Okanogan School District No. 105Local Government

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Okanogan School District No. 105 September 1, 2022 through August 31, 2023 2023-001 The District did not have adequate internal 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, 0145073 COVID-19, 84.425U, 0138248 COVID-19, 84.425W, 0459025 COVID-19, 84.425W, 0459580 COVID-19, 84.425U, 137037 COVID-19, 84.425D, 9813 61 COVID-19, 84.425D, 9814 61 COVID-19, 84.425D, 9815 61 Known 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 the fiscal year 2023, the District spent a total of $2,014,915 of its ESF awards. This included $64,916 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $1,942,668 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U), and $7,331 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). The District spent $1,012,834 in program funds for various improvements and repairs to its facilities. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program 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. The District may use a contracted project manager to collect certified payroll reports from contractors and subcontractors, but ultimately, it is the District‘s responsibility to comply with these requirements and maintain documentation demonstrating compliance. Description of Condition During the 2023 school year, the District spent $1,012,834 for payments to two contractors for two projects for various improvements and repairs to its schools. 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 the contract with the prime contractor for one of two contracts we tested. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The District relied on the contract manager for compliance, and staff were not aware they needed to monitor the contract manager. In addition, the District did not notify the contract manager that the project was paid with federal funding and thus subject to federal wage rate requirements. Effect of Condition Without adequate internal controls to ensure it includes the wage rate clauses in its contracts, the District cannot demonstrate it complied with federal wage rate requirements. Additionally, because the District did not notify the contractor that the project was federally funded, the contractor submitted state certified payroll reports instead of federal certified payroll reports. The District could also be liable for paying any additional wages if the contractor and subcontractor did not pay prevailing wage rates to laborers working on the contract. The District did not include federal wage provisions in one out of two contracts. Recommendation We recommend the District strengthen internal controls to ensure compliance with federal wage rate requirements. This should include inserting wage rate clauses into contracts and obtaining the federal certified payroll reports. District’s Response District administration acknowledges that contracts signed prior to the 22-23 school year may not have had adequate federal wage rate language but continues to maintain that contracts signed within the current year audit and beyond contain all required federal wage rate language clauses. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to resolving this finding. We will review the corrective action taken 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, 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).

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Okanogan School District No. 105 September 1, 2021 through August 31, 2022 2022-001 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, 84.425D, 0120469 COVID-19, 84.425U, 0138248 COVID-19, 84.425W, 0459025 COVID-19, 84.425W, 0459580 COVID-19, 84.425U, 137037 COVID-19, 84.425U, 0712261 COVID-19, 84.425U, 712313 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 $1,917,896 of its ESF awards. This included $1,113,450 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $802,272 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U), and $2,173 in the American Rescue Plan Elementary and Secondary School Emergency Relief ? Homeless Children and Youth (ARP ESSER - HCY I & II) 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 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 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 During the 2021-22 school year, the District spent $449,988 from its ESSER III award to pay one contractor for work it performed on a project to add a portable building to the District?s campus. 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 prevailing wage rate clauses in the contract with the prime contractor. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. This issue was reported as a finding in the prior audit as finding 2021-001. Cause of Condition District staff included the state prevailing wage language in the construction contract. However, staff did not know the District also needed to include the federal prevailing wage requirements.Effect of Condition and Questioned Costs Without adequate internal controls to ensure it includes the required prevailing wage clauses in public works contracts, the District cannot demonstrate it complied with federal wage rate requirements. This increases the risk that contractors would not know the project is subject to federal prevailing wage requirements and pay the higher of state or federal wage. 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 contracts. Recommendation We recommend the District develop internal controls to ensure compliance with federal wage rate requirements. This should include inserting the prevailing wage rate clauses into construction contracts. District?s Response The District administration will obtain and include required Davis-Bacon Act contract language to facilitate adequate internal controls for ensuring compliance with the federal wage rate requirements in future federally funded projects. 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 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).

