GRANITE FALLS SCHOOL DISTRICT

2025-001 The District did not have adequate internal controls and did not comply with federal eligibility and procurement requirements. Assistance Listing Number and Title: 10.553 - School Breakfast Program, 10.555 - National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of the Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. In the 2024-25 school year, the District received $841,788 in federal funding to administer these programs. 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. Eligibility Districts providing free and reduced priced meals to students must verify students’ eligibility for these programs by either obtaining applications at the beginning of each school year or through the direct certification process, which is used for categorically eligible children for free meals without further application. 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. The District’s procurement policy conforms to the most restrictive laws and requires the District to obtain three price or rate quotations for purchases of goods between $10,000 and $75,000. Description of Condition Eligibility Our audit found the District did not have adequate internal controls to ensure it only provided eligible students with free and reduced-price meals. Procurement Our audit found the District did not have adequate controls to ensure it complied with procurement requirements. Specifically, the District did not follow its policy when procuring dairy and food products. The District paid three vendors a total of $93,734 in federal program funds. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. Cause of Condition The District experienced turnover in the position responsible for managing program eligibility and procuring food products. Current staff were unable to locate the documentation, such as an application or direct certification, to demonstrate students were eligible to receive free and reduced-price meals. Additionally, current staff were unable to locate the documentation to demonstrate compliance with procurement requirements.   Effect of Condition and Questioned Costs Eligibility Using a nonstatistical sample, we found three out of 23 students tested (13%) were not supported by documentation evidencing their eligibility. Without documentation showing the students were eligible for free and reduced-price meals, the District cannot demonstrate compliance with the awarding agency’s eligibility requirements. These errors resulted in the District receiving $1,328 in excess federal funds. Based on the projection of our sample, we identified an additional $13,107 in estimated overpayments for free and reduced meal costs. Procurement The District did not comply with procurement requirements for three of six transactions we tested that were subject to procurement. Without effective internal controls, 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 lowest responsible bidder. Recommendation Eligibility We recommend the District establish and follow internal controls to ensure it complies with federal and OSPI requirements for verifying eligibility for free or reduced-price meals and maintain documentation of this verification process. Procurement We recommend the District strengthen internal controls to ensure it complies with its policy and federal regulations for procuring dairy and food related products and that it maintains documentation to demonstrate it complied with federal procurement requirements. District’s Response Eligibility While we believe the person in charge of overseeing eligibility for the 2024-25 school year followed all of the required guidelines because we met all of the requirements in her previous years, we acknowledge that the transition to a new Manager of Child Nutrition resulted in a gap in organization of documentation. Specifically, we had a very difficult time locating eligibility records that were maintained by the previous Manager of Child Nutrition. The list of missing records was greatly reduced through multiple searches but, in the end, we could not locate enough of the missing records to satisfy compliance. Going forward, we will create a district online shared drive that will house this documentation (by year) so that future transitions will happen more seamlessly. Procurement As we understand it, our deficiency around following federal procurement guidelines revolves around two conditions. 1. We failed to demonstrate that we actually received three bids from vendors on one or more procurement contracts. We showed that we requested bids from 4 vendors but only 2 vendors responded. Our process has been to request bids from all vendors that serve our area and that has been sufficient in the past. This seems to be a gray area that needs to be tightened up so we will change our process to the following: Request bids from all vendors that service our area. If we do not receive at least three formal responses, we will then place an advertisement in a journal or newspaper with at least regional circulation formally requesting bids. If/When we do not receive any additional bids we will hold that documentation for audit purposes. 2. We recognize that we also failed to comply with federal procurement requirements around our milk procurement. We made procurement assumptions based on past meal quantities and determined we would not likely meet the required threshold but our meal quantities increased significantly and we exceeded the threshold by several thousand dollars. We could have also used the locally grown regulations to meet the requirements but we do not have a board policy formally adopting that. Going forward, we will need to do a better job of forecasting meals, being far more conservative and we will be adopting a board policy around locally grown products. 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 7 CFR Part 245, Section 245.6 – Application, eligibility and certification of children for free and reduced price meals and free milk. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring goods and services.

