Tukwila School District No. 406Local Government

2022-001       The District overcharged indirect costs to the Education Stabilization Fund Program . 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 expended $4,174,781 of its ESF awards. This included $3,200,645 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), as well as $880,541 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER III) subprogram (84.425U). 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. Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. The Office of Superintendent of Public Instruction (OSPI) establishes the indirect cost rate for each award, and districts cannot exceed this approved rate when claiming reimbursement. If there are changes to the rate during a multi-year award, districts must adjust the amount claimed, if needed, to ensure they do not exceed the approved rate. Description of Condition The District’s internal controls were inadequate for ensuring it charged the correct indirect cost rate for its ESSER II award (84.425D). We consider this deficiency in internal controls to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition Management did not know the District needed to manually adjust the unrestricted indirect cost rate for ESSER awards that covered two fiscal years. Instead, the District relied on the rate established in the iGrants claim reimbursement system, which was the prior year’s rate. Effect of Condition and Questioned Costs We reviewed all indirect costs charged to the program. We found that the District charged $151,627 more in indirect costs than allowable because it did not use the correct rate for its ESSER II award. We are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are greater than $25,000 for each type of compliance requirement. We question costs when we find the District has not complied with grant regulations and/or when it does not have adequate documentation to support expenditures. Recommendation We recommend the District ensure it uses the correct OSPI-issued unrestricted indirect cost rate for the fiscal period when charging costs to federal awards.   District’s Response On an annual basis the District will make sure that it reviews the current federal indirect rates via the OPSI website that is in effect for the current school year as indirect rates change from fiscal year to fiscal year and may not be reflected on grants that carryover from year to year. The District did the calculations for the 2022-23 SY to account for the overage charged in indirect and made sure that amount was used for direct expenditures. This was the best option as the grant was still being expended and the correction could be made without needing to repay the indirect amount over claimed back to OSPI. Auditor’s Remarks We appreciate the District’s commitment to resolving the issue. We will review the condition 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, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs.

Tukwila School District No. 406 September 1, 2018 through August 31, 2019 2019-001 The District did not have adequate internal controls to ensure compliance with federal procurement requirements. CFDA Number and Title: 84.027 ? Special Education ? Grants to States 84.173 ? Special Education ? Preschool Grants 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:0306569, 0338171 Questioned Cost Amount: $0 Description of Condition The objective of the Special Education program is to help local education agencies provide special education and related services to all children with disabilities. During fiscal year 2019, the District spent $589,695 under its Special Education grant program. 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 require recipients to follow their own written procurement procedures, which must reflect applicable local, state and federal laws. The procedures must conform to federal procurement thresholds to ensure recipients follow the most restrictive of local, state or federal procurement methods when using federal funds. The District had written procurement policies that conform to these requirements. When at least part of a professional service contract will be paid with federal funds, the District must competitively procure those services, such as speech therapy, physical therapy and professional development provided at the District. The District did not follow its policy to perform a competitive process to procure professional services for a contract that expired and did not have an option to renew or extend. We consider this control deficiency to be material weaknesses. This issue was not reported as a finding in the prior audit. Cause of Condition The District decided not to competitively procure the services again because it determined it was in the best interest of the students to maintain consistency and use the same provider from the previous contract. Effect of Condition The District paid the physical therapy service provider $195,608 in federal funds without performing a competitive process to procure the services, as required by federal regulations. Because the District did not use competitive procurement procedures to award the contract, it cannot demonstrate it received the best price or the proposal most advantageous to the program and students. Recommendations We recommend the District comply with federal procurement requirements and follow its procurement policies and procedures. Further, it should monitor to ensure it complies with policies. District?s Response The District concurs with the finding and has already taken steps to correct the issues of the Finding, which includes ensuring that all contracts are signed prior to services being rendered. In addition to verifying suspension and debarment through purchase orders. Auditor?s Remarks We thank the District for their efforts addressing this matter. 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 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by non-federal entities.

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