The District did not have adequate controls for ensuring compliance with Davis-Bacon Act (prevailing wage rate) requirements. 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 Pass-through Award/Contract Number: 84.425D 0120166 & 84.425D 0120469 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 $827,141 of its ESF awards during fiscal year 2021. This included $235,798 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) and $591,343 of its ESSER subprogram award funded by the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act (ESSER II). 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. The Davis-Bacon Act requires contractors and subcontractors that work on construction contracts in excess of $2,000 financed with federal financial assistance to pay laborers and mechanics prevailing wages?the wage rates the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. Prevailing wage requirements specify that the contract between the District and the prime contractor include specific language to ensure contractors and subcontractors are paid at prevailing wage rates. Additionally, the District is required to collect weekly certified payroll reports from contractors and subcontractors, which include copies of their payroll and signed ?Statement of Compliance.? Description of Condition The District hired one contractor to repair and upgrade the elementary school kitchen to increase cooler space, upgrade the dishwasher, and replace outdated fixtures to improve cleanliness during food preparation and clean up. During the 2020-2021 school year, the District paid $144,093 from its ESSER II award to the contractor for work it performed on the project. The District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not include the required prevailing wage rate clauses in the contract with the prime contractor, and the District did not request or receive any weekly certified payrolls from the contractor and subcontractors during the audit period. 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 District staff was aware that prevailing wage language is required in contracts, but was not aware they must include the exact language from federal regulations. Staff was also unaware of the requirement to obtain weekly certified payrolls for the project. Effect of Condition and Questioned Costs Without adequate internal controls to ensure it includes the required prevailing wage clauses in public works contracts and obtains required weekly certified payrolls, the District cannot demonstrate it complied with the Davis-Bacon Act requirements. The District could be liable for paying any additional wages if the contractor did not pay prevailing wage rates to laborers working on the contract. Recommendation We recommend the District develop internal controls to ensure compliance with federal wage rate requirements. This should include implementing effective monitoring to ensure that all public works contracts include the required prevailing wage clauses, and that it obtains and reviews all weekly certified payrolls from contractors and subcontractors. District?s Response The District was aware of the prevailing wage contract language and did obtain certified payrolls for the project at completion. The District was aware the Contractor was paying proper prevailing wages. The District continues to work to properly implement internal controls to ensure compliance with federal wage rate requirements. This includes implementing effective monitoring to ensure that all Davis-Bacon Act public works contracts include the required prevailing wage clauses, and obtaining and reviewing all weekly certified payrolls from contractors and subcontractors. 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. Title 29 CFE, 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). 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.

2020-001 The District did not have adequate controls in place to ensure compliance with verification requirements. CFDA Number and Title: 10.553 ? School Breakfast Program 10.555 ? National School Lunch Program 10.559 ? COVID-19 ? Summer Food Service Program for Children Federal Grantor Name: United States Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of the Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Background During fiscal year 2020, the District received $346,013 in federal funding for the School Breakfast Program, National School Lunch Program and COVID-19 ? Summer Food Service Program for Children. These programs provide funding for free and reduced-price meals for eligible low-income students whose households met specific income requirements set by the U.S. Department of Agriculture. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Each school year, the District must select a sample of household applications and verify that family income information reported to the District is correct. The Office of Superintendent of Public Instruction (OSPI) instructs school districts how to verify program eligibility, including the number of applications and how to sample the applications. The District must review selected applicants? income documentation and confirm students are receiving correct benefits of free or reduced-price meals. Otherwise, the student is not eligible and must pay for meals at full price. Description of Condition Though the District had a process in place to perform the annual verification process, internal controls were not effective to ensure that the District performed the income verification correctly. The District verified four applications using the three percent random sampling method. The District obtained support from the households to verify the income reported on the applications. The District did not correctly enter household income for one of the four selected applications. Further, the District?s review of the verified application and income documentation was not adequate to identify the error. 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 prior audit. Cause of Condition The District experienced turnover in the position responsible for verification of household applications and did not monitor to ensure the employee completed the process correctly. Effect of Condition and Questioned Costs The lack of effective internal controls over the verification process increases the risk that the District might have received funding for households that did not qualify for free or reduced-priced meals. The student associated with the application was not eligible for free or reduced-price meals. Therefore, the District requested reimbursement for $240 in unallowable costs for a household that did not qualify for free or reduced-priced meals. Recommendation We recommend the District improve its internal controls to monitor the verification process and ensure it properly reviews and verifies applications using correct household income amounts. District?s Response The Okanogan School District concurs with audit finding 2020-001. The following corrective actions have been taken to ensure the error does not happen again. The district moved to the Community Eligibility Program for Child Nutrition services beginning with the 2020-2021 fiscal year. Free and Reduced Meal Applications are no longer a part of the program and application verification are no longer completed. If the district returns to the regular Child Nutrition Program at a later day at least two staff will attend relevant trainings. One staff member will process the verification and the second will review the process and results prior to submission. Auditor?s Remarks We appreciate the District's commitment to resolving the issues noted, and will follow up during the 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 7 CFR, Part 245, Determining Eligibility For Free And Reduced Price Meals And Free Milk In Schools, Section 6a, Verification requirements sets forth the verification requirements for verifying eligibility of children for free and reduced price meal benefits and reporting results to the granting agency.