OLYMPIA SCHOOL DISTRICT #111

Olympia School District No. 111 September 1, 2022 through August 31, 2023 2023-001 The District’s internal controls were inadequate for ensuring compliance with federal Title I eligibility requirements. 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 Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2022-001 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 the 2022–23 school year, the District spent $1,632,584 in Title I program funds. 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. Title I requires participating districts to allocate more funds to schools with higher poverty percentages. Districts must rank schools from highest to lowest poverty concentrations based on the total number of students from low-income families attending the school or residing in the area. A district with more than 1,000 students may choose to use a “feeder pattern” poverty rate calculation for middle and/or high schools when determining Title I rankings and allocations. The feeder pattern is the enrollment pattern of students in a district from one school to the next during their education. The feeder pattern poverty rate calculation uses the number of elementary school students from low-income families to estimate the number of students from low-income families at middle and high schools based on enrollment patterns. This allows middle and high schools to have a more accurate poverty level calculation, since some eligible middle and high school students may not be signed up for free and/or reduced-priced meals. Community eligibility provision (CEP) schools are those that can serve free and reduced-price lunch to all students without collecting applications because of the high concentration of students from low-income families, and they must be used when determining poverty percentages. The rankings are included in the Title I application, and districts must maintain documentation supporting their rankings. Description of Condition The District’s internal controls were inadequate for ensuring compliance with eligibility requirements. The District used poverty rates to rank and allocate Title I funds to school buildings, and chose to use the feeder method for middle and high schools. However, staff incorrectly entered poverty rates for CEP elementary schools when determining poverty percentages. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The District had turnover in the positions responsible for entering low-income student counts for eligibility determinations, and current staff were not adequately trained to ensure they entered the correct CEP low-income student counts. Effect of Condition Because the District allocated Title I funds incorrectly, the amount of services provided at schools with higher percentages of low-income students might have been unfairly limited. The District did not comply with eligibility requirements and did not allocate Title I funds from the highest to lowest school buildings, as federal regulations require. The District overallocated $58,837 to one elementary school building that had a lower poverty rate than one other elementary school building with a higher poverty rate. In addition, the District’s use of the feeder method led to one high school and two middle schools with Title I funding being given different per-pupil amounts than the District had intended. Recommendation We recommend the District strengthen internal controls and perform additional research when necessary to ensure staff understand the guidance received and confirm it is complete and accurate before ranking and allocating Title I funding to school buildings. District’s Response The Olympia School District will utilize the Title I, Part A guide released by OSPI annually and reference the School Low-Income counts to ensure that the District is using the correct low-income codes that should be included based on the form selected in the grant application. The District will have the Executive Director of Teaching and Learning, the Program Manager, and OSPI Title I, Part A Program contact confirm that student data is accurate prior to submitting the 2024-2025 grant. 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 34 CFR, Part 200, Title I – Improving the Academic Achievement of the Disadvantaged, Section 78 – Allocation of funds to school attendance areas and schools.

