Eatonville School District

The District did not have adequate internal controls in place to ensure compliance with federal child nutrition program requirements concerning verification and suspension and debarment. CFDA Number and Title: 10.553 School Breakfast Program 10.555 National School Lunch Program Federal Grantor Name: United States Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: WA27404 Questioned Cost Amount: $0 Background During fiscal year 2019, the District received $397,035 in funding for the School Breakfast and National School Lunch Programs. These programs provide funding for free and reduced-price meals for eligible low-income students whose households meet 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. Verification Each 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. Suspension and debarment Federal regulations prohibit grant recipients from contracting with parties suspended or debarred from doing business with the federal government. When the District contracts for goods or services it expects to cost $25,000 or more paid all or in part with federal funds, including contracts procured by others (state or local agency or cooperative), it must verify the contractors have not been suspended or debarred or otherwise excluded. This verification maybe 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 it is not suspended or debarred. The District must meet this requirement before awarding the contract and must maintain documentation to demonstrate compliance. Description of Condition Verification Though the District did have a process in place to perform the annual verification, internal controls were not effective to ensure it completed this process accurately. The District needed to verify the eligibility of four applications. The District did not correctly enter household income for one of the four selected applications. The student associated with the application was not eligible for free or reduced-price meals. We consider this deficiency in internal controls to be a material weakness. The issue was not reported as a finding in the prior audit. Suspension and debarment The District had a process in place, but that was 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 one contractor subject to this requirement was not suspended or debarred from doing business with the federal government. The District paid this contractor, which was a local government, $474,024 of program funds during fiscal year 2019 for food services. We consider this deficiency in internal controls to be a material weakness. The issue was not reported as a finding in the prior audit. Cause of Condition Verification The District employee responsible for obtaining income documentation to verify the application did not ensure the income was within OSPI requirements, and there was no secondary review of the verification process. Suspension and debarment The District did not know that suspension and debarment verification must still be performed when entering into contracts with local governments. Effect of Condition and Questioned Costs Verification Lack of proper internal controls over the verification process increases the risk that the District might provide free or reduced-priced meals to children who are not eligible to receive them. The District received $460 in funding for a household that did not qualify for free or reduced-priced meals. Suspension and debarment Without adequate internal controls over suspension and debarment requirements, the District cannot ensure it pays federal funds only to parties that are eligible to participate in federal programs. Any payments made to an ineligible party would be unallowable and subject to recovery by the funding agency. Because we verified that the contractor was not suspended or debarred, we are not questioning costs. Recommendation We recommend the District improve its internal controls to ensure applications are properly reviewed and verified, such as implementing a secondary review of the verification process and using available forms from OSPI, including the OSPI verification checklist. We further recommend the District strengthen its internal controls to ensure that all contractors, including state or local agencies or cooperatives, it expects to pays $25,000 or more are not suspended or debarred from participating in federal programs. District?s Response The District concurs that it failed to run debarment on another Washington School District from whom it purchased services. The assumption was made that a district receiving federal funds would necessarily be in good standing. In the future, debarment will be run on all entities for which procurement thresholds are expected to be met. The District also concurs that an error was made in assessing qualifying income for free/reduced meals through the child nutrition program. The employee in charge of the assessments has received additional training to avoid future issues. Auditor?s Remarks We thank the District for its cooperation and assistance during the audit and look forward to reviewing 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. 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 7 CFR Part 245, Determining Eligibility for Free and Reduced Price Meals and Free Milk in Schools, Section 6a, Verification requirements, establishes requirements for verifying eligibility of children for free and reduced price meal benefits and reporting results to the granting agency. 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

CORRECTIVE ACTION PLAN FOR FINDINGS REPORTED UNDER UNIFORM GUIDANCE Eatonville School District No. 404 September 1, 2018 through August 31, 2019 This schedule presents the corrective action planned by the District for findings reported in this report in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Finding ref number: 2019-001 Finding caption: The District did not have adequate internal controls in place to ensure compliance with federal child nutrition program requirements concerning verification and suspension and debarment. Name, address, and telephone of School District contact person: Kim Knight, Director of Business and Human Resources PO Box 698 Eatonville, WA 98373 360-879-1037 Corrective action the auditee plans to take in response to the finding: The District concurs that it failed to run debarment on another Washington School District from whom it purchased services. The assumption was made that a district receiving federal funds would necessarily be in good standing. In the future, debarment will be run on all entities for which procurement thresholds are expected to be met. The District also concurs that an error was made in assessing qualifying income for free/reduced meals through the child nutrition program. The employee in charge of the assessments has received additional training to avoid future issues. Anticipated date to complete the corrective action: Completed 4/30/2020

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