2023-001 The District’s internal controls were inadequate for ensuring it complied with federal suspension and debarment requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Agency Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program, and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from low-income families. The District received $708,468 to administer these programs during the 2022–23 school year. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding the program requirements and monitoring the effectiveness of established controls.   Description of Condition Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that contractors have not been suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Our audit found the District did not have adequate controls in place to verify one of three contractors we tested was not suspended or debarred from participating in federal programs. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition When setting up the purchase order for the 2022–23 school year, the Child Nutrition Supervisor reviewed the prior year expenditures with the contractor and initially expected they would be less than $25,000 for the school year. However, because staff did not monitor total expenditures for the contractor during the school year, they did not notice that actual expenditures exceeded this amount. As a result, the Supervisor did not verify the contractor’s suspension and debarment status before expenditures exceeded $25,000. Effect of Condition The District did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify one contractor paid $37,620 in part with federal funds was not suspended or debarred before contracting or purchasing. Without adequate internal controls, the District cannot ensure the contractor it paid with federal funds is 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 awarding agency could potentially recover them. Because we subsequently verified the contractor was not suspended or debarred, we are not questioning costs. Recommendation We recommend that the District strengthen its internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them. District’s Response The District agrees that it failed to check Suspension and Debarment for one of its Child Nutrition vendors. Corrective action was taken May of 2023, at the time of the previous audit. Unfortunately, May is very late in the year, so actions that occurred prior to the Audit rolled forward into this audit period. Moving forward, just to be extra cautious, Child Nutrition will be issuing the Suspension and Debarment Attestation Form to all vendors and keeping copies on file. Auditor’s Remarks We appreciate the steps the District has taken to resolve this issue and will review the condition 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 180, OMB Guidelines to Agencies on Government wide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

2022-001 The District?s internal controls were inadequate for ensuring it complied with federal procurement, suspension and debarment requirements. "See Schedule of Findings and Questioned Costs for chart/table" Background The District participates in the Child Nutrition Cluster, which includes the National School Lunch Program and the Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from low-income families. The District received $1,070,704 to administer these programs during the 2021-2022 school year. 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. Description of Condition Procurement Federal regulations require grant recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR ? 200.318-327. The procedures must reflect the most restrictive of applicable federal requirements, state laws and local policies. When using federal funds to procure goods and services, governments must apply the more restrictive requirements applicable to the purchase. For goods and supplies costing more than $75,000, state purchase requirements would require the District to award contracts to the lowest responsible bidder. Additionally, state and federal requirements, as well as the District?s policy, allow it to bypass normal procurement laws through a process commonly referred to as ?piggybacking.? This process allows entities to purchase goods and services using contracts awarded by another government or group of governments via an interlocal agreement or cooperative. When piggybacking, the entity must enter into an agreement before it purchases services or goods from another entity?s contract. If the District uses such an agreement, federal regulations require it to confirm the awarding entity followed all procurement laws and regulations applicable to the District when selecting the contractor. Our audit found the District did not have adequate internal controls for ensuring compliance with federal procurement requirements. Specifically, the District piggybacked onto another government?s contract to purchase food items, but it did not retain supporting documentation showing it verified the awarding government followed applicable procurement requirements before purchasing. 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. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with parties that are suspended or debarred from doing business with the federal government. Whenever the District contracts for goods and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that contractors have not been suspended or debarred, or otherwise excluded, from participating in federal programs. This verification may be accomplished by obtaining a written certification from the contractor, inserting a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The District must perform this verification before entering into the contract, and it must maintain documentation to demonstrate compliance. Our audit found the District did not have adequate controls in place to verify two contractors were not suspended or debarred from participating in federal programs. 