Mount Baker School District No. 507

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Mount Baker School District No. 507 September 1, 2018 through August 31, 2019 2019-001 Mount Baker School District did not have adequate internal controls to ensure compliance with requirements for time and effort documentation for its Title I and Special Education programs. CFDA Number and Title: 84.010 Title I Grants to Local Education Agencies 84.027 Special Education Grants to States 84.173 Special Education Preschool Grants Federal Grantor Name: Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: Title I Grants to Local Educational Agencies 0203230 Special Education Grants to States 0306485 Special Education Preschool Grants 0365980 Questioned Cost Amount: N/A Background Title I Grants to Local Education The objective of the Title I program is to improve the teaching and learning of children who are at risk of not meeting academic standards and who reside in areas with high concentrations of children from low-income families. The District spent $572,606 in federal funds for its Title I program during fiscal year 2019. Employee salaries and benefits made up 100 percent of program expenditures. Special Education Grants to States/Preschool Grants The objective of the Special Education program is to provide special education and related services to eligible children with disabilities. The District spent $390,302 in federal funds for its Special Education program during fiscal year 2019. Employee salaries and benefits made up 100 percent of program expenditures. Requirements applicable to both Title I and Special Education programs Federal regulations require recipients of federal awards to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established program controls. The District is responsible for ensuring all of the expenditures charged to the programs are allowable and supported by appropriate documentation. The District is responsible for ensuring all payroll costs charged to the grant are supported by time-and-effort documentation, as required by federal regulations and the grantor. Depending on the number and type of activities employees work, time and-effort documentation can take the form of a semi-annual certification or monthly personnel activity report, such as a timesheet. Description of Condition For both the Title I and Special Education federal programs, the District assigns employees to work on federal programs during the annual budgeting process. If there are changes in employee participation in federally funded programs throughout the year, this is reflected on a Personnel Action Form. However, Personnel Action Forms are not updated promptly in the general ledger payroll module throughout the year. Because they are not updated promptly, the District performs a year-end journal entry adjustment to reflect these modifications in each of the federal programs? payroll costs. This process is not effective in ensuring these significant adjustments are accurate and adequately supported by underlying records. The District did not have an effective process to ensure all of the payroll costs charged to the federal programs had appropriate time-and-effort documentation, correctly reflected the actual time worked on each program, and were signed by the employee or their supervisor as appropriate. We consider these deficiencies in internal controls to be material weaknesses. This issue was reported as a finding in the prior audit of Title I, finding number 2018-001. It was not reported as a finding in the prior audit of Special Education. Cause of Condition The District has not prioritized the development of control structures to ensure all of the payroll costs charged to both Title I and Special Education programs are accurate and supported by required time-and-effort documentation. The District did not have procedures and communication that were clearly defined and effective to ensure responsible departments complied with all applicable requirements. Effect of Condition and Questioned Costs Without adequate processes and controls, the District cannot ensure that only staff who worked on the programs were charged to it. Further, without required time and effort documentation, the grantor cannot be assured the costs charged to the program were accurate and valid. Title I grants to local education We identified 27 employees for whom payroll expenditures were charged to the grant during the audit period and tested them all. We identified the following issues during our compliance testing: ? Seven instances when employee payroll and benefit expenditures did not have signed time-and-effort certifications. The District provided updated semi-annual time and effort certifications for two of these employees. We concluded that expenditures attributable to those employees are allowable. For the remaining five employees, the District did not provide support because those employees did not work in the program during the year, constituting total unallowable payments of $10,233 in federal expenditures. Special Education grants to states/preschool grants We identified 10 employees for whom payroll expenditures were charged to the grant during the audit period and tested them all. We identified the following issues during our compliance testing: ? Ten instances when employee payroll and benefit expenditures did not accurately represent federal program participation, as indicated on semi annual time and effort certifications. The District provided updated semi-annual time and effort certifications that reflected auditor calculated proportions of time for each employee. For both of these programs, the District performed a year-end journal entry adjustment to true up budgeted amounts. We could not reconcile the year-end adjusting journal entry to supporting documentation, including semi-annual time-and-effort certifications, the tracking spreadsheet, and general ledger payroll expenditure reports. This made it difficult to determine if this significant adjustment was accurate and supported. We could not determine if the amounts charged were appropriate. Recommendation We recommend the District implement an effective control process that ensures: ? All employees charged to the Title I and Special Education programs have appropriate time-and-effort documentation supporting their actual time worked in the programs, which are signed by either the employees or a supervisor with firsthand knowledge of the work performed ? Timely and accurate updates to the general ledger payroll module upon the receipt of Personnel Action Forms to ensure the accurate allocation of payroll and benefit expenditures to federal program expenditure codes ? Timely reconciliations of the expenditures charged to federal programs District?s Response The District concurs with the determination by the State Auditor's Office (SAO). The practice in-place at present has been long-standing and requires a material shift in how the District structures and accounts for allocation of staff resources. The District will work for the remainder of 2019/2020 on a bi-monthly review of staff assignments and accounting. In addition, for the 2020/2021 budget, all staff will be initially coded to Basic Education or Special Education (a hybrid of zero-based budgeting) and from the allocations and assignment expectations will be provided to School Administrators that will be reflected in categorical program budgets. Auditor?s Remarks We thank the District for its cooperation and assistance during the audit and look forward to reviewing the District?s corrective action 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. 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.

