Pioneer School District No. 402

2022-001 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, 84.425D-0120580 COVID-19, 84.425U-0137095 COVID-19, 84.425U-0138060 COVID-19, 84.425W-0459589 COVID-19, 84.425U-0712229 Known Questioned Cost Amount: $0 Description of Condition The objectives of the Education Stabilization Fund (ESF) are to prevent, prepare for, and respond to the COVID-19 pandemic. In fiscal year 2022, the District spent $788,390 in federal funds through its ESF awards. This included $705,878 in the Elementary and Secondary School Emergency Relief (ESSER I and II) Fund subprogram (84.425D), $82,453 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U), and $59 in the American Rescue Plan Elementary and Secondary School Emergency Relief ? Homeless Children and Youth (ARP ESSER ? HCY I and II) subprogram (84.425W). Of these awards, the District spent $274,492 on salaries and benefits. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding award 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 type of activities employees perform, time-and-effort documentation can be a semiannual certification or monthly personnel activity report, such as a detailed timesheet. Time-and-effort documentation must also be signed and dated after the work is completed. Description of Condition The District?s internal controls were ineffective for ensuring it supported all salaries and benefits charged to the ESF program with appropriate time-and-effort documentation, as the awarding agency requires. The District could not provide time-and-effort documentation for two employees who worked part-time in the ESF program. The employees were paid with funds through both ESF and another federal program. We consider this internal control deficiency to be a significant deficiency. The issue was not reported as a finding in the prior audit. Cause of Condition Due to an unusual amount of turnover, District personnel usually responsible for monitoring time-and-effort compliance had additional roles and responsibilities added to their workload. After roles changed, the District did not properly reassign responsibility for monitoring time-and-effort compliance and could not demonstrate proper procedures were followed. Further, personnel who were responsible for monitoring time-and-effort compliance during the 2021?22 school year are no longer with the District, and current staff could not locate any supporting documentation that may have existed. Effect of Condition The District did not obtain time-and-effort documentation for two employees whose payroll and benefits costs totaling $41,209 were charged to the ESF program. Without adequate time-and-effort documentation, the District cannot demonstrate compliance with the granting agency?s requirements to support costs charged to federal programs. Further, the District cannot assure the federal grantor 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 these employees worked on the programs; therefore, we are not questioning these costs. Recommendation We recommend the District design and follow internal controls to ensure employees complete time-and-effort documentation to support payroll costs charged to federal programs. District?s Response Pioneer School District agrees with the State Auditor?s Office reporting of a finding based on the referenced laws and regulations. While the District does agree with the finding, we would also like to highlight the circumstances that ultimately led to it. Over the course of the year, the District had turnover in six of nine administrative positions in addition to having a new Director of Finance, as of September 1, 2021. The amount of change within the District?s administrative team created many difficulties in determining all the responsibilities of departed employees and who would take on that responsibility. Pioneer School District is committed to the safeguarding of public resources through the implementation and maintenance of strong internal controls. Working with the new administrative team, we have addressed the issues highlighted in this finding and other recommendations made by the State Auditor?s Office. We are working and will continue working on creating a strong set of internal controls that will limit the amount of risk associated with District activities. 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. Office of Superintendent of Public Instruction Addendum to Bulletin 048-17, Guidelines for Charging Employee Compensation to Federal Grants.

The District did not have adequate internal controls for ensuring compliance with federal requirements for allowable activities and costs. See Schedule of Findings and Questioned Costs for chart/table Description of Condition The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. The District spent $341,701 of its ESF awards during fiscal year 2021. This included $301,564 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), $2,040 of its ESSER subprogram award funded by the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act (ESSER II), and $38,097 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. The CARES Act allowed Districts to claim for lost revenue related to unrealized enrollment for the 2020-2021 school year. The Office of Superintendent of Public Instruction (OSPI) provided guidance on how to quantify unrealized enrollment and reminded Districts any claim against ESSER funds must be spent on allowable uses. Specifically, funds claimed due to unrealized enrollment must be spent in alignment with the allowable uses of funds outlined in the CARES Act, such as expenses necessary for maintaining operations and continuing public school services during the pandemic, providing mental health services, purchasing educational technology, etc. OSPI?s grant system (iGrants) and claims system operates on a reimbursement basis, meaning the District is required to incur and pay for eligible costs before requesting reimbursement, including reimbursement of expenditures that offset the unrealized enrollment. The District submitted claims for unrealized enrollment as lost revenues under its ESSER I subprogram award. However, the District?s internal controls were inadequate for ensuring amounts requested for reimbursement were supported by specific, allowable ESSER expenditures, which is required. 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 District officials said they were not aware that amounts claimed for lost revenue related to unrealized enrollment under the ESSER I subprogram were required to be supported by specific, allowable ESSER expenditures. Effect of Condition Without adequate internal controls, the District cannot demonstrate it complied with allowable cost requirements. Our audit found the District requested reimbursement for $249,248 of lost revenues and $52,316 of related indirect costs, which were not supported by specific, allowable ESSER expenditures. During the audit, the District provided documentation of specific costs it could have charged to the program in support of its reimbursement requests. We performed sampling procedures on those costs and determined they were allowable ESSER expenditures. 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 allowable costs. Specifically, the District should ensure any amounts requested for reimbursement are supported by specific, allowable program costs. District?s Response Pioneer School District agrees with the State Auditor?s Office reporting of a finding based on the referenced laws and regulations. While the District does agree with the finding, we would also like to highlight the circumstances that ultimately led to it. The District?s long-time Executive Director of Finance and Operations retired, effective 8/31/2021, which presented a unique set of circumstances for year-end reporting. During the transition, no clear notes regarding the use of ESSER 1 funds were located. In addition, the information communicated by OSPI during this time was confusing and often contradicting of earlier communications, which led to many difficulties when submitting the Schedule of Expenditures of Federal Awards. Pioneer School District is committed to the safeguarding of public resources through the implementation and maintenance of strong internal controls. We have already made improvements to the internal controls related to the ESSER programs in order to ensure expenditures charged to the grant are allowable program costs and are properly supported. 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 U.S. Code of Federal Regulations (CFR) Part 200, Subpart E and appendices III-VII establishes principles and standards for determining allowable direct and indirect costs for federal awards. Section 18003(d) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act describes allowable ESSER I activities.