Sequim School District No. 323Local Government

Sequim School District No. 323 September 1, 2020 through August 31, 2021 2021-001 The District did not have adequate internal controls for ensuring compliance with federal requirements to provide equitable services funding to private schools. CFDA 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 (OSPI) Pass-through Award/Contract Number: 84.425D / 0120258, 84.425D / 0120355, 84.425U / 0138035 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. The District spent $819,711 of its ESF awards during fiscal year 2021. This included $298,116 of its Elementary and Secondary School Emergency Relief fund (ESSER) subprogram award funded by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (ESSER I), $43,355 of its ESSER subprogram award funded by the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act (ESSER II), and $478,240 of its ESSER subprogram award funded by the American Rescue Plan Act (ARPA) (ESSER III). Federal regulations require award recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding award requirements and monitoring the effectiveness of established controls. Federal regulations require districts using ESSER I funds to identify any students living within their boundaries attending private schools. If districts have private school students living within their boundaries, the private school they attend is eligible for ESSER I equitable services funding from the District. The District must determine the proportional share of ESSER I funds available for equitable services, consult with the private school, and provide the planned services or funds. Description of Condition During fiscal year 2021, the District had one private school that chose to participate in federal programs. The District did not have adequate internal controls and did not comply with the requirement to provide ESSER I funding for equitable services for students attending this private school. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition While the District contacted private schools as required, only one staff member was in communication with the private school that chose to participate. During the audit period, this staff member went on extended leave, and other District staff did not know about the private school?s request to receive available funding for equitable services. As a result, the District did not provide funding to the private school. Effect of Condition The District allocated $2,464 of its ESSER I award to provide equitable services to one private school, but it did not provide the planned services or spend the funds on private school students as required. Recommendation We recommend the District establish and follow internal controls to ensure it provides allocated federal funding to private schools for equitable services. District?s Response The District will establish a process to ensure that we have internal controls in place to provide allocated federal funding to private schools for equitable services. We will include in our process, contact names that will be responsible for carrying out the internal controls of the federal grant process and the backup contacts will be included in the communication process as well. Written process will be given to the Director of Business & Finance, Director of Teaching and Learning, and the other contacts related to the specific grant so that all departments of the district that are participating in the grant are able to ensure equitable services are delivered. Auditor?s Remarks We appreciate the District?s commitment to resolving the issues noted and will follow up during the next scheduled 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 1, Part A of the ESEA (20 USC 6320), section 1117, providing equitable services to students and teachers in private schools.

The District lacked adequate internal controls for ensuring compliance with federal procurement and suspension and debarment requirements for its Special Education program. Background During fiscal year 2020, the District spent $480,414 in federal funds from the U.S. Department of Education through the Special Education Cluster (IDEA) program, which gives funding to states to help school districts provide special education and related services to all children with disabilities. Federal regulations require recipients to establish and follow internal controls for ensuring compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition Procurement When using federal funds to purchase goods or services, governments must apply the more restrictive of federal requirements, state law, or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. The government must keep documentation supporting the procurement history. District policy conforms to federal requirements for professional services, and requires price or rate quotations from a reasonable number of qualified sources for services costing between $10,000 and $250,000. Additionally, District policy allows noncompetitive procurement when the circumstance meets specific criteria, such as inadequate competition or single source purchases. The District must prepare and keep documentation supporting the applicable circumstance and its rationale for noncompetitive procurement. State law also requires the governing body to record its waiver of competitive bidding requirements. The District?s internal controls were ineffective for ensuring it complied with federal regulations or its own policy. The District could not show it obtained price or rate quotations or met noncompetitive procurement criteria for five professional service contracts it procured. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. This issue was not reported as a finding in the previous audit. Suspension and debarment Federal requirements prohibit grant recipients from contracting with parties that have been suspended or debarred from doing business with the federal government. Whenever a government contracts for goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that the contractor is not suspended or debarred, including other local governments. Governments can verify a contractor?s status by obtaining written certification from the contractor, or it can insert a clause into the contract stating the contractor is not suspended or debarred. Alternatively, the government can check the U.S. General Services Administration?s Excluded Parties List System (EPLS). The government must perform this verification before entering into the contract or paying the contractor over $25,000, and it must keep documentation demonstrating compliance with this federal requirement. The District?s controls were ineffective for ensuring that all parties receiving $25,000 or more in federal funds were not suspended or debarred. The District did not obtain written certification, include a clause in the contract, or review the EPLS to verify that one of its six contractors was not suspended or debarred. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. This issue was not reported as a finding in the previous audit. Cause of Condition Procurement The District did not dedicate the necessary time and resources for ensuring it followed procurement requirements. Although District staff members responsible for selecting contractors were aware of the District?s procurement policy, they did not fully understand federal requirements; they believed these contracts were sole source, and as such, did not require competition. Additionally, the District did not have effective monitoring procedures over procurement. Suspension and debarment District staff members did not know they still needed to perform suspension and debarment verification when entering into contracts with other local governments. Effect of Condition Procurement The District procured professional special education services from five contractors at a total cost of $227,463, without obtaining any price or rate quotations or documenting its rationale for sole source determinations, as federal regulation and District policy require. Therefore, the District cannot demonstrate it received the best price for the services it purchased. The purchases are allowable under the federal program, so we are not questioning these costs. Suspension and debarment Without adequate internal controls, the District cannot ensure the contractors paid with federal funds are eligible to participate in federal programs. Any program funds the District used to pay contractors that have been suspended or debarred would be unallowable, and the federal grantor could potentially recover them. The District did not verify one of its six contractors subject to this requirement was not suspended or debarred. During fiscal year 2020, the District used $30,392 of program funds to pay this contractor for visual impairment teaching, as well as orientation and mobility and behavioral specialist services. We verified the contractor was not suspended or debarred, so we are not questioning these costs. Recommendation Procurement We recommend the District dedicate the necessary time and resources for ensuring all staff responsible for procuring goods and services are familiar with federal procurement requirements and District policy. Further, we recommend the District improve its internal controls over procurement, such as implementing monitoring procedures for compliance with federal regulations and District policy. Suspension and debarment We recommend the District strengthen its internal controls for ensuring that all contractors, including other governments, it expects to pay $25,000 or more with federal funds are not suspended or debarred. District?s Response Federal Procurement will be done following Policy & Procedure 6220. All contractual services will have at least three (3) price or rate quotations from qualified services. We are strengthening our internal controls over procurement by requiring the documentation for the three (3) price or rate quotations be attached to the contractual services agreement when it comes to the Business Office for approval. Suspension and Debarment was done successfully on all contracts but one which was the Olympic Educational Service District 114 which is a local government. At the time we were not aware that suspension and debarment was required on a local government. At this time, Sequim School District has a Suspension and Debarment form that is included on all contractual services agreements. We will ensure that the OESD114 is included on suspension and debarment procedure per Procedure 6220 Item J which addresses suspension and debarment. Auditor?s Remarks We appreciate the District?s commitment to resolving the issues noted and will follow up during the next scheduled 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 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension, establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 ? Methods of procurement to be followed, describes each allowable procurement method. RCW 39.04.280, Competitive bidding requirements - Exemptions

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