Kalama School District

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Kalama School District No. 402 September 1, 2023 through August 31, 2024 2024-001 The District’s internal controls were inadequate for ensuring compliance with requirements for time-and-effort documentation. 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, 84.425V-0144008 COVID-19, 84.425U-0138293 COVID-19, 84.425U-0137283 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $590,344 in federal funds from the Education Stabilization Fund (ESF). The objectives of the ESF program are to prevent, prepare for and respond to the COVID-19 pandemic. 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. The District is responsible for ensuring it supports all payroll costs charged to the program with adequate time-and-effort documentation, as federal regulations and the awarding agency require. 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 their work. Description of Condition The District’s internal controls were ineffective for ensuring it supported all salaries and benefits it charged to the Transition to Kindergarten program, which was funded using the ESF, as federal regulations and the Office of Superintendent of Public Instruction (OSPI) require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition District officials did not know about the requirement to obtain time-and-effort documentation for staff it paid with Transition to Kindergarten program funds. Effect of Condition The District did not obtain time-and-effort documentation for four employees whose salary and benefits totaling $266,236 were charged to the federal program. Without adequate time-and-effort documentation, the District cannot demonstrate compliance with the granting agency’s documentation requirements to support costs charged to the federal program. Further, the District cannot assure federal grantors that payroll costs charged to the program were accurate and valid. During the audit, the District supported these payroll costs by providing alternative documentation to show the employees worked on the federal program; therefore, we are not questioning these costs. Recommendation We recommend the District develop and follow internal controls to ensure it complies with federal and OSPI requirements for obtaining time-and-effort documentation timely. District’s Response The Kalama School District greatly appreciates the work and efforts of the State Auditor's Office (SAO). Furthermore, we appreciate that we were able to provide, and the SAO accepted, alternative documentation showing that our team members were correctly charged off to the Federal Grant appropriately. We had a new Business Director start with the district at the end of the 23-24 FY and they immediately found that Time and Effort documentation was missing or done incorrectly in the past. We were able to get this documentation for the current fiscal year and will continue to collect Time and Effort documentation each year. 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 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 (OSPI) Addendum to Bulletin 048-17, Guidelines for Charging Employee Compensation to Federal Grants Office of Superintendent of Public Instruction Addendum to Bulletin 048-17, Guidelines for Charging Employee Compensation to Federal Grants establishes requirements for documenting time-and-effort, including fixed schedule systems.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Kalama School District No. 402 September 1, 2022 through August 31, 2023 2023-002 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 the Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425U 0137283 COVID-19, 84,425D 0144008 COVID-19, 84.425U 0138293 COVID-19, 84.425U 0142510 Known Questioned Cost Amount: $0 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 the fiscal year 2023, the District spent a total of $1,219,029 of its ESF awards. This included $148,848 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D) and $1,070,182 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). 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. Description of Condition During the 2023 school year, the District spent $119,895 for payments to one contractor for the installation of a security system. Our audit found that 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 • Collect weekly certified payroll reports from the contractor to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. Cause of Condition District staff were unaware of the federal wage rate contract clause requirement and that the District needed to obtain all certified payroll reports each week. 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 did not pay prevailing wage rates to laborers working on the contract. Recommendation We recommend the District establish internal controls to ensure compliance with federal wage rate requirements. This should include inserting wage rate clauses into contracts and implementing effective monitoring processes to collect and review all weekly certified payroll reports from contractors. Additionally, we recommend the District provide training to ensure staff overseeing compliance with federal programs are aware of all applicable requirements. District’s Response The Kalama School District has taken the following steps to ensure that we are currently in compliance, and will continue to stay in compliance, with the Davis-Bacon Act; 1. All new contractors and existing contractors covered by the Davis-Bacon Act will submit certification attesting to compliance of prevailing wage requirements. 2. District staff will review the State Labor and Industries prevailing wage and certification website on a weekly basis when work is performed or collect a certified payroll record from the contractor on a weekly basis. 3. All new staff that have purchasing or financial oversight will be trained on these procedures when hired and on an ongoing basis. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to resolve 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).