PUGET SOUND EDUCATIONAL SERVICE DISTRICT

2022-001 The District?s internal controls were inadequate for ensuring compliance with federal reporting requirements for the Head Start Cluster. Assistance Listing Number and Title: 93.600 ? COVID-19 Head Start Cluster 93.600 ? Head Start Cluster Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 3419-0623-0000, COVID-19-3419-0623-0019, 3435-0200-0000, 3435-1022-0000, 3440-1021-0000, 3440-1022-0000, 3471-0200-0000, 3471-0822-0000, 3474-1021-0000, 3474-1022-0000 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Background The Head Start program promotes school readiness by providing early education programs to children from low-income families and those eligible for public assistance. In fiscal year 2022, the District spent more than $20.2 million in federal program funds, approximately $8.5 million of which it paid to subrecipients. Under the Federal Funding Accountability and Transparency Act (FFATA), the District is required to collect and report information on each subaward of federal funds more than $25,000 in the Federal Funding Accountability and Transparency Subaward Reporting System (FSRS). For federal awards issued on or after November 12, 2020, the monetary threshold for reporting increased to $30,000. The District must report subawards by the end of the month following the month in which it made the subaward (or subaward amendment). The intent of the FFATA is to empower citizens with the ability to hold the federal government accountable for spending decisions and, as a result, reduce wasteful government spending. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition Our audit found the District did not have adequate internal controls over and did not comply with requirements to ensure it filed reports required by the FFATA. During the audit period, the District was required to report about $8.5 million of program funds that it awarded to 23 subrecipients. We found the District did not accurately report subawards in FSRS as required. For 20 of the 25 contracts and amendments we tested, the contract and amendment amounts were different from the amount reported in FSRS, and 13 amendments and contracts subject to reporting during fiscal year 2022 were not submitted in FSRS in a timely manner. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. The issue was reported as a finding in the prior audit as finding 2021-001. Cause of Condition District personnel were not aware of the correct FSRS reporting process. Specifically, staff incorrectly reopened and resubmitted the same three reports to update for monthly changes over the life of the three contracts instead of creating new monthly reports, as FSRS guidance explains. Effect of Condition Failing to submit the required reports diminishes the federal government?s ability to ensure accountability and transparency of federal spending. Below is a summary of the discrepancies we identified. Transactions Tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements 25 0 13 20 0 Dollar Amount of Tested Transactions Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements $6,459,918 $0 $471,391 $3,793,103 $0 Recommendation We recommend the District: ? Strengthen its internal controls to ensure it submits required FFATA reports ? Establish policies and procedures for filing required reports ? Provide training for employees who oversee reporting and who verify the submission and accuracy of the reports ? Ensure management monitors reporting of this information so future reports are submitted completely and timely District?s Response The District agrees with the finding presented by SAO that some Head Start subawards reported on FFATA Subaward Reporting System (FSRS) did not comply with the reporting requirements of the FSRS system. All awards were reported in FSRS and total contract amounts (contracts plus amendments) are accurately reflected in FSRS. The District failed to print reports reflecting the subaward activity each month and did not record amendments properly. The District took into consideration SAO?s recommendations and developed a Corrective Action Plan which will be implemented immediately. Early Learning program management will ensure that employees are adequately trained and adhere to FFATA/FSRS reporting requirements. Auditor?s Remarks We appreciate the District?s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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, Appendix A to Part 170, Reporting Subaward and Executive Compensation Information, establishes reporting requirements for first tier subawards.

CORRECTIVE ACTION PLAN FOR FINDINGS REPORTED UNDER UNIFORM GUIDANCE Puget Sound Educational Service District No. 121 September 1, 2021 through August 31, 2022 This schedule presents the corrective action planned by the District for findings reported in this report in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Finding ref number: 2022-001 Finding caption: The District?s internal controls were inadequate for ensuring compliance with federal reporting requirements for the Head Start Cluster. Name, address, and telephone of District contact person: Irina Minasova 800 Oakesdale Avenue S.W. Renton, WA 98057 (425) 917-7773 Corrective action the auditee plans to take in response to the finding: The District agrees with the finding presented by SAO that some Head Start subawards reported on FFATA Subaward Reporting System (FSRS) did not comply with the reporting requirements of the FSRS system. All awards were reported in FSRS and total contract amounts (contracts plus amendments) are accurately reflected in FSRS. The District failed to print reports reflecting the subaward activity each month and did not record amendments properly. The District took into consideration SAO?s recommendations and developed a Corrective Action Plan which will be implemented immediately. Early Learning program management will ensure that employees are adequately trained and adhere to FFATA/FSRS reporting requirements: ? Amendments will be submitted to FSRS per FSRS instructions instead of added to the original contract amount ? Reports will be printed monthly for all subawards and forwarded to the Business Office for retention ? EL Grants Accounting and Compliance Manager will participate in additional training and train additional EL fiscal staff on the process for backup, redundant process, and secondary review EL program leadership will ensure that remedial steps are made effective immediately and FFATA reporting is corrected for the audit year 2022-2023. Anticipated date to complete the corrective action: The District is committed to implementing the Corrective Action Plan effective immediately. FFATA reporting should be in compliance by August 31, 2023.

