KENT SCHOOL DISTRICTLocal Government

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Kent School District No. 415 September 1, 2021 through August 31, 2022 2022-001 The District did not have adequate internal controls for ensuring compliance with requirements for time-and-effort documentation. 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 (OSPI) Pass-through Award/Contract Number: COVID-19 – 84.425W; 459549 COVID-19 – 84.425U; 140614 COVID-19 – 84.425D; 120550 COVID-19 – 84.425U; 138100 COVID-19 – 84.425D; 130197 COVID-19 – 84.425U COVID-19 – 84.425U; 712212 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background The objectives of the Education Stabilization Fund (ESF) are to prevent, prepare for, and respond to the COVID-19 pandemic. In fiscal year 2022, the District spent $30,615,680 of its ESF awards. This included $24,366,285 in the Elementary and Secondary School Emergency Relief (ESSER II) Fund subprogram (84.425D), $6,215,569 in the American Rescue Plan – Elementary And Secondary School Emergency Relief (ARP ESSER/ESSER III) Fund subprogram (84.425U), and $33,826 in the American Rescue Plan – Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP ESSER/HCY II) subprogram (84.425W). Federal regulations require award 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. 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 types of activities employees perform, time-and-effort documentation can be a semiannual certification or monthly personnel activity reports, such as a detailed timesheet. Time-and-effort documentation must also be signed and dated after the work is completed. Description of Condition The ESF program allowed the District to claim ESSER II funds for continuing to employ existing District staff, as well as for other activities that were necessary for maintaining the operation and continuity of public school services during the COVID-19 pandemic. Our audit found the District’s internal controls were ineffective for ensuring it supported all salaries and benefits charged to the ESF program with appropriate time-and-effort documentation, as the awarding agency requires. The District could not provide time-and-effort documentation for 126 food service workers paid with funds through both ESF and another federal program. We consider this internal control deficiency to be a significant deficiency. Cause of Condition District officials did not know about the requirement to obtain time-and-effort documentation for staff paid with funds through ESF and another federal program. Effect of Condition The District did not obtain time-and-effort documentation for 126 employees whose payroll and benefits costs totaling $2,768,175 were charged to the ESF program. Without adequate time-and-effort documentation, the District cannot demonstrate compliance with the granting agency’s documentation requirements to support costs charged to federal programs. Further, the District cannot assure federal grantors that payroll costs charged to the program were accurate and valid. During the audit, the District supported these payroll costs by providing alternative documentation to show the employees worked on the programs, so we are not questioning these costs. Recommendation We recommend the District design and follow internal controls to ensure employees complete time-and-effort documentation to support payroll costs charged to federal programs. District’s Response The district acknowledges that it did not provide individual employee signatures as part of a time & effort (T&E) demonstration for employees in the Child Nutrition Program partially charged to ESSER. The district’s misunderstanding of this requirement is due in part to the diverging guidance provided from OSPI and the US Department of Education (USDOE); USDOE has notified us in writing that they do not require T&E for ESSER 2 & 3 expenditures fitting this description. It is unusual for state and federal guidance to diverge in this way for a federal program, but the district acknowledges the OSPI requirement and has prepared a corrective action plan accordingly. The compliance issue sited is solely one of documentation, rather than the actual allowability of the costs. 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. Office of Superintendent of Public Instruction Addendum to Bulletin 048-17 established requirements for documenting time and effort.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Kent School District No. 415 September 1, 2021 through August 31, 2022 2022-002 The District did not have adequate internal controls for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 84.027 – Special Education Grants to States 84.173 – COVID-19 – Special Education Preschool Grants 84.173 – Special Education Preschool Grants Federal Grantor Name: U.S. Department of Education, Office of Special Education and Rehabilitation Services Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 307485, 338471 Known Questioned Cost Amount: Prior Year Audit Finding: $0 N/A Background The District spent $5,888,268 in Special Education Cluster grant funds during the 2021–22 school year. The objective of the Special Education program is to help education agencies provide special education and related services to all children with disabilities. 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. When using federal funds to purchase goods or services, governments must apply the most restrictive of federal requirements, state law, or local policies by obtaining quotes or following a competitive bid process, depending on the estimated cost of the purchase. Governments must also keep documentation supporting the procurement method they used. District policy conforms to the most restrictive laws for purchases, requiring written quotations from three or more qualified sources for purchases of goods and services costing between $10,000 and $250,000. In addition, 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 enter into this interlocal agreement or cooperative and confirm the awarding entity followed all procurement laws and regulations applicable to the awarding entity before it purchases services or goods from the other entity’s contract. A nonpublic agency (NPA) is an entity authorized by the Office of Superintendent of Public Instruction under Chapter 28A.300 RCW to contract with a school district to provide a program of special education services for students whose special education needs cannot be met by their resident school district. NPAs are nonprocurement transactions, so districts do not have to demonstrate competition. Description of Condition Our audit found the District did not have adequate internal controls for ensuring compliance with federal procurement requirements. Specifically, the District procured special education