2022-001 The District?s internal controls were inadequate for ensuring compliance with federal Title I requirements for eligibility and assessment system security. 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 Pass-through Award/Contract Number: 203417 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 the 2021?2022 school year, the District spent $1,644,588 in Title I program funds. 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. Eligibility Title I requires participating districts to allocate more funds to schools with higher poverty percentages. Districts must rank schools from highest to lowest poverty concentrations based on the total number of students from low-income families attending the school or residing in the area. A district with more than 1,000 students may choose to use a ?feeder pattern? poverty rate calculation for middle and/or high schools when determining Title I ranking and allocations. The feeder pattern is the enrollment pattern of students in a district from one school to the next during their education. The feeder pattern poverty rate calculation uses the number of elementary school students from low-income families to estimate the number of students from low-income families at middle and high schools based on enrollment patterns. This allows middle and high schools to have a more accurate poverty level calculation, since some eligible middle and high school students may not be signed up for free and/or reduced-priced meals. The rankings are included in the Title I application, and districts must maintain documentation supporting their rankings. Assessment System Security 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 them for all standardized tests. The Office of Superintendent of Public Instruction (OSPI) provides templates for all districts to document their Test Security and Building Plans for each assessment they administer. OSPI also provides detailed guidance and manuals on test security. Description of Condition Eligibility The District?s internal controls were inadequate for ensuring compliance with eligibility requirements. The District used poverty rates to rank and allocate Title I funds to school buildings. The District chose to use the feeder method for middle and high schools. This method bases the poverty rates off the poverty percentages for school buildings that feed into those schools. However, staff incorrectly calculated poverty rates from community eligibility provision (CEP) elementary feeder schools when determining high school poverty percentages. CEP schools are those that can serve free and reduced-price lunch to all students without collecting applications because of the high concentration of students from low-income families. To account for the lack of application data at CEP schools, the District should have calculated the poverty rate by multiplying the number of direct certification students by a 1.6 multiplier. In addition, the District used middle school building poverty rates rather than feeder rates when determining middle school poverty levels. Assessment Security System The District did not have adequate controls for ensuring it complied with assessment system security requirements. Specifically, the District did not have written Test Security and Building Plans in place for two of the 18 schools we reviewed that administered the Washington-Access to Instruction and Measurement (WA-AIM), Smarted Balanced, World-Class Instructional Design and Assessment (WIDA), and Washington Comprehensive Assessment of Science (WCAS) standardized tests, as OSPI requires. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. These issues were reported as a finding in the prior audit as finding 2021-002. Cause of Condition Eligibility In the prior audit, we made a recommendation regarding this topic due to District staff misunderstanding OSPI?s guidance over eligibility determinations. Due to the timing of the recommendation, the District was not able to correct the issues identified for the current audit, as the eligibility determinations were made and submitted as part of the Title I application before the start of 2021?2022 school year. Assessment System Security The District had turnover in the key roles responsible for creating the Test Security and Building Plans. Due to this turnover, District staff were unable to find support to evidence that the District had Test Security and Building Plans in place for two of the 18 schools we reviewed. Effect of Condition Eligibility Because the District allocated Title I funds incorrectly, the amount of services provided at schools with higher percentages of low-income students might have been unfairly limited. The District did not comply with eligibility requirements and did not allocate Title I funds from the highest to lowest school buildings, as federal regulations require. The District overallocated $23,280 to one middle school building that had a lower poverty rate than one other middle school building with a higher poverty rate. Assessment System Security Without a documented plan for two of the 18 schools we reviewed, the District cannot demonstrate it implemented and complied with OSPI?s assessment system security requirements for any of the four standardized tests it administered in the 2021?2022 school year. Recommendation Eligibility We recommend the District strengthen internal controls and perform additional research when necessary to ensure staff understand the guidance received and confirm it is complete and accurate before ranking and allocating Title I funding to school buildings. Assessment System Security We recommend the District improve its internal controls and establish policies and procedures to comply with OSPI?s assessment system security requirements. Specifically, the District should establish written test security building plans for all standardized tests it will administer. District?s Response Title I, Part A: Ranking and Allocation The Olympia School District will utilize the Title I, Part A guide released by OSPI annually and reference the School Low-Income counts (page 52) to ensure that the District is using the correct low-income codes that should be included based on the form selected in the grant application. The District will have the Executive Director of Teaching and Learning, the Program Manager, and OSPI Title I, Part A Program contact confirm that student data is accurate prior to submitting the 2023 2024 grant. Assessment System Security Prior to the 2022 school year, Assessment Services was part of the Teaching and Learning Department. Moving forward, OSD will move responsibility of Assessment Services back to this department. Part of this transition will include the Executive Director of Teaching and Learning and Assessment Director developing written test security building plans for all standardized tests administered in OSD Additionally, these same directors will work closely with OSPI?s Assessment Operations Department to ensure compliance with each state assessment?s training and documentation requirements. 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 34 CFR, Part 200, Title I ? Improving the Academic Achievement of the Disadvantaged, Section 78 ? Allocation of funds to school attendance areas and schools. 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.