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 had turnover in program staff at the beginning of the 2021-2022 school year. Employees did not know they needed to obtain procurement documentation from the awarding agency to verify the process complied with procurement requirements before purchasing. Although the District has an established affidavit process that staff are supposed to use for verifying contractors are not suspended or debarred, new employees were not aware of the process or the requirement to verify a contractor?s status. Effect of Condition The District piggybacked onto another agency?s contract, and it spent $212,609 of federal funds to purchase food items from one food service contractor. Without effective internal controls, the District cannot demonstrate it complied with piggybacking requirements, and cannot ensure it allowed for full and open competition. The District also did not obtain written certifications, insert clauses into the contracts, or check SAM.gov to verify two contractors paid $268,920 in federal funds were not suspended or debarred before contracting or purchasing. Without adequate internal controls, the District cannot ensure the contractors were 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 funding agency could potentially recover them. Because we subsequently verified the contractors were not suspended or debarred, we are not questioning costs. Recommendation We recommend that the District strengthen its internal controls to ensure compliance with federal procurement, suspension and debarment requirements. This should include retaining documentation supporting its compliance with program requirements. We also recommend the District provide training to staff responsible for program requirements. District?s Response During the 2021-2022 school year, Granite Falls School District failed to demonstrate that suspension and debarment requirements were met in the child Nutrition program. The Child Nutrition program ?piggyback? on two contracts used by numerous other districts to purchase food for the program. Even though these vendors have been vetted by many other school districts and the contacts did not originate with Granite Falls, we are still required to ensure that these vendors meet the suspension and debarment requirement. During the 2021-2022 school year, we transitioned to a new supervisor in that department and during the change-over, we neglected to confirm that even though these were contracts from other agencies, we still had to verify suspension and debarment. We have a good system in place currently where all contacts sign an attestation confirming they meet the suspension and debarment requirements. Child Nutrition now understands that they need to use this attestation on all contracts even if they do not originate from Granite Falls. Auditor?s Remarks We appreciate the steps the District has taken to resolve this issue and will review the condition 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, section 318, General procurement standards, establishes requirements for written procedures and maintaining records sufficient to detail the history of procurement. Title 2 CFR Part 200, Section 319 ? Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR Part 200, Section 320 ? Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities. Title 2 CFR Part 180, OMB Guidelines to Agencies on Government wide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

The District did not have adequate internal controls for ensuring compliance with federal procurement requirements for its Special Education grant program. ?See Schedule of Findings and Questioned Costs for chart/table? Background During fiscal year 2021, the District spent $517,376 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 that ensure compliance with program requirements. These controls include understanding various grant requirements and monitoring the effectiveness of established program controls. Federal regulations also require grant recipients to follow their own written procurement procedures, which must reflect the most restrictive of applicable federal, state or local laws. Established procedure must conform to federal procurement requirements to ensure recipients follow the most restrictive thresholds and methods when using federal funds. For personal services greater than $10,000 but less than $250,000, District policy requires price or rate quotations from an adequate number of qualified sources. The District must also keep records to demonstrate compliance with these requirements. Description of Condition Our audit found the District did not have an effective process to demonstrate the competitive procurement of personal services. Specifically, the District did not have documentation demonstrating it sought quotes for personal services, as policy requires. This issue was reported as a finding in the prior audit as finding 2020-001. We consider this control deficiency to be a material weakness. Cause of Condition During the audit period, the District experienced turnover in the Director position who was responsible for these requirements. However, our Office noted this issue in prior audits, and management did not verify that staff reviewed documentation to confirm compliance with requirements. Additionally, the District did not have a standard documentation protocol to demonstrate the history of the procurement. Effect of Condition Without adequate internal controls over procurement, the District cannot ensure it received the best possible price for the services, and it cannot demonstrate that it complied with federal regulations for procuring goods and services. During the fiscal year, the District only entered into one contract, which was for speech therapy services totaling $88,600. We determined the services were allowable under the federal program; therefore, we are not questioning the costs paid under this contract. Recommendation We recommend the District strengthen internal controls to ensure personnel responsible for procuring services comply with its procurement policy and that it keeps records to demonstrate compliance with federal procurement requirements and District policy. District?s Response The systems that the district put in place to address the prior audit findings are working well with the exception of documenting the competitive bidding process for one federal contract. In order to ensure compliance with federal procurement requirements in the Special Education program, we will create a check list / form to be completed by the department whenever they are considering hiring contractors to perform work in the district. This check list / form will guide the department thru the process and create input requirements for the department that will satisfy the procurement requirements. Auditor?s Remarks We appreciate the steps the District has taken to resolve this issue and will review the condition 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, Section 319 ? Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR Part 200, Section 320 ? Methods of procurement to be followed, describes each allowable procurement method.