services from a professional service contractor at a total cost of $837,361 without obtaining sealed bids or announcing a request for proposals, as federal regulations and District policy require. The District also piggybacked onto another government’s contract to purchase special education curriculum totaling $75,717, but did not retain supporting documentation showing it verified the awarding government followed applicable procurement requirements before purchasing the services. We consider these deficiencies in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The District had worked previously with the professional service contractor. Staff thought the District did not need to competitively procure the services because the contractor was on the NPA list. However, the contractor was no longer on the NPA list during the audit period, and District staff did not know this before purchasing the services. In addition, staff did not know the District needed to obtain procurement documentation from the awarding agency to verify the process complied with procurement requirements before purchasing the curriculum. Effect of Condition and Questioned Costs Without effective internal controls that ensure it follows procurement and piggybacking procedures, the District cannot demonstrate it complied with applicable federal procurement requirements and received the best price for the curriculum. Recommendation We recommend the District establish and follow internal controls to ensure it complies with procurement requirements for purchases of goods and services. District’s Response The district acknowledges that it did not request and retain the competitive bid documentation in a situation where it “piggy-backed” on another governmental entity’s purchase of special education curriculum materials. It further acknowledges that it mistakenly coded expenses for a professional service contractor to federal rather than state special education funds; this triggered procurement requirements which were unintended. The compliance issues cited are solely related to documentation, rather than the actual allowability of the costs. 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 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR Part 200, Uniform Guidance, Section 319 — Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. 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.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Kent School District No. 415 September 1, 2021 through August 31, 2022 2022-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, procurement, and restricted purpose requirements. Assistance Listing Number and Title: 32.009, COVID-19 – Emergency Connectivity Fund Program Federal Grantor Name: Federal Communications Commission Federal Award/Contract Number: CPF Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: Prior Year Audit Finding: $9,289,675 N/A Background The Emergency Connectivity Fund (ECF) Program provides funding to meet the needs of students and school staff who would otherwise lack access to connected devices and broadband connections sufficient to engage in remote learning. This is referred to as “unmet need.” In fiscal year 2022, the District spent $9,405,485 in ECF Program funds to purchase tablets, mobile hotspots, routers, and broadband services for students and school staff. 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. Allowable activities and costs ECF Program recipients may only seek reimbursement for the eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking and receiving reimbursement for eligible equipment and services purchased for use solely at the school or held for future use (i.e., warehousing). Procurement When using ECF Program funds to purchase eligible services and equipment, the Federal Communications Commission (FCC) requires recipients to comply with all applicable state or local procurement laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. State law and District policy allows for the purchase of goods and services from contracts awarded by another government or group of governments via an interlocal agreement or contract, often referred to as “piggybacking.” If entering into such an agreement, the District must confirm the awarding entity followed all procurement laws and regulations applicable to the awarding entity when selecting the service provider. Restricted purpose – unmet need When submitting applications to the FCC, schools only had to provide an estimate of their students’ and staff’s unmet need. However, when requesting reimbursement, the District could only request program funds for eligible equipment and services provided to students and school staff with actual unmet need. Restricted purpose – per-user limitations The FCC imposed per-location and per-user limitations to maximize the use of limited funds. Under the program, eligible schools could only be reimbursed for one connected device and Wi-Fi hotspot per student or school employee with unmet need. Description of Condition Allowable activities and costs/restricted purpose – unmet need The District estimated unmet need for eligible equipment and services when it applied for ECF Program funds. However, our audit found the District’s internal controls were ineffective for ensuring it documented the determination of actual unmet need and only requested reimbursement for equipment and services provided to students and school staff. Specifically, the District purchased tablet computers, Wi-Fi hotspots and routers, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $9,405,845. However, the District did not maintain documentation showing it provided each tablet computer, Wi-Fi hotspot, and router paid with program funds to a student or employee with unmet need. Procurement Our audit found the District’s internal controls were ineffective for ensuring it followed state law and its own policy when procuring equipment that it charged to the ECF Program. Specifically, the District paid one contractor $9,062,998 for tablet computers using a purchasing cooperative. However, the District did not maintain documentation showing it verified the awarding entity met the most restrictive procurement practices applicable to that entity. The District also paid two contractors a total of $254,768 for mobile hotspots, but did not obtain quotes from three or more qualified sources, as its policy requires. Restricted purpose – per-location and per-user limitations Our audit found the District’s internal controls were ineffective for demonstrating it complied with the FCC’s per-location and per-user limitations. Specifically, the District did not maintain documentation showing it monitored or had a tracking process in place to ensure it only provided one device per user and location. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Allowable activities and costs/restricted purpose – unmet need District staff did not know about the requirement to request reimbursement only for actual unmet need, and thought the estimate of unmet need provided during the application process was sufficient to comply with this requirement. District staff who were authorized to order eligible equipment and services did not know about the required certifications stating that the District was only seeking reimbursement for eligible equipment and/or services provided to students or employees with unmet need. Procurement Staff did not know they needed to obtain procurement documentation from the awarding agency to verify the process complied with procurement requirements before purchasing. Staff also did not know they needed to retain documentation to support the procurement history of the mobile hotspots purchased from the two contractors. Restricted purpose – per-location and per-user limitations Staff said they did not know the District could not provide more than one device and/or connection per student and employee. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose – unmet need Because the District did not have documentation supporting whether it provided eligible equipment and services to students and school staff with actual unmet need, it cannot demonstrate compliance with the program’s requirements. Given the nature of the program and circumstances, it is likely that at least some of the equipment and services the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students’ and staff’s actual unmet need means that all costs are unsupported. Since we do not have a reasonable basis for estimating how much of the District’s expenditures are allowable, we are questioning all unsupported 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 does not have adequate documentation to support expenditures. Procurement The District cannot demonstrate it complied with the procurement requirements. Additionally, it cannot be sure all interested contractors had the opportunity to bid and that it obtained the lowest price for the tablet purchases and wireless services. Restricted purpose – per-location and per-user limitations Because the District provided some students and staff more than one device and received reimbursement for them, it did not comply with the FCC’s requirement. As noted in the allowable activities and costs section above, we are questioning the costs for these devices and services. Recommendation We recommend the District work with the granting agency to determine audit resolution. We further recommend the District establish and follow internal controls to ensure staff fully understand the requirements for ECF awards. Specifically, the District should: • Request reimbursement only for eligible equipment provided to students or staff with unmet need, and maintain documentation demonstrating compliance • Comply with state law and its own policy when procuring goods and services paid with ECF Program funds, and keep documentation showing it complied with procurement requirements • Provide no more than one device per student and staff in compliance with the ECF Program’s requirements District’s Response It is KSD’s position that all expenditures and actions associated with our implementation of the Emergency Connectivity Fund (ECF) during the Pandemic were entirely consistent with the spirit and intent of this emergency federal program. KSD’s understanding is that a vast majority of districts audited in this program are receiving findings, and that state officials are in discussions with the Federal Communications Commission (FCC) to achieve greater regularity clarity moving forward. The district appreciates the State Auditor’s acknowledgement in a June 5th Seattle Times editorial that greater clarity would have prevented nearly all of the issues confronting school districts in this most recent audit cycle. We agree. Under the emergency conditions of the Pandemic, KSD was approved for funding by the Federal Communications Commission (FCC) and mobilized quickly to provide the devices necessary to equip students and staff for an emergency remote or hybrid program of instruction. Based on the instructional program design, the district provided devices to students and staff who needed them based on a number of factors, including whether they had a device to begin with, or whether their existing device was up to technical standards, including whether it had all required software and security features to support the program. The district acknowledges that it is not able to produce the time-stamped documentation required by SAO to verify the district’s process for determining “unmet student need”; doing so would have apparently required a student-bystudent, staff-by-staff signature certification process during a Pandemic period where such methods would seem highly impractical. The district also acknowledges that it did not request and retain the competitive bid documentation from the purchasing cooperative used to procure some of the devices. Finally, it acknowledges the limitations of our asset management inventory to prove, at a historical moment in time, that we did not have multiple devices allocated to one student, or any devices in temporary inventory that were funded with these ECF funds. As a policy, KSD only allocates multiple devices to a student or staff person when one is temporarily dysfunctional. The ECF audit findings are an issue of statewide concern. We join the voices from districts across the state asserting that more intergovernmental coordination could have greatly reduced unintended impacts on school districts during this audit cycle. Auditor’s Remarks The State Auditor’s Office is sympathetic to the significant challenges the District faced during the COVID-19 pandemic, and deeply respects its commitment to student learning despite these challenges. SAO knows that in many cases, governments across Washington received significant pandemic-era federal funds without also receiving clear guidance on how to use them. Then, and now, SAO continues to advocate for clear, timely guidance from federal agencies to make sure Washington governments are not put in a difficult position at audit time. However, when auditing federal programs of any kind, governments must provide documentation to substantiate that they met the award requirements. As is our practice and audit standards require, we will review the status of this finding during our next audit. We value our partnership with the District in striving for transparency in public service. 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 47 CFR Part 54, Universal Service, Subpart Q, Emergency Connectivity Fund, describes the ECF Program requirements.

