Castle Rock School District No. 401Local Government

Castle Rock School District No. 401 September 1, 2023 through August 31, 2024 2024-002 The District did not have adequate internal controls and did not comply with federal procurement and suspension and debarment 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 Federal Award/Contract Number: N/A Pass-through Entity Name: Office of the Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-001 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. The District received $750,680 to administer these programs during the 2023-2024 school year. Federal regulations require 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. State and federal requirements allow local entities 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. If the District uses such an agreement, federal regulations require it to confirm that the procurement methods the awarding agency followed met its own statutory procurement laws and followed regulations applicable to the District when selecting the contractor. Additionally, to make a valid piggybacking transaction, the District must purchase goods or services from the contractor that the original entity awarded the contract to through its own procurement process. Additionally, federal requirements prohibit grant 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 the contractors are not 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 perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition The District did not have a process to ensure it complied with procurement requirements when purchasing food. The District piggybacked onto a purchasing cooperative’s contract and a neighboring school district’s contract for food and dairy products; however, the District did not confirm that the procurement methods the awarding agencies followed met its own statutory procurement requirements before purchasing. Additionally, the District did not have a process in place to ensure it only purchased products that were awarded through the awarding entities’ contracts at the established price. Additionally, although the District has a process to verify the suspension and debarment status for contractors it pays more than $25,000, our audit found the District could not demonstrate it verified all three contractors were not suspended or debarred before purchasing from them. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. Cause of Condition The District was unaware of the piggybacking requirements until it received a finding in the prior audit. Due to the timing of the prior audit, the District had already begun purchasing off the new contracts. Additionally, the District experienced turnover in the Director of Fiscal Services position, and current staff could not locate documentation to demonstrate compliance with federal suspension and debarment requirements. Effect of Condition The District piggybacked on three contracts without reviewing bid documentation and spent about $128,000 of federal funds to purchase food and dairy products. Without effective internal controls, the District cannot demonstrate it complied with piggybacking federal procurement requirements, allowed for full and open competition, and received the current contract price for the food purchases. The District did not obtain written certification from the contractors, insert a clause into the contract or retain evidence that it checked for exclusion records at SAM.gov to verify contractors it paid $435,630 using federal funds were not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the District strengthen internal controls to ensure it complies with applicable procurement requirements for purchases of goods and services. Additionally, we recommend the District strengthen its internal controls to verify 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 and maintain documentation demonstrating compliance with this requirement. District’s Response The District will conduct mandatory training for all staff involved in procurement on federal regulations, including how to check vendors against the System for Award Management (SAM.gov) for suspension or debarment. The District will also establish a procurement review checklist to be completed by the vendor and staff. Send out yearly with request of updated w-9 the vendor acknowledgment with debarment statement. Review debarment statues yearly. 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. Title 2 CFR Part 200, Uniform Guidance, 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 Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689. 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.

