Coupeville School District No. 204Local Government

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Coupeville School District No. 204 September 1, 2024 through August 31, 2025 2025-001 The District did not have adequate internal controls and did not comply with time-and-effort and procurement requirements. Assistance Listing Number and Title: 84.027 – Special Education Grants to States 84.173 – Special Education Preschool Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: GT-03882 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2025, the District spent $219,471 in federal funds from the Special Education program cluster. This program ensures students with disabilities receive free and appropriate public education with specially designed instruction that addresses their unique needs. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.Time and Effort The District is responsible for ensuring it supports all payroll costs it charges to the program with adequate time-and-effort documentation, as required by federal regulations and the awarding agency. Depending on the number and types of activities employees perform, time-and-effort documentation can be a semiannual certification or a monthly personnel activity report, such as a detailed timesheet. Time-and-effort documentation must also be signed and dated after employees complete the work. Procurement When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. The District must maintain documentation showing the procurement process it performed. Federal regulations and District policy require the District to obtain price or rate quotations for personal services costing between $10,000 and $250,000. Description of Condition Time and Effort The District’s internal controls were ineffective for ensuring it supported all salaries and benefits it charged to the program with appropriate time-and-effort documentation, as federal regulations and OSPI require. Procurement The District’s internal controls were ineffective for ensuring compliance with federal procurement requirements. Specifically, the District did not follow its policy when procuring personal services for speech-language pathology and occupational therapy. The District paid two contractors a total of $134,444 in federal program funds. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance.Cause of Condition Time and Effort The District experienced turnover in key positions responsible for managing the program. As a result, the current staff were unable to locate supporting time-andeffort documentation. Procurement District staff were aware of procurement requirements but did not retain documentation of price or rate quotations to demonstrate compliance with procurement requirements. Effect of Condition Time and Effort The District did not obtain time-and-effort documentation for two employees whose payroll and benefits costs totaling $83,902 were charged to the program. Without adequate time-and-effort documentation, the District cannot demonstrate compliance with the awarding agency’s documentation requirements to support costs charged to federal programs. During the audit, the District obtained and provided the signed time-and-effort records to support the payroll costs it charged to the program; therefore, we are not questioning these costs. Procurement Without effective internal controls or documentation, the District cannot demonstrate it complied with federal procurement standards and its own policy, allowed for full and open competition, received the best price or selected the most qualified provider.Recommendation Time and Effort We recommend the District establish and follow internal controls to ensure it complies with federal and OSPI requirements for obtaining signed time-and-effort documentation timely. Procurement We recommend the District strengthen internal controls to ensure it complies with its policy and federal regulations for procuring personal services and that it maintains documentation to demonstrate it complied with federal procurement requirements. District’s Response The District acknowledges the above finding related to time-and-effort documentation and procurement requirements under the Special Education program cluster (CFDA 84.027 – Special Education Grants to States and CFDA 84.173 – Special Education Preschool Grants), pass-through award GT-03882 administered by OSPI. The District acknowledges that due to turnover in key positions, time-and-effort documentation for two employees whose payroll and benefits costs totaling $83,902 were charged to the program was not retained and readily available. The District has since obtained and provided signed time-and-effort records to the auditor to support all payroll costs charged to the program. To prevent recurrence, the Business Manager has implemented a monthly checklist to ensure time-and-effort certifications are completed and signed by applicable staff within required timeframes, in compliance with OSPI Bulletin 039-24 and 2 CFR Part 200, Subpart E. This checklist will be maintained on file as documentation of ongoing compliance. The District acknowledges that price or rate quotations were not retained for two contractors providing speech-language pathology and occupational therapy services, totaling $134,444 in federal program funds, as required for personal services contracts between $10,000 and $250,000 under 2 CFR Part 200, section 320, and Board Policy 6220.To address this, the Business Manager will provide written guidance to special education leadership and applicable staff by June 12, 2026, outlining price and rate quotation requirements for personal services contracts and the District's documentation retention obligations under Board Policy 6220 and federal procurement standards. Going forward, the Business Manager will verify that all personal services contracts procured with federal funds include required price or rate quotation documentation prior to execution. The District is committed to maintaining these strengthened internal controls to ensure full and ongoing compliance with federal program requirements under the Special Education program cluster. 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, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction Addendum to Bulletin 039-24, Guidelines for Charging Employee Compensation to Federal Grants establishes requirements for documenting time-and-effort, including fixed schedule systems. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring goods and services, including noncompetitive procurement.

2023-001 The District did not have adequate controls for ensuring compliance with federal 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 84.425D-144903, COVID-19 84.425U-138095, COVID-19 84.425W-459527Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2022-001 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 2023, the District spent a total of $638,378 of its ESF awards. The specific program and amounts were: • $20,727 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D) • $607,424 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) • $10,227 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W) 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors 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 2022-23 school year, the District spent $126,317 for payments to four contracts for four projects. The projects were for heating, ventilation, and air conditioning (HVAC) at the woodshop to prevent the spread of COVID-19 and for various other improvements from its ARP ESSER/ESSER III award (84.425U). Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not: • Include the required wage rate provisions in one contract • Collect weekly certified payroll reports from all contractors and subcontractors to confirm they paid laborers proper prevailing wages. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. Cause of Condition The District does not normally use federal funds on public works projects. While District officials were aware of wage rate requirements, District staff said it lacked adequate oversight in this area. Due to the timing of the communication of the prior audit recommendation, the District had already completed the projects and was unable to resolve the control weaknesses. Effect of Condition Without adequate internal controls to ensure it includes the wage rate clauses in its contracts and 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. During the audit period, the District did not include federal wage provisions in one contract and it did not collect weekly certified payroll reports from four contractors. Recommendation We recommend the District develop internal controls to ensure compliance with federal wage rate requirements. This should include inserting wage rate clauses into contracts, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports timely from contractors and subcontractors. District’s Response Auditor’s Remarks 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, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports. Title 29 CFR, Section 5.5 – Contract provisions and related matters establishes the requirements for the contracting officer to insert in full in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part with federal funds the clauses listed, which includes but is not limited to the minimum wages to be paid and payrolls and basic records to be maintained (submission of weekly certified payrolls).