The District did not have adequate internal controls to ensure compliance with federal time-and-effort, procurement, and suspension and debarment requirements for its Special Education grant program. ?See Schedule of Findings and Questioned Costs for chart/table? Background During fiscal year 2020, the District spent $535,311 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 to ensure compliance with program requirements. These controls include understanding various grant requirements and monitoring the effectiveness of established program controls in areas such as the following: Time-and-effort documentation The District is responsible for ensuring all expenditures charged to the programs are allowable and supported by appropriate documents. As part of this responsibility, the District must ensure it supports all payroll costs charged to the grant with adequate time-and-effort documents, as required by federal regulations and the grantor. Depending on the number and type of activities employees perform, time-and-effort documents take the form of semi-annual certification or monthly personnel activity report, such as a detailed timesheet. Employee salaries and benefits made up $479,492 of program expenditures. Procurement Federal regulations require grant recipients to follow their own written procurement procedures, which must reflect the most restrictive of applicable federal, state, or local laws. Established procedure must conform to federal procurement requirements to ensure recipients follow the most restrictive thresholds and methods when using federal funds. For personal services greater than $10,000 but less than $250,000, District policy requires price or rate quotations from an adequate number of qualified sources and to keep records to demonstrate compliance. Suspension and debarment Federal regulations prohibit recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the District contracts for goods or services that it expects to equal or exceed $25,000, paid all or in part with federal awards, it must verify the contractors have not been suspended or debarred or otherwise excluded. This verification may be accomplished by (1) checking the federal Excluded Parties List system (EPLS) maintained by the U.S. General Services Administrator, (2) collecting a written certification from the contractor, or (3) adding a clause or condition into the contract where the contractor states that is not suspended or debarred. The District must meet this requirement before awarding the contract and must keep records to show compliance. Description of Condition Time-and-effort documentation The District did not have an effective process to ensure all of the payroll costs charged to the federal program had appropriate time-and-effort documents. The District did not obtain time-and-effort documents for all six employees who worked full-time in the program for the entire award period. The issue was reported as a finding in the prior two audits as findings 2019-002 and 2018-001. Procurement The District did not have an effective process to demonstrate competitive procurement of personal services. There was no documentation demonstrating it sought quotes for personal services as required by District policy. The issue was not reported as a finding in the prior audit. Suspension and debarment The District did not have internal controls in place to ensure compliance with suspension and debarment requirements. The District did not obtain a written certification, include a clause in the contract, or review the EPLS to verify the contractor subject to this requirement during the audit period was not suspended or debarred from doing business with the federal government. The issue was reported as a finding in the prior audit. We consider these control deficiencies to be material weaknesses. Cause of Condition During the audit period, the Department experienced turnover in the Director position who was responsible for these requirements. However, these issues were also noted in prior audits, and management did not verify that documentation was reviewed to confirm compliance with requirements. Time-and-effort documentation The District did not monitor and track the submission of time-and-effort documents to ensure all payroll costs charged to the Special Education programs were supported by requirement documentation. Procurement The District didn?t have standard documentation protocol to demonstrate the history of the procurement. Suspension and debarment The District knew of the suspension and debarment requirements, but did not have internal controls, such as standard forms or templates, to document verification that parties are not suspended or debarred prior to entering into contracts. Effect of Condition and Questioned Costs Time-and-effort documentation Without adequate time-and-effort documents, the District cannot assure the federal grantor that payroll costs of $479,492 charged to the program were accurate and valid. The District provided alternative documents that adequately showed the employees worked in the program and the costs charged to the grant were for allowable activities. Therefore, we are not questioning these costs. Procurement Without adequate internal controls over procurement, the District cannot ensure it received the best possible price for the services and cannot demonstrate that is complied with federal regulations for procuring goods and services. During the fiscal year the District only entered into one contract, which was for speech therapy services totaling $86,400. We determined the services were allowable under the federal program. Therefore, we are not questioning the costs paid under this contract. Suspension and debarment Without adequate internal controls, the District cannot ensure it pays federal funds only to parties that are eligible to participate in federal programs. Any payments to ineligible parties would be unallowable and subject to recovery by the funding agency. During fiscal year 2020, the District paid one contractor $86,400 for speech therapy services without verifying the contract?s suspension and debarment status for the current contract year. The District subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning these payments. Recommendation We recommend the District strengthen internal controls to ensure: ? Personnel responsible for administering its federal program monitor and collect all required time-and-effort certification in a timely manner to show payroll costs charged to the grant are for allowable purposes. ? Personnel responsible for procurement of services comply with their procurement policy and that records are kept to demonstrate compliance with federal procurement, suspension and debarment requirements and District policy. District?s Response The Granite Falls School District has experienced an unusual amount of turnover in the Special Education Director position. There have been 4 directors in 4 years. As a result, we recognize that we have had a recurring problem with time and effort, procurement documentation, and debarment documentation in that department. In order to address this finding, the district has developed the following action plan: ? Suspension and Debarment clause has been added to our personal services contract. ? Re-training of the Special Education leadership team around time and effort with a first quarter check-in by the Director of Business and Operations to review compliance. ? Re-training of the Special Education leadership team around federal procurement requirement with a specific emphasis on competitive bid requirements and a first quarter check-in by the Director of Business and Operations to review compliance. Due to the delays in the audit process this year, these may not be fully corrected for the 20-21 school year since this finding was issued during the last week of the school year but this plan will be fully implemented for the 21-22 school year. Auditor?s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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 2 CFR Part 200, Uniform Guidance, section 403 ? Factors Affecting Allowability of Costs, established the general criteria costs must meet in order to be allowable under Federal awards. 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. Title 2 CFR Part 200, Section 319 ? Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR Part 200, Section 320 ? Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Government wide Department and Suspension (Nonprocurement) establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