CORRECTIVE ACTION PLAN FOR FINDINGS REPORTED UNDER UNIFORM GUIDANCE Mount Baker School District No. 507 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: Mount Baker School District did not have adequate internal controls to ensure compliance with requirements for time and effort documentation for its Title I and Special Education programs. Name, address, and telephone of District contact person: Ben Thomas P.O. Box 95 Deming, WA 98244-0095 (360)-383-2005 Corrective action the auditee plans to take in response to the finding: The District concurs with the determination by the State Auditor's Office (SAO). The practice in-place at present has been long-standing and requires a material shift in how the District structures and accounts for allocation of staff resources. The District will work for the remainder of 2019/2020 on a bi-monthly review of staff assignments and accounting. In addition, for the 2020/2021 budget, all staff will be initially coded to Basic Education or Special Education (a hybrid of zero-based budgeting) and from the allocations and assignment expectations will be provided to School Administrators that will be reflected in categorical program budgets. The District will review its progress and make adjustments as necessary. Anticipated date to complete the corrective action: 3/25/2020

2018-001

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Mount Baker School District No. 507 September 1, 2018 through August 31, 2019 2019-002 Mount Baker School District?s internal controls were not adequate to ensure compliance with federal Title I grant requirements for assessment system security. CFDA Number and Title: 84.010 Title I Grants to Local Education Agencies Federal Grantor Name: Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 0203230 Questioned Cost Amount: N/A Background The program objective of Title I is to help local education agencies improve the teaching and learning of children who are at risk of not meeting academic standards and who reside in areas with high concentrations of children from low-income families. The District spent $572,606 in federal funds for its Title I program during fiscal year 2019. Federal regulations require recipients of federal awards to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established internal controls. States, in consultation with school districts, must establish and maintain an assessment system that is valid, reliable and consistent with relevant professional and technical standards. States must have formal, well-documented policies and procedures to maintain test security and ensure that districts implement these policies and procedures for all standardized tests. To demonstrate compliance, OSPI provides districts with a Test Security and Building Plan (TSBP) template. This serves as the districts? written policies and procedures. The template contains a link to detailed guidance as well as other templates for logging staff who required training and test security staff assurances. These templates provide assurance school districts are following the prescribed requirements and understand any new requirements. Description of Condition The District did use some OSPI-created resources, and staff attended trainings to ensure they were qualified to conduct standardized tests. However, the District did not use the OSPI TSBP template and did not have a process in place to ensure a written TSBP included all of the required elements for all standardized tests it administered, as OSPI required. District staff informally collaborated on TSBP before conducting standardized tests. However, the District did not keep documentation to support these activities. The District did not have controls adequate to ensure that staff performed and documented the TSBP. We consider this control deficiency a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition The District was not aware of the OSPI TSBP template or the requirement to have a formal written plan for test security that includes specific information. OSPI templates and other resources were not obtained by District staff who were responsible for fulfilling the requirements. Effect of Condition and Questioned Costs Without a documented plan, the District could not demonstrate it complied with all of OSPI?s assessment security requirements while conducting standardized tests. Recommendation We recommend the District implement internal controls and established policies and procedures to ensure it appropriately implements and follows the test security building plan (TSBP). Specifically, the District should either use the OSPI TSBP templates or establish written TSBPs for each test it administers that contain all the required elements for all standardized tests, as OSPI requires. District?s Response The District concurs with the determination by the State Auditor's Office (SAO). The District does have a plan in place; however, it was limited in documentation. Additional supporting documentation will be into place to demonstrate plan compliance. Auditor?s Remarks We thank the District for its cooperation and assistance during the audit and look forward to reviewing 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. 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 20 U.S. Code section 6311(b)(2)(B)(iii) requires state and local education agencies to establish and maintain valid and reliable assessment systems, consistent with relevant professional and technical standards.

CORRECTIVE ACTION PLAN FOR FINDINGS REPORTED UNDER UNIFORM GUIDANCE Mount Baker School District No. 507 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: 2019-002 Finding caption: Mount Baker School District?s internal controls were not adequate to ensure compliance with federal Title I grant requirements for assessment system security. Name, address, and telephone of District contact person: Ben Thomas P.O. Box 95 Deming, WA 98244-0095 (360)-383-2005 Corrective action the auditee plans to take in response to the finding: The District concurs with the determination by the State Auditor's Office (SAO). The District does have a plan in place; however, it was limited in documentation. Additional supporting documentation will be into place to demonstrate plan compliance. The District will review its progress and make adjustments as necessary. Anticipated date to complete the corrective action: 3/25/2020