Meridian School District No. 505Local Government

Meridian School District No. 505 September 1, 2021 through August 31, 2022 2022-001 The District did not have adequate internal controls for ensuring compliance 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: 84.425D-120471, 84.425D-140511, 84.425U-138132, 84.425U-137129 Known Questioned Cost Amount: $0 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 2022, the District spent a total of $1,760,422 in federal funding under its ESF awards. This included $858,630 in the Elementary and Secondary School Emergency Relief (ESSER II) Fund subprogram (84.425D), and $901,792 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U). Federal regulations require award recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding grant 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 money must pay laborers and mechanics prevailing wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. 16 Office of the Washington State Auditor sao.wa.gov For construction contracts subject to these wage rate requirements, the District must include a provision that the contractor and subcontractor comply with those requirements and the Department of Labor?s regulations. This includes a requirement for the contractor and its subcontractor to submit to the District weekly, for each week in which any contract work is performed, certified payroll reports. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition During the 2021?22 school year, the District spent $808,174 from its ESSER II award to pay seven contractors to install portable classrooms. Our audit found the District did not have adequate internal controls for ensuring compliance with wage rate requirements. Specifically, the District did not: ?Ensure the clause in the contract specifically conveyed the requirement ?Review weekly certified payroll reports submitted by the contractors toconfirm they paid laborers proper prevailing wages We consider these deficiencies in internal controls to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition The District used a contract procured through a cooperative and believed the language included in the contract was adequate to convey the wage rate requirement. Further, the District was aware that the contractor needed to submit weekly certifications but were not aware of the federal guidelines to review those prior to payment. Instead, the District focused on the state requirements including the Affidavit of Wages paid that were submitted with each progress payment to ensure the higher of federal or state prevailing wage rates were paid. Effect of Condition Without adequate internal controls that ensure it includes the prevailing wage rate clauses in its contracts and reviews all weekly certified payroll reports, the District cannot demonstrate it complied with the federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and 17 Office of the Washington State Auditor sao.wa.gov subcontractors did not pay prevailing wage rates to laborers working on the contract. We were able to confirm that weekly certifications were submitted and that the higher of federal or state prevailing wages were paid. Therefore, we are not questioning any costs related to these projects. Recommendation We recommend the District strengthen internal controls to ensure compliance with federal wage rate requirements. This should include a process to ensure the prevailing wage rate clause in contracts clearly convey the applicable requirements. Further, the District should strengthen monitoring processes to ensure all weekly certified payroll reports are reviewed in a timely manner from contractors and subcontractors. District?s Response The district would like to thank the auditors for their work and recommendations regarding Davis-Bacon requirements. The district has implemented internal controls to ensure that contract language meets Davis-Bacon requirements. The district has also implemented internal controls to ensure that contractors submit weekly certified payroll and Davis-Bacon requirements are met. 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. 18 Office of the Washington State Auditor sao.wa.gov 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 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). 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. 19