Olympia School District No. 111 September 1, 2020 through August 31, 2021 2021-001 The District did not have adequate controls for ensuring compliance with federal suspension and debarment and procurement requirements. CFDA Number and Title: 10.555 ? COVID 19 ? National School Lunch Program 10.555 ? National School Lunch Program 10.559 ? Summer food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: 207WAWA3N1099 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Background The District participates in the National School Lunch Program and the Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from low-income families. During the 2020-2021 school year, the District received $1,446,042 in federal funding to administer these programs. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Suspension and debarment 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 contracts for goods and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractor is not suspended, debarred or otherwise excluded. The District may verify a contractor?s status by obtaining a written certification from the contractor or inserting a clause into the contract in which the contractor states it is not suspended or debarred. Alternatively, the District may check the U.S. General Services Administration?s Excluded Parties List System (EPLS). The District must meet one of these requirements before awarding the contract, and it must retain documentation demonstrating compliance with this federal requirement. Procurement 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. The procedures must reflect the most restrictive of applicable federal requirements, state laws or local policies. When using federal funds to procure goods and services, governments must apply the more restrictive requirements by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the purchase. Description of Condition Suspension and debarment The District has a process in place to verify contractors are not suspended or debarred; however, it was ineffective for ensuring compliance when using a noncompetitive procurement method. During the audit period, the District contracted with a party under the noncompetitive procurement method because an emergency did not allow for competition, but staff did not verify the contractor was not suspended or debarred. Procurement The District?s established written procurement policy does not conform to federal procurement standards. Specifically, the policy does not reflect the most restrictive methods and thresholds for purchasing materials, supplies and equipment. Additionally, the District?s procurement policy did not include other required procedures for procuring transactions, such as architectural and engineering services, piggybacking, cost and price analysis, and more. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance with federal requirements. These issues were not reported as a finding in the prior audit. Cause of Condition Suspension and debarment The District?s normal process is to include suspension and debarment language in its bidding documents. However, due to the COVID-19 pandemic, the District?s Board used an emergency suspension of policy for this purchase that did not require competitive bidding. As such, the District did not verify the contractor was not suspended or debarred. Procurement District employees said they were not aware of the requirement to update the District?s procurement policy to conform to the procurement standards in Uniform Guidance. Effect of Condition Suspension and debarment Without adequate internal controls, the District cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the District used to pay a contractor that has been suspended or debarred would be unallowable, and the awarding agency could potentially recover them. We tested three contractors and found the District did not verify the suspension and debarment status of one contractor that was paid $35,404 during the fiscal year. We subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning the related costs. Procurement Without having adequate policies in place, the District may not be complying with federal procurement requirements. However, our testing found that the District complied with federal requirements for competitive procurement and small purchase procedures. Recommendation We recommend the District strengthen internal controls to ensure it verifies the suspension and debarment status of contractors paid $25,000 or more, all or in part with federal funds, before contracting. We also recommend the District update its written procurement policy to conform to Uniform Guidance standards for all procurement activities. District?s Response The district relies on a competitive bid process and procedure steps within the process to ensure that no contractor has been suspended or debarred. The district also has policy and procedure to support the contracting process in an emergency. However, the emergency process does not contain procedural steps to ensure that a contractor has not been suspended or debarred. The district concurs with the need to strengthen internal controls and ensure that in utilizing the emergency process, all contractors are specifically checked for suspension or debarment. 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 2 CFR Part 180, OMB Guidelines to Agencies on Government wide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures.

