Lake Chelan School District No. 129Local Government

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Lake Chelan School District No. 129 September 1, 2021 through August 31, 2022 2022-001 The District?s internal controls were inadequate for ensuring compliance with federal requirements for allowable costs and time-and-effort documentation. Assistance Listing Number and Title: 84.010, Title I Grants to Local Educational Agencies Federal Grantor Name: U.S. 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: 204057, 270587 Known Questioned Cost Amount: $0 Background The objective of the Title I program is to improve the teaching and learning of children who are at risk of not meeting state academic standards and who reside in areas with high concentrations of children from low-income families. During fiscal year 2022, the District spent $285,238 in federal funds through its Title I program. Of this amount, the District spent about 70 percent 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 Our audit found the District?s internal controls were ineffective for ensuring it supported all salaries and benefits charged to the Title I program with appropriate and accurate time-and-effort documentation, as federal regulations and OSPI require. The District could not provide time-and-effort documentation for two administrators who worked part-time in the program. Additionally, the District did not ensure two teachers who worked part-time in the program completed accurate time-and-effort documentation for some months during the school year. We consider these internal control deficiencies to be a material weakness that led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition The District had turnover in the employees overseeing the program, and former staff did not reconcile Title I payroll costs at year-end to the teachers? time-and-effort documentation to ensure it supported time worked in the program. Additionally, District staff transferred a portion of payroll costs for two administrators to the Title I program without confirming whether they had time-and-effort documentation supporting their time worked in the program. Effect of Condition We tested four employees whose payroll costs totaling $94,025 were charged to the Title I program. We found two of the employees tested did not complete time-and-effort documentation to support their time worked in the program, and the other two employees? time-and-effort documentation did not accurately reflect actual hours worked in the program for March through June 2022. Further, for one of these employees, the District could not fully support their time worked in the program, and incorrectly charged the program for $4,098 in payroll costs plus $187 in related indirect costs. Without adequate time-and-effort documentation, the District cannot assure its federal grantor that payroll costs charged to the program were accurate and valid. During the audit, the District provided alternative documentation to show that employees worked in the program and the costs charged to the grants were for allowable activities and costs, except for the one employee?s unsupported payroll and related indirect costs of $4,285 charged to the program. Therefore, we are not questioning these costs. Recommendation We recommend the District establish and follow internal controls to ensure it complies with federal and OSPI requirements for time-and-effort documentation. Specifically, we recommend the District ensure employees complete required time-and-effort documentation and the appropriate staff review it to ensure it is accurate and supports payroll costs charged to the program, as OSPI requires. District?s Response The Lake Chelan School District has acknowledged and understands the finding being issued and put a multistep plan in place to correct the issue regarding the internal control for time-and-effort documentation. The Lake Chelan School District has implemented standardized time-and-effort documentation forms that each of the certified staff including directors will be using as of the 2022-2023 fiscal year. There will be an internal review process which will require the employee, principals and director to sign off on the appropriate certification date warranted by the need. The Business Manager and the Payroll Director will each do a reconciliation to verify what is being paid in the system matches the hours worked. With this corrective action plan, we aim to address the inadequate internal controls for time-and-effort documentation. 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 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 controls to ensure compliance with federal suspension and debarment requirements. CFDA Number and Title: 10.553 School Breakfast Program 10.555 National School Lunch Program Federal Grantor Name: U.S. 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: 04-129 Questioned Cost Amount: $0 Background The District participates in the School Breakfast and National School Lunch Programs and received $111,784 for the breakfast program and $446,375 for the lunch program in the 2018-19 school year. These programs provide funding for free and reduced-price meals for students from low-income families. 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 program controls. Federal requirements prohibit grant recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the District contracts for goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that vendors have not been suspended or debarred or otherwise excluded. This verification may be accomplished by obtaining a written certification from the vendor or inserting a clause in the contract in which the vendor states it is not suspended or debarred. Alternatively, the District may review the federal Excluded Parties List (EPLS) issued by the U.S. General Services Administration. The District must meet one of these requirements before entering into a contract with the vendor. Description of Condition The District?s internal controls were not effective in ensuring it complied with applicable suspension and debarment requirements. The District?s procedures did not include monitoring to ensure that all vendors paid $25,000 or more during the year were not suspended or debarred. We consider this control deficiency to be a material weakness. The issue was not reported as a finding in the prior audit. However, it was reported in the audits for fiscal years 2017, 2015, and 2014 as finding numbers 2017-001, 2015-001, and 2014-001, respectively. Cause of Condition The District?s lack of supervision allowed an employee unfamiliar with the District?s procurement processes to secure a contract without verifying the vendor?s suspension and debarment status. Effect of Condition The District did not verify that a contractor it paid $30,000 for consulting services was not suspended or debarred. Any payments of program funds to a vendor that has been suspended or debarred would be unallowable and subject to recovery by the grantor. We verified the vendor had not been suspended or debarred. Therefore, we are not questioning the related costs. Recommendation We recommend the District strengthen its internal controls to ensure employees understand and follow its established procedures and to ensure it verifies all parties paid $25,000 or more are not suspended or debarred before entering into a contract or extending a purchase agreement. District?s Response Thank you for this opportunity to respond to the recent audit finding. We acknowledge that this contract was not checked for suspension or debarment prior to implementation. We are thankful that the vendor was not suspended or debarred. Training will be provided to key employees over the requirements of the Office of the Superintendent of Public Instruction and the Code of Federal Regulations. The trainings along with additional oversight of the contract process will allow us to correct the finding going forward. Auditor?s Remarks We appreciate the steps the District is taking to resolve this issue. We will follow up on the condition of these matters in 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, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement) establishes non-procurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689.

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