Meridian School District No. 505 September 1, 2021 through August 31, 2022 2022-002 The District did not have adequate internal controls for ensuring compliance with federal procurement requirements. CFDA 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: Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: 699800 619803 Questioned Cost Amount: $0 Background The District participates in the School Breakfast Program, National School Lunch Program, and the Summer Food Service Program for Children. During the 2021?2022 school year, the District spent $939,498 in federal funding to administer these programs. 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. When using federal funds to purchase goods or services, governments must apply the more restrictive of federal requirements, state law or local policies by obtaining quotes or following a competitive bidding process, depending on the purchase amount. 20 Office of the Washington State Auditor sao.wa.gov Additionally, 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 ensure it purchases the same goods or services at the same price in the awarding entity?s specifications. Description of Condition Our audit found the District?s control procedures were ineffective for ensuring compliance with federal procurement and state piggybacking requirements. Specifically, the District piggybacked onto a purchasing cooperative?s contract for the installation of a portable building to be used as a cafeteria. However, the awarding entity?s contract specifications were for the purchase and installation of a portable building and did not allow for only the installation. This resulted in the District not performing competitive procurement procedures when paying $226,612 for installation services for a portable building that was to be used as a cafeteria. Therefore, the District did not comply with all the applicable federal procurement requirements. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The District did not properly evaluate the contract to ensure its specifications appropriately matched the services it was procuring. Effect of Condition The District spent $226,612 in program funds on a contract that it did not properly procure. Since the District did not purchase the same services that were detailed in the awarding entity?s contract, federal procurement requirements would have required it to competitively procure the installation of the portable building. Without effective internal controls that ensure it follows procurement or piggybacking procedures, the District cannot demonstrate it complied with applicable procurement requirements and received the best price for the public works project. 21 Office of the Washington State Auditor sao.wa.gov Recommendation We recommend the District strengthen internal controls to ensure it complies with applicable procurement requirements, including purchasing the same goods or services for the same specified price when piggybacking onto a contract from another government or group of governments. District?s Response The district disagrees with the findings by the auditor in all areas related to the Scheduled of Federal Award Findings and Questioned Costs. The district prides itself on developing and implementing effective internal controls. The district has effective internal controls to ensure that we meet procurement and piggybacking requirements. Through the audit process the district has demonstrated that it complied with applicable procurement process and received the best price for the portable relocation project. The Director of Business and Finance and Director of Maintenance and Operations are knowledgeable of state and federal procurement requirements. They meet on a regular basis to evaluate the best method to obtain the lowest pricing while also meeting all state and federal requirements. In this instance, contract KCDA #19-255 was reviewed, and it was determined that piggybacking for relocation and installation services were allowable within the contract. The finding states that ?the awarding entity?s contract specifications were for the purchase and installation of a portable building and did not allow for only the installation.? We disagree with the auditor?s stance. The contract has language that allows for relocation and installation services and does not specify that a building is required to be purchased to obtain those services. The district reviewed the contract and noted that section (D) specifically states relocation pricing. The district also noted that section (F) details ?any additions that are specific to a project/building installation may be covered by R.S. Means.? The finding states ?Since the District did not purchase the same services that were detailed in the awarding entity?s contract, federal procurement requirements would have required it to competitively procure the installation of the portable building.? As noted above, section (F) allows for project specific installation costs to be determined using R.S. Means price listing. As was the case for the scope of this project. The project specific R.S. Means price list was provided to the auditors as well as the accompanying invoices that detail the district received pricing within the contract limits. 22 Office of the Washington State Auditor sao.wa.gov Auditor?s Remarks State law allows for piggybacking on contracts when the specifications and price are the same. The contract the District piggybacked did not clearly identify the specifications and price but instead referenced ?any additions that are specific to a project/building installation.? This is not specific enough to be an allowable piggybacking method.We reaffirm our finding and will review 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. 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, and requires non-federal entities to have written procedures for procurement transactions. Title 2 CFR Part 200, Section 320 ? Methods of procurement to be followed, describes each allowable procurement method.

2020-001 The District?s internal controls were not adequate to ensure compliance with federal Title I grant requirements for standardized test security. CFDA Number and Title: 84.010 Title I Grants to Local Educational Agencies Federal Grantor Name: Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of the Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 203411 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 concentration of children from low-income families. The District spent $255,882 in federal funds for its Title I program during fiscal year 2020. Federal regulations require recipients of federal awards to establish and follow internal controls to ensure compliance with program requirements. The 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. OSPI provides templates for all districts to document their Test Security and Building Plans (TSBP) for each assessment that districts administer. 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 attend required training and staff assurances for test security. These templates also provide assurance that school districts are following the prescribed requirements and understand any new requirements. The District started the English Language Proficiency Assessment for the 21st Century (ELPA21), which some students completed, until assessments were cancelled due to the COVID-19 pandemic. Description of Condition The District did not have controls in place, and did not prepare a written TSBP with all of the required elements, for the ELPA21 tests it administered. The District did complete the Test Security Assurance reports and required trainings. We consider this internal control deficiency to be a material weakness, which 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 of OSPI?s TSBP template or the requirements to have a formal written plan for test security that includes specific information. District staff responsible for fulfilling the requirements did not use OSPI templates and other resources. Effect of Condition Without a documented plan, the District could not show it implemented and complied with all of OSPI?s assessment security requirements while conducting standardized tests. Recommendation We recommend the District establish and follow internal controls and establish a written TSBP to ensure it appropriately implements and follows the TSBP requirements. Specifically, the District should either use the OSPI TSBP templates or establish written TSBPs for each test it administers that contain all of the required elements for all standardized tests, as required by OSPI. District?s Response The district will utilize the OSPI created document ?Test Security and Building Plan? to ensure all the necessary staff are aware of security plans. When planning the District?s Yearly Assessment Calendar for our building administrators, district staff will also include when to distribute, complete, and gather the Test Security and Building Plan, as well as other required security documents. The ?Test Security and Building Plan? document will be completed for each of our state and federal assessments. The district will then submit the ?Test Security and Building Plan? as necessary and will keep both electronic and physical copies on file. 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 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.

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