Olympia School District No. 111 September 1, 2020 through August 31, 2021 2021-002 The District?s internal controls were inadequate for ensuring compliance with federal Title I requirements for eligibility and assessment system security. CFDA Number and Title: 84.010 ? Title I Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: 203417 Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A 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 the 2020-2021 school year, the District spent $1,426,428 in Title I program funds. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Eligibility Title I requires participating districts to allocate more funds to schools with higher poverty percentages. Districts must rank schools from highest to lowest poverty concentrations based on the total number of students from low-income families attending the school or residing in the area. A district with more than 1,000 students may choose to use a ?feeder pattern? poverty rate calculation for middle and/or high schools when determining Title I ranking and allocations. The feeder pattern is the enrollment pattern of students in a district from one school to the next during their education. The feeder pattern poverty rate calculation uses the number of elementary school students from low-income families to estimate the number of students from low-income families at middle and high schools based on enrollment patterns. This allows middle and high schools to have a more accurate poverty level calculation, since some eligible middle and high school students may not be signed up for free and/or reduced-priced meals. The rankings are included in the Title I application, and districts must maintain documentation supporting their rankings. Assessment System Security 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. The Office of Superintendent of Public Instruction (OSPI) provides templates for all districts to document their Test Security and Building Plans for each assessment they administer. OSPI also provides detailed guidance and manuals on test security. Description of Condition Eligibility The District?s internal controls were inadequate for ensuring compliance with eligibility requirements. The District used poverty rates to rank and allocate Title I funds to school buildings. However, it incorrectly calculated poverty rates from community eligibility provision (CEP) elementary feeder schools. CEP schools are those that can serve free and reduced lunch to all students without collecting applications because of the high concentration of students from low-income families. To account for the lack of application data at CEP schools, the District should have calculated the poverty rate by multiplying the number of direct certification students by a 1.6 multiplier. Assessment Security System The District did not have adequate controls for ensuring it complied with assessment system security requirements. Specifically, the District did not have written Test Security and Building Plans in place for any of the Washington-Access to Instruction and Measurement (WA-AIM) standardized tests, as OSPI requires. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition Eligibility District employees communicated with OSPI regarding their calculation of poverty rates using the feeder school method and reviewed guidance that OSPI provided them. However, they did not ask additional questions to ensure they understood the guidance received and that it was complete and accurate for the District?s circumstances. Assessment System Security District employees said there was some confusion about whether students would take standardized tests during the 2020-2021 school year because of the COVID-19 pandemic. This affected the time available to staff responsible for preparing the test administration plans. Employees were aware of the requirement of having written Test Security and Building Plans; however, they overlooked this requirement due to OSPI?s late decision to administer the tests. Effect of Condition Eligibility Because the District allocated Title I funds incorrectly, the amount of services provided at schools with higher percentages of low-income students might have been unfairly limited. The District did not comply with eligibility requirements and did not allocate Title I funds from the highest to lowest school buildings, as required. The District overallocated $35,066 to two school buildings that had lower poverty rates than one school building with a higher poverty rate, and it underallocated $181,251 in funding to another school building. Assessment System Security Without a documented plan, the District cannot demonstrate it implemented and complied with OSPI?s assessment system security requirements for all nine standardized tests it administered in the 2020-2021 school year. Recommendation Eligibility We recommend the District strengthen internal controls and perform additional research when necessary to ensure staff understand the guidance received and confirm it is complete and accurate before ranking and allocating Title I funding to school buildings. Assessment System Security We recommend the District improve its internal controls and establish policies and procedures to comply with OSPI?s assessment system security requirements. Specifically, the District should establish written test security building plans for all standardized tests it will administer. District?s Response Assessment During the 2020-2021 school year, the timeframe for this audit, Olympia School District and all districts were responding to the unusual circumstances of the spring 2020 assessments and the fact that several assessments were deferred to a fall test administration. The Olympia School District has previously complied with all test administration protocols and has returned to these standards with the resumption of normal testing protocols