2022-001 The District overcharged costs to the Education Stabilization Fund program, and it did not have adequate controls for ensuring compliance with federal 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: 84.425U-712072, 84.425D-120332, 84.425U-138095, 84.425U-311282 Known Questioned Cost Amount: $61,010 Prior Year Audit Finding: N/A 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 reported it spent $1,656,274 of its ESF awards. This included $684,871 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), and $971,403 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER III) subprogram (84.425U). Federal regulations require award 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.   Allowable Activities/Costs Federal regulations establish principles and standards for determining allowable direct and indirect costs for federal awards. The Office of Superintendent of Public Instruction (OSPI) establishes the indirect cost rate for each award, and districts cannot exceed this approved rate when claiming reimbursement. If there are changes to the rate during a multi-year award, districts must adjust the amount claimed, if needed, to ensure they do not exceed the approved rate. Districts are also required to ensure only allowable costs are charged to federal programs. Wage Rate Requirements 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 funds must pay laborers and mechanics wage rates 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 subcontractor 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 Allowable Activities/Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and allowable cost requirements, it charged the incorrect indirect cost rate for its ESSER II award (84.425D). Additionally, the District overcharged the program by removing expenditures from the program that had already been reimbursed. Wage Rate Requirements During the 2021–22 school year, the District paid $32,964 from its ESSER III award to one contractor to update the heating, ventilation and air conditioning controls in one schools to improve air quality and circulation to prevent the spread of COVID-19. The District also paid $248,286 from its ESSER II award to one contractor for a modular building, as well as $45,507 from its ESSER II award to four additional contractors for electrical, fire, fencing and site work for a modular building. Our audit found the District did not have adequate internal controls for ensuring compliance with federal prevailing wage rate requirements. Specifically, the District did not: • Include the required prevailing wage provision in four out of six contracts • Collect weekly certified payroll reports from contractors or 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. Cause of Condition Allowable Activities/Costs Management and staff relied on the rate posted in the OSPI iGrants system, and did not know the District needed to manually adjust the indirect cost rate for ESSER awards that covered two fiscal years. In addition, after requesting reimbursement, the District identified costs it no longer wanted to be paid from program funds. Staff made an accounting adjustment to remove these transactions from the program expenditures within the accounting system, but did not alert the grantor of this change or replace the costs with other eligible expenditures. Wage Rate Requirements The District does not normally use federal funds on public works projects. While District officials were aware of state prevailing wage requirements, they were not aware of the federal guidelines to review these prior to payment. Therefore, the District focused on the state requirements. Effect of Condition and Questioned Costs Allowable Activities/Costs We reviewed all indirect costs charged to the program. We found the District charged $41,900 more in indirect costs than allowable because it did not use the correct rate for its ESSER II program. In addition, we identified the District received reimbursement for $19,110 more than its identified expenditures. We are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are greater than $25,000 for each type of compliance requirement. We question costs when we find the District has not complied with grant regulations and/or when it does not have adequate documentation to support expenditures. Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts and 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 did not pay prevailing wage rates to laborers working on the contract. During the audit period, the District was required to collect certified payroll reports from five contractors and multiple subcontractors. We found the District did not obtain any weekly certified payroll reports from the contractors or subcontractors. Recommendation Allowable Activities/Costs We recommend the District ensure it uses the correct OSPI-issued unrestricted indirect cost rate for the fiscal period when charging costs to federal awards. We further recommend the District ensure only allowable costs are charged to federal awards. Wage Rate Requirements We recommend the District develop internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting prevailing wage rate clauses into contracts, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports timely from contractors and subcontractors. District’s Response It is very unusual for the district to ever complete projects with unrestricted Federal funds and in this case it was in the midst of a national crisis. Initially some expenditures were charged to the ESF program but late in the fiscal year a different grant materialized so the expenditures were moved, via journal entries, to the new grant. The district incurred other qualifying expenditures that could have been charged, recorded via additional journal entries, to the Education Stabilization Fund (ESF) program. In the event that there are future projects that are Federally funded in excess of $2,000, Coupeville School District (CSD) will have adequate controls for ensuring compliance with Davis-Bacon Act (Federal prevailing wage rate) requirements. Additionally, when Federal unrestricted ESF funds are received, CSD will be sure to better substantiate expenditures with journal entries so that the program does not appear to be overcharged on the financials. 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 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs. 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, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports. Title 29 CFR, Section 5.5 – Contract provisions and related matters establishes the requirements for the contracting officer to insert in full in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part with federal funds the clauses listed, which includes but is not limited to the minimum wages to be paid and payrolls and basic records to be maintained (submission of weekly certified payrolls).