2021-001 The District did not have internal controls for ensuring compliance with federal time-and-effort documentation requirements. "See Schedule of Findings and Questioned Costs for chart/table" Background The objectives of the Education Stabilization Fund (ESF) are to prevent, prepare for, and respond to the COVID-19 pandemic. During fiscal year 2021, the District spent $2,490,266 in federal funding from the Elementary and Secondary School Emergency Relief (ESSER) Fund subprogram award funded by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (ESSER I). Federal regulations require award 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. Federal regulations and the Office of Superintendent of Public Instruction (OSPI) require the District to have adequate time-and-effort documentation to support all payroll costs charged to the ESSER I award. Depending on the number and types of activities employees perform, time-and-effort documentation can be a semiannual certification or monthly personnel activity reports, such as a detailed timesheet. Description of Condition The CARES Act allowed the District to claim ESSER I funds for continuing to employ existing District staff, and for other activities that were necessary for maintaining the operation and continuity of public school services. During the audit period, the District charged payroll costs to its ESSER I subprogram award to temporarily replace transportation and food services employees who were unable to work due to the COVID-19 pandemic. The District did not have internal controls for ensuring compliance with requirements over time-and-effort reporting. Our audit found the District did not have sufficient time-and-effort records containing all required information, including the specific cost objective staff worked on to support all payroll costs charged to the ESSER program. Specifically, the District did not obtain semiannual certifications or monthly personnel activity reports for the 254 employees whose payroll costs were charged to the ESSER I subaward. We consider this internal control deficiency to be a material weakness that led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition Staff did not know the District was required to have time-and-effort documentation to support payroll costs claimed under the ESSER I award. While the District did have a method to track allowable payroll costs charged to the program, it did not obtain the required time-and-effort documentation to show compliance with award requirements. Effect of Condition The District?s noncompliance with program requirements can jeopardize future federal funding, and it can be grounds for returning federal funds to the grantor, if requested. By not keeping proper time-and-effort records, the District cannot demonstrate compliance with OSPI?s documentation requirements to support payroll costs charged to the federal program. Further, it cannot assure federal grantors that payroll costs charged to the ESSER I subaward were accurate or valid. The District provided alternate documentation that demonstrated $873,699 in payroll costs charged to the program were allowable; therefore, we are not questioning costs. Recommendation We recommend the District design and follow controls to ensure it prepares adequate time-and-effort documentation to support payroll costs charged to the federal grant. District?s Response The district acknowledges that it did not use the traditional ?time and effort? federal forms for the one month of payroll expenses charged to ESSER for bus drivers and food service workers sent home during the Pandemic, pursuant to the Governor?s Emergency Order. District staff were mistakenly under the impression that this requirement had been lifted for all ESSER costs. We now understand the requirement has only been lifted for ESSER 2 and 3, but not for ESSER 1. We have exhausted all ESSER 1 claims and so this will, by definition, not be a corrective issue in the future. The district understands the finding to be purely procedural and is not in any way questioning the allowability of costs charged to ESSER. The district did present detailed employee-by-employee records of the specific time charged to ESSER for the month in question, with accompanying supervisor signatures. This provides extensive verification of the time charged, but we acknowledge that it does not meet the auditor?s needs given the audit standard provided to them. We also have been informed that the auditor does not have the discretion to categorize this as an exit item under federal guidelines. The time and effort requirement is a challenge to implement during a Pandemic when, for stretches of time, employees were compensated and staying home for safety reasons. According to OSPI?s website, time and effort reports are required to ?document that federal funds were charged only for time worked on allowable cost activities and, ensure that federal programs paid only their proportionate share of personnel costs.? However, in this case, the workers in question were not working at all. Instead, they were at home by direction of the Governor?s order during the COVID-19 Pandemic. Securing several hundred signatures in a remote working environment also presents certain practical challenges, and may explain why the requirement was ultimately lifted for ESSER 2 & 3. We nevertheless appreciate the auditor?s diligence and assistance in helping us better document and conform to approved federal grant protocols. 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. Office of Superintendent of Public Instruction Addendum to Bulletin 048-17, established requirements for documenting time and effort.

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