Action:  The  District’s  spreadsheet  has  since  been  updated  to  include  all  costs  when determining net expenditures. The old template was discarded, and a new template was created going forward. This was done after reviewing the previous method with our auditor which identified an error in our calculation. The updated spreadsheet will be used going forward.

Finding Number: 2023‐001 Repeat Finding: No Program Name/Assistance Listing Title: COVID‐19 Education Stabilization Fund Assistance Listing Number: 84.425U, 84.425W Federal Agency: U.S. Department of Education Federal Award Number: S425U210038, S425W210003 Pass‐Through Agency: Arizona Department of Education Questioned Costs: N/A Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Allowable Costs/Cost Principles Criteria According  to  the  Office  of  Management  and  Budget  Uniform  Guidance  requirements  2  CFR  §200.230(i) charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Specifically, according to 2 CFR §200.430(i)(vii) the records must support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non‐Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition Time and effort records were not accurately maintained for employees. Cause District management did not have adequate internal controls in place to ensure the time and effort documentation completed by the employee accurately reflected the work performed. Effect The District was not in compliance with the requirements set forth by the federal government. Context For one employee reviewed, time and effort documentation was not maintained for an employee that worked on a federal program and non‐federal program. For seven employees reviewed who work  on  more  than  one  federal  program,  the  employees'  time  and  effort  documentation  only  included one federal program. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The  District  should  design  and  implement  internal  controls  to  ensure  proper  training  on  the  preparation of time and effort documentation is distributed to all employees and that all time and effort documentation accurately reflects the work performed. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐001 Program Name/Assistance Listing Title: COVID‐19 Education Stabilization Fund Assistance Listing Number: 84.425U, 84.425W Contact Person: Andrea Leon Foster, Director of Federal Programs Anticipated Completion Date: June 30, 2024 Planned Corrective Action: Although the Federal Programs Department has a process for periodic certification, compression was not included in the percentage breakdown for each classified staff salary. Reporting adjustments have been made to include ESSER funded positions with additional oversight  on  percentage  breakdowns  for  positions  funded  with  multiple  cost  objectives.  These  breakdowns are reflected in the electronic version of FORMS B and D in addition to the hard copies. The  Federal  Programs  Director  will  work  with  district  leadership  to  ensure  all  employees  in  each  department (Curriculum and Instruction, Professional Development, etc.) on the process of maintaining Time and Effort logs and signing the bi‐annual FORM B and FORM D.

FINDINGS AND QUESTIONED COSTS RELATED TO FEDERAL AWARDS Finding Number: 2020-001 Repeat Finding: No Program Name/CFDA Title: Child Nutrition Cluster CFDA Number: 10.553, 10.555, 10.559 Federal Agency: U.S. Department of Agriculture Federal Award Number: 7AZ300AZ3 Pass-Through Agency: Arizona Department of Education Questioned Costs: $265,701 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Allowable Costs/Cost Principles CRITERIA According to the Memo SP60-2016, Indirect Costs Guidance for State Agencies and School Food Authorities, issued by the United States Department of Agriculture (USDA), a District may recover indirect costs of services rendered to school food service at a rate not to exceed the unrestricted indirect cost rate approved by the Arizona Department of Education (ADE). The approved indirect cost rate is subject to change each fiscal year. CONDITION The District charged the Child Nutrition Cluster program, reported in the Food Service Fund, $893,524 in indirect costs for the fiscal year, whereas the maximum allowable indirect costs was calculated at $627,823. CAUSE The District was unaware that certain costs must be excluded when determining the net expenditures that the approved unrestricted indirect cost rate is applied against. EFFECT The District overcharged indirect costs of $265,701 to the Child Nutrition Cluster program as reported in the Food Service Fund. CONTEXT When calculating indirect costs, the District did not exclude specific costs prohibited in the indirect cost calculation. As a result, the 11.91 percent indirect cost rate was applied to a net food service expenditure amount that was greater than it should have been. Therefore, the District overcharged $265,701 to the Child Nutrition Cluster program as reported in the Food Service Fund. The sample was not intended to be, and was not, a statistically valid sample. RECOMMENDATION The District should ensure indirect costs are calculated in accordance with the formula set forth in the guidance issued by USDA. VIEWS OF RESPONSIBLE OFFICIALS See Corrective Action Plan.

Findings and Questioned Costs Related to Federal Awards Finding Number: 2020-001 Program Name/CFDA Title: Child Nutrition Cluster CFDA Numbers: 10.553, 10.555, 10.559 Contact Person: Brenda Maloney Anticipated Completion Date: March 31, 2021 Planned Corrective Action: Return cash to Food Service Fund from Indirect Cost Fund by journal entry to fund balance of Indirect Cost Fund in the current year.