2021-001

2021-001 The District?s internal controls were inadequate for ensuring compliance with reporting requirements for the Head Start Cluster. CFDA Number and Title: 93.600 ? COVID-19 Head Start Cluster 93.600 ? Head Start Cluster Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: COVID-19-3419-0623-0019, 3435- 0190-0000, COVID-19-3435-0190- 0019, COVID-19-3435-0200-0000, 3435-0200-0019, 3440-0190-0000, COVID-19-3440-0190-0019, 3440- 1021-0000, 3471-0190-0000, 3471- 0200-0000, COVID-19-3471-0200- 0019, 3474-0190-0000, COVID-19- 3474-0190-0019, 3474-1021-0000 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Background The objective of the Head Start program is to provide early education programs to low-income children and those eligible for public assistance to promote school readiness. In fiscal year 2021, the District spent more than $24.5 million in federal program funds, approximately $9.4 million of which it paid to subrecipients. Under the Federal Funding Accountability and Transparency Act (Act), the District is required to collect and report information on each subaward of federal funds more than $25,000 in the Federal Funding Accountability and Transparency Subaward Reporting System (FSRS). For federal awards issued on or after November 12, 2020, the monetary threshold for reporting increased to $30,000. The District must report subawards by the end of the month following the month in which it made the subaward (or subaward amendment). The intent of the Act is to empower citizens with the ability to hold the federal government accountable for spending decisions and, as a result, reduce wasteful government spending. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition Our audit found the District did not have adequate internal controls over, and did not comply with, requirements to ensure it filed reports required by the Act. During the audit period, the District was required to report approximately $11 million of program funds that it awarded to 32 subrecipients. We found the District did not accurately report subawards in FSRS as required. For eight of the 12 contracts, the contract amounts were different from the amount reported in FSRS, and 21 amendments for 10 contracts subject to reporting during fiscal year 2021 were not reported in FSRS. We consider this internal control deficiency 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 Many of the District?s Head Start grant contracts have numerous subawards. District personnel were not aware of the applicability of the Act?s reporting requirements to these subawards. Effect of Condition Failing to submit the required reports diminishes the federal government?s ability to ensure accountability and transparency of federal spending. Below is a summary of the discrepancies we identified. Transactions tested Subawards not reported Reports not submitted timely Subaward amounts incorrect Subawards missing key elements 25 0 21 21 21 Dollar amount of tested transactions Dollar amount of subawards not reported Dollar amount of reports not submitted timely Dollar amount of incorrect subaward amounts Dollar amount of subawards missing key elements $10,990,635 $0 $4,350,522 $4,350,522 $4,350,522 Recommendation We recommend the District: ? Establish effective internal controls to ensure it submits required reports ? Establish policies and procedures for filing required reports ? Provide training for employees who oversee reporting and who verify the submission and accuracy of the reports ? Ensure management monitors reporting of this information so future reports are submitted completely and timely District?s Response The District agrees with the finding presented by SAO and agrees that the Head Start subawards reported on FFATA Subaward Reporting System (FSRS) did not match actual amounts of subawards. All awards were reported in FSRS. The District failed to report amendments issued to subrecipients during the fiscal year. The District took into consideration SAO?s recommendations and developed a Corrective Action Plan which will be implementing immediately. Early Learning program management will ensure that employees are adequately trained. Auditor?s Remarks We appreciate the District?s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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 U.S. Code of Federal Regulations (CFR), Appendix A to Part 170, Reporting Subaward and Executive Compensation Information, establishes reporting requirements for first-tier subawards.

Puget Sound Educational Service District No. 121 September 1, 2020 through August 31, 2021 This schedule presents the corrective action planned by the District for findings reported in this report in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Finding ref number: 2021-001 Finding caption: The District?s internal controls were inadequate for ensuring compliance with reporting requirements for the Head Start Cluster. Name, address, and telephone of District contact person: Irina Minasova 425-917-7773 800 Oakesdale Avenue S.W. Renton, WA 98057 Corrective action the auditee plans to take in response to the finding: The District agrees with the finding presented by SAO and agrees that the Head Start subawards reported on FFATA Subaward Reporting System (FSRS) did not match actual amounts of subawards. All awards were reported in FSRS, The District failed to report amendments issued to subrecipients during the fiscal year. The District took into consideration SAO?s recommendations and developed a Corrective Action Plan which will be implementing immediately. Early Learning program management will ensure that employees are adequately trained. Following steps will be taken to ensure amount of subaward and all amendments issued by Early Learning Head Start program match amount reported on FSRS: ? Initial subaward will be reported by EL program on FSRS as soon as awarded ? All amendments will be reported on FSRS monthly, to meet timeline requirement ? EL Director of Compliance will train additional EL fiscal staff on the process for backup, redundant process, and secondary review ? EL program leadership will ensure that remedial steps are made effective immediately and FFATA reporting is corrected for the audit year 2122 ? EL program is working on reducing number of amendments issued during the year