Castle Rock School District No. 401 September 1, 2023 through August 31, 2024 2024-003 The District did not have adequate internal controls and did not comply 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-02372 COVID-19, 84.425D-0120374 COVID-19, 84.425U-0138017 COVID-19, 84.425D-0459515 COVID-19, 84.425U-0137066 COVID-19, 84.425D 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 fiscal year 2024, the District reported total expenses of $1,603,672 of its ESF awards. This included $203,142 in the Elementary and Secondary School Emergency Relief Fund (ESSERII) subprogram (84.425D) and $1,400,529 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 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 must comply with those requirements and the Department of Labor’s regulations. This includes a requirement that the contractors and its subcontractors must submit certified payrolls reports to the District weekly, for each week that laborers performed contract work. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition The District spent $1,035,138 for payments to five contractors for eight projects to update the heating, ventilation and air conditioning (HVAC) system controls and repair insulation in its facilities. 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 all the contracts • Collect weekly certified payroll reports from five contractors and subcontractors 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 did not know about the federal wage rate contract clause requirement. Additionally, when the District paid for work on some of the projects, staff did not intend to use federal funds to pay for the costs. As a result, the District did not follow requirements to obtain and review certified payrolls before payment. 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 and subcontractor did not pay prevailing wage rates to laborers working on the contract. The District did not collect eight out of a total of 73 weekly certified payroll reports. Also, the District did not include federal wage provisions in seven out of eight 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, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports from contractors and subcontractors. 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 District will: • Provide a check list for finance, facilities, and procurement staff on Davis- Bacon compliance requirements, including how to access and apply wage determinations from SAM.gov. • Require all contractors and subcontractors on federally funded projects to sign certifications of compliance with federal wage laws. • Implement a checklist for federal construction projects. • Provide training to all relevant staff on reviewing and verifying certified payroll reports. 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 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 Castle Rock School District No. 401 September 1, 2022 through August 31, 2023 2023-001 The District did not have adequate internal controls for ensuring compliance with federal procurement 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 Grantor 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 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2022-001 Background The District participates in the National School Lunch, School Breakfast and Summer Food Service programs. For the 2022–23 school year, the District received a total of $739,367 for these programs. These programs provide funding for free and reduced-price meals for students of low-income families. Federal regulations require 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. State and federal requirements allow local entities 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. To comply with piggybacking requirements under state law, the entity must enter into this interlocal agreement before it purchases services or goods from the other entity’s bid contract. If the District uses such an agreement, federal regulations require it to confirm that the procurement methods the awarding agency followed met its own statutory procurement laws and followed regulations applicable to the District when selecting the contractor. Additionally, in order to make a valid piggybacking transaction, the District must purchase goods or services from the contractor that the original entity awarded the contract to through its own procurement process. Description of Condition The District did not have a process to ensure it complied with procurement requirements when purchasing food. The District previously piggybacked onto another school district for food purchases; however, the interlocal agreement allowing this arrangement expired at the end of the 2019–2020 school year and was not renewed. The District continued to purchase food based on these expired contracts until March 2023 when the District entered into interlocal agreements with a neighboring school district and a purchasing cooperative, piggybacking onto their food service contracts. However, the District did not confirm that the procurement methods the awarding agencies followed met its own statutory procurement requirements before purchasing. Additionally, the District did not have a process in place to ensure it only purchased products that were awarded through the awarding entities’ contracts. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The District experienced turnover in the director of fiscal services position, which is responsible for overseeing compliance with federal grant requirements. Officials said they did not know that the District’s interlocal agreements had expired at the end of the 2019–2020 school year. To address the prior audit finding, District staff expedited the approval of new interlocal agreements for piggybacking without researching applicable procurement requirements. Effect of Condition The District spent $266,063 in program funds from September 2022 to March 2023 based on an expired interlocal agreement. Since the District did not renew this interlocal agreement with the lead agency that allowed for piggybacking, state law would have required the District to competitively procure the food purchases for this period. The District piggybacked on two contracts beginning in March 2023 and spent $147,255 of federal funds to purchase food. Without effective internal controls, the District cannot demonstrate it complied with piggybacking requirements and allowed for full and open competition. Recommendation We recommend the District strengthen internal controls to ensure it complies with applicable procurement requirements for purchases of goods and services. District’s Response Once the district was notified of the noncompliance regarding Child Nutrition federal procurement requirements, an interlocal agreement was immediately put in place with Longview School District for our small purchases of $150,000 or below. The agreement was approved by the Castle Rock School Board at the March 8, 2023 board meeting and approved by the Longview School District School Board on March 17, 2023. For our purchases above $150,000, the district requested to be a member of the Puget Sound Joint Purchasing Cooperative on March 6, 2023 and the membership was approved by the PSJPC Board on March 12, 2023. PSJPC provided the district with an interlocal agreement and the agreement was approved by the Castle Rock School Board at the March 22, 2023 board meeting. This agreement with PSJPC is a continuing membership and the district currently pays $150.00 to be apart of the cooperative. On August 30, 2024 Castle Rock renewed their interlocal agreements with Longview School District, however, Castle Rock did not request all of the documentation from Longview to ensure they were compliant with the required procurement laws. Castle Rock has since requested all applicable procurement documentation from Longview School District and has ensured they were compliant with procurement laws for the 2022-2023 and 2023-2024 school years. Moving forward, Castle Rock School District will request required documentation and ensure Longview School District is in compliance before entering into the interlocal agreements for the 2024-2025 school 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. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities. 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.

The District did not have adequate internal controls for ensuring compliance with federal procurement 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 Grantor 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 Known Questioned Cost Amount: $0 Background The District participates in the National School Lunch, Breakfast, and Summer programs. For the 2021?2022 school year, the District received a total of $879,299 for these programs. These programs provide funding for free and reduced-price meals for students of low-income families; however, during the 2021?2022 school year, the District used the funding to provide free meals to all students, which was allowed under a waiver from the U.S. Department of Agriculture. Federal regulations require 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. State and federal requirements allow local entities 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. To comply with piggybacking requirements under state law, the entity must enter into this interlocal agreement before it purchases services or goods from the other entity?s bid contract. Description of Condition The District did not have a process to ensure it complied with procurement requirements when purchasing food. The District previously piggybacked onto another school district for food purchases; however, the interlocal agreement allowing this arrangement expired at the end of the 2019?2020 school year and was not renewed. The District continued to purchase food based on these expired contracts. We consider this internal control deficiency 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 The District experienced turnover in the Director of Fiscal Services position, which is responsible for overseeing compliance with federal grant requirements. Officials said they did not know that the District?s interlocal agreements had expired at the end of the 2019?2020 school year. Effect of Condition The District spent $352,093 in program funds based on an expired interlocal agreement. Since the District did not renew this interlocal agreement with the lead agency that allowed for piggybacking, state law would have required the District to competitively procure the food purchases. Without effective internal controls that ensure it follows procurement or piggybacking procedures, the District cannot demonstrate it complied with applicable federal procurement requirements and received the best price for the food products. However, since the purchases were allowable under the federal program, we are not questioning costs. Recommendation We recommend the District strengthen internal controls to ensure it complies with applicable procurement requirements for purchases of goods and services. District?s Response Once the district was notified of the noncompliance regarding Child Nutrition federal procurement requirements, an interlocal agreement was immediately put in place with Longview School District for our small purchases of $150,000 or below. The agreement was approved by the Castle Rock School Board at the March 8, 2023 board meeting and approved by the Longview School District School Board on March 17, 2023. For our purchases above $150,000, the district requested to be a member of the Puget Sound Joint Purchasing Cooperative on March 6, 2023 and the membership was approved by the PSJPC Board on March 12, 2023. PSJPC provided the district with an interlocal agreement and the agreement was approved by the Castle Rock School Board at the March 22, 2023 board meeting. 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 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities. 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.