and the opportunity to normalize operations as the pandemic has subsided. Eligibility In order to more accurately reflect the need for resources at the middle and high school level, beginning with the 2020-2021 school year, the Olympia School District began using a feeder approach to establishing Title I school eligibility. District staff obtained guidance from the Office of Superintendent of Public Instruction (OSPI). In developing our eligibility test and our allocations of Title I resources to distribute to schools, Olympia School District (OSD) has done so following the guidance of OSPI to derive a common poverty metric. Specifically OSD has used option 3 in the Title I guidance to derive a poverty metric where Community Eligibility School (CEP) poverty data is under-counted: Apply the 1.6 multiplier to the number of students directly certified through SNAP to CEP and non-CEP schools. The district identified the three elementary schools who meet the eligibility test: Hansen, L.P. Brown, and Garfield. The secondary schools that meet the eligibility test are: Jefferson, Thurgood Marshall, Reeves and Capital. Once eligibility was established, in part by applying the 1.6 multiplier for CEP schools? direct certification eligibility for free and reduced price lunch, the district followed OSPI guidance to determine the number of low income students for purposes of resource distribution. Our understanding from regional meetings and specific conversations with OSPI is that the amount ultimately allocated to Capital HS (CHS) was appropriate because CHS is the only school in this grade band and the high school grade band is the last to be prioritized in the allocation process. As the CHS poverty rate is greater than 35% district staff were advised that there is no requirement for a minimum per pupil expenditure of $959. Importantly, we are committed to allocating resources as required by the U.S. Department of Education, and as guided by OSPI. District staff will use this audit to recommit to ensuring that all schools are allocated their fair allocation of Title I resources. Further, we will ensure that we treat CEP schools? data appropriately in both the eligibility determination and the resource allocation steps. This will be especially important given the expansion of the CEP program into a fifth school for the 2022-2023 school year. 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 34 CFR, Part 200, Title I ? Improving the Academic Achievement of the Disadvantaged, Section 78 ? Allocation of funds to school attendance areas and schools Title 20 U.S. Code section 6311(b)(c)(B)(iii) requires state and local education agencies to establish and maintain valid and reliable assessment systems, consistent with relevant professional and technical standards.

Olympia School District No. 111 September 1, 2019 through August 31, 2020 2020-001 The District?s internal controls are inadequate to ensure compliance with Paid Lunch Equity 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 (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 207WAWA3N1099 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 for Children. The District received $1,740,167 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 include understanding grant requirements and monitoring the effectiveness of established controls. The USDA requires school districts participating in the National School Lunch Program to provide sufficient funds to the non-profit school food service account for meals served to students not eligible for free or reduced-price meals (paid lunches). When the average paid lunch price is less than the difference between the free and paid lunch federal reimbursement rates (known as ?equity?), districts must take action by increasing the prices charged for paid lunches or providing additional non-Federal funding to cover the cost of providing full-price lunches. Each year, the USDA issues the Paid Lunch Equity tool, which districts must complete to assist with calculations and decisions to meet this requirement. We found the District lacked sufficient internal controls to fully complete all required fields of the Paid Lunch Equity tool to ensure it met this requirement. We consider this internal control deficiency to be a material weakness. The issue was not reported as a finding in the prior audit. Cause of Condition The District?s Child Nutrition Supervisor was not aware of the required fields to complete in the Paid Lunch Equity tool. Additionally, the District was not aware these additional tools are required to be completed in order to verify compliance with Paid Lunch Equity requirements. Effect of Condition Because the District did not have adequate controls to fully complete the Paid Lunch Equity tool, the District was unable to demonstrate it complied with Paid Lunch Equity requirements. During the audit, the District completed the Paid Lunch Equity tool for the 2019-2020 school year. It showed that the District did not meet equity and would have needed to either raise its lunch prices by $.03, or provide $7,089 in non-Federal funding. The District did not increase its lunch prices; however, we confirmed the District did provide sufficient non-Federal funds. Recommendation We recommend the District establish and follow internal controls to ensure staff understand how to complete the Paid Lunch Equity tool and to provide adequate oversite to ensure it is completed accurately to comply with this requirement. District?s Response We appreciate the recommendation provided by the State Auditor and will implement a corrective action plan to resolve the issue immediately. 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 regularly scheduled audit. We appreciate the District?s commitment to resolve this issue 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 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.