Finley School District No. 53Local Government

Finley School District No. 53 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls to ensure compliance with procurement requirements related to piggybacking. Assistance Listing Number and Title: Child Nutrition Cluster – ALN 10.553/555 – School Breakfast Program and National School Lunch Program Federal Grantor Name: Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 237WAWA3N11 237WAWA3N8903 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster program, which includes the School Breakfast and National School Lunch programs. These programs provide free or reduced-price meals to students from low-income families. The District received $632,822 to administer the 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 program requirements and monitoring the effectiveness of established controls. Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws, either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived 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 before purchasing through another entity’s contract. If the District uses such an agreement, federal regulations require it to confirm the awarding entity followed all procurement laws and regulations applicable to the entity when selecting the contractor. In addition, the District must ensure it purchases the same goods or services as detailed in the awarding entity’s specifications and at the same specified price. Description of Condition The District’s internal controls were ineffective for ensuring compliance with federal procurement standards. The District piggybacked onto a purchasing cooperative’s contract for dairy products; however, because it was an adjustable price contract with monthly pricing changes, it did not have a process to ensure it purchased the same goods and at the same price as detailed in the purchasing cooperatives contract. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District experienced turnover in the position responsible for reviewing and approving purchases. The District did not provide adequate training the new staff, so they did not know they needed to verify the goods and prices matched the current contract pricing schedule. Effect of Condition The District spent $59,526 of program funds for dairy products. 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 current contract price for the food products. Recommendation We recommend the District strengthen its internal controls to ensure it complies with applicable procurement requirements for purchases of goods and services, including ensuring it received the current contract price. We also recommend the District provide adequate training to employees responsible for the procurement process. District’s Response The Finley School District has put in place internal controls to ensure compliance with procurement requirements related to piggybacking: The Food Service Director will compare invoices to the monthly price list to ensure contract pricing is used and initial invoices once reviewed. If there are discrepancies, the Food Service Director will contact the vendor for corrections. Quarterly, the Business Manager will select a sample of invoices to review for compliance. Auditor’s Remarks We appreciate the District’s commitment to resolve the issue. 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 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities.

Finley School District No. 53 September 1, 2019 through August 31, 2020 2020-001 The District did not have adequate internal controls in place to ensure compliance with federal suspension and debarment requirements. CFDA Number and Title: 10.553 ? School Breakfast Program 10.555 ? National School Lunch Program 10.559 ? COVID-19 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 (OSPI) Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Description of Condition The District participates in the School Breakfast Program, the National School Lunch Program, and the COVID-19 Summer Food Service Program. The District received $741,289 in federal funding to administer these programs during the 2019-2020 school year. Federal regulations require recipients of federal awards to establish and follow internal controls to ensure compliance with program requirements. These controls included understanding grant requirements and monitoring the effectiveness of established controls. Federal regulations prohibit 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, including contracts procured by others (state or local agency), it must verify the contractors have not been suspended or debarred or otherwise excluded. This verification may be accomplished by (1) checking the federal Excluded Parties List System (EPLS) maintained by the U.S. General Services Administration, (2) collecting a written certification from the contractor, or (3) adding a clause or condition into the contract where the contractor states it is not suspended or debarred. The District must meet this requirement before awarding the contract and must maintain documentation to demonstrate compliance. The District had a process in place, but it was not effective to ensure all parties receiving $25,000 or more were not suspended or debarred. The District did not obtain written certification, include a clause in the contract, or review EPLS to verify a contractor subject to this requirement was not suspended or debarred from doing business with the federal government. The District paid this contractor a total of $32,925 of program funds during fiscal year 2020 for food products. We consider this control deficiency to be a material weakness. The issue was reported as a finding in the prior audit as finding 2019-001. Cause of Condition The District did not maintain documentation showing evidence of suspension and debarment verifications being performed by the District. Effect of Condition and Questioned Costs Without adequate internal controls and documentation of suspension and debarment requirements, the District cannot provide evidence that it has paid federal funds only to parties that are eligible to participate in federal programs. Any payment of program funds made to ineligible parties would be unallowable and subject to recovery by the funding agency. We verified that the contractor was neither suspended nor debarred. Therefore, we are not questioning costs for these payments. Recommendation We recommend the District strengthen its internal controls to ensure that documentation is maintained and contractors, including those procured by others, paid $25,000 or more are neither suspended nor debarred from participating in federal programs. District?s Response The Finley School District has corrected this as of September 2020. Auditor?s Remarks We appreciate the District?s commitment to resolve this matter 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 CFR Part 180, OMB Guidelines to Agencies on Government wide Debarment and Suspension (Nonprocurement) establishes non-procurement debarment and suspension regulations implementing Executive Order 12549 and 12689.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finley School District No. 53 September 1, 2018 through August 31, 2019 2019-001 The District did not have adequate internal controls in place 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 Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Description of Condition The District participates in the School Breakfast Program and National School Lunch Program, and received $433,096 in federal funding to administer the program during the 2018 19 school year. 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 controls. Federal regulations prohibit 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, including contracts procured by others (state or local agency or cooperative), it must verify the contractors have not been suspended or debarred or otherwise excluded. This verification may be accomplished by (1) checking the federal Excluded Parties List System (EPLS) maintained by the U.S. General Services Administration, (2) collecting a written certification from the contractor, or (3) adding a clause or condition into the contract where the contractor states it is not suspended or debarred. The District must meet this requirement before awarding the contract and must maintain documentation to demonstrate compliance. The District had a process in place, but it was not effective to ensure all parties receiving $25,000 or more were not suspended or debarred. The District did not obtain a written certification, include a clause in the contract, or review EPLS to verify one contractor subject to this requirement was not suspended or debarred from doing business with the federal government. The District paid this contractor, which was procured by a state agency, $33,687 of program funds during fiscal year 2019 for dairy products. We consider this control deficiency to be a material weakness. This issue was not reported as a finding in the prior audit. Cause of Condition The District did not know that suspension and debarment verification must still be performed when entering into contracts procured by a state agency. Effect of Condition and Questioned Costs Without adequate internal controls over suspension and debarment requirements, the District cannot ensure it pays federal funds only to parties that are eligible to participate in federal programs. Any payment of program funds made to ineligible parties would be unallowable and subject to recovery by the funding agency. We verified that the contractor was not suspended or debarred. Therefore, we are not questioning costs for these payments. Recommendation We recommend the District strengthen its internal controls to ensure that all contractors, including those procured by others, that it expects to pay $25,000 or more are not suspended or debarred from participating in federal programs. District?s Response The District will be checking the vendors in September of each school year Auditor?s Remarks We appreciate the District?s commitment to resolve this matter 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. 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 internal control requirements for management of Federal awards to non-Federal entities. Title 2 CFR Part 180, OMB Guidelines to Agencies on Government wide Debarment and Suspension (Nonprocurement) establishes non-procurement debarment and suspension regulations implementing Executive Order 12549 and 12689.

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