The District did not have adequate internal controls to ensure compliance with federal suspension and debarment and time and effort requirements for its Special Education grant program. ?See Schedule of Findings and Questioned Costs for chart/table? Background During fiscal year 2019, the District spent $584,699 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 to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Suspension and debarment Federal regulations prohibit recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the District contracts for goods or services that it expects to equal or exceed $25,000, paid all or in part with federal awards, it must verify the contractors have not been suspended or debarred or otherwise excluded. This verification may be accomplished by (1) checking the federal Excluded Parties List System (EPLS) maintained by the U.S. General Services Administration, (2) collecting a written certification from the contractor, or (3) adding a clause or condition into the contract where the contractor states that it is not suspended or debarred. The District must meet this requirement before awarding the contract and must keep records to show compliance. Time-and-effort documentation The District is responsible for ensuring all expenditures charged to the programs are allowable and supported by appropriate documents. As part of this responsibility, the District must ensure it supports all payroll costs charged to the grant with adequate time-and-effort documents, as required by federal regulations and the grantor. Depending on the number and type of activities employees perform, time-and-effort documents can take the form of semi annual certification or monthly personnel activity report, such as a detailed timesheet. Employee salaries and benefits made up $278,201 of program expenditures. Description of Condition Suspension and debarment Though our audit found the District had procedures in place, they were not effective to ensure all parties receiving $25,000 or more were not suspended or debarred. The District did not obtain a written certification, include a clause in the contract, or review EPLS to verify that two of the four contractors subject to this requirement during the audit period were not suspended or debarred from doing business with the federal government. Time-and-effort documentation The District did not have an effective process to ensure all of the payroll costs charged to the federal program had appropriate time-and-effort documents. The District did not obtain time-and-effort documents for the second half of the school year for three employees who worked full-time in the program. We consider these control deficiencies to be material weaknesses. These issues were not reported as a finding in the prior audit. Cause of Condition Suspension and debarment The District knew of the procurement and suspension and debarment requirements. However, the District misunderstood the requirements for two contracts. For one contractor, it believed suspension and debarment was not applicable because the contractor was approved by the grantor and not subject to procurement. For the other contractor, the District believed it did not need to check its status again because it had used and verified it in the prior year. The District has not provided adequate training to ensure staff understand when to verify suspension and debarment. Time-and-effort documentation The District did not monitor and track the submission of time-and-effort documents to ensure all payroll costs charged to the Special Education programs were supported by required documentation. Effect of Condition and Questioned Costs Suspension and debarment Without adequate internal controls, the District cannot ensure it pays federal funds only to parties that are eligible to participate in federal programs. Any payments to ineligible parties would be unallowable and subject to recovery by the funding agency. During fiscal year 2019, the District paid one contractor $84,075 for speech therapy services, and a second contractor $121,424 for specialized student services without verifying the contractors? suspension and debarment status. The District subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning these payments. Time-and-effort documentation Without adequate time-and-effort documents, the District cannot assure the federal grantor that payroll costs of $167,317 charged to the program were accurate and valid. The District provided alternative documents that adequately showed the employees worked in the program. In addition, once requested for audit, the District obtained the time-and-effort forms from the employees, and we verified the costs charged to grant were for allowable activities. Therefore, we are not questioning these costs. Recommendations We recommend the District strengthen internal controls to ensure: ? All contractors paid $25,000 or more are not suspended or debarred from doing business with the federal government before entering into contracts. This may be accomplished by training staff and monitoring for compliance. ? Personnel responsible for administering its federal program monitor and collect all required time-and-effort certifications in a timely manner to show payroll costs charged to the grant are for allowable purposes District?s Response In response to this audit finding, the District acknowledges that it had a recurring problem in the special education department revolving around both time and effort as well as suspension and debarment verification. These recurring audit issues have been confined to one department, Special Education. The current director will be leaving at the end of this school year and has been replaced by a director from another school district. As part of the new director?s on-boarding, the District will go over prior audit findings with her and stress the importance of correcting these issues. Together we will develop a system to ensure that these two audit items are corrected for the 20/21 school year. Auditor?s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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. 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, section 303 ? Internal controls, establishes requirements for management of Federal awards to non-federal entities. Title 2 CFR Part 200, Uniform Guidance, Section 403 ? Factors Affecting Allowability of Costs, establishes the general criteria costs must meet in order to be allowable under Federal awards. 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. Title 2 CFR Part 180, OMB Guidelines to Agencies on Government wide Debarment and Suspension (Nonprocurement) establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

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