Warden School District No. 146-161

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Warden School District No. 146-161 September 1, 2021 through August 31, 2022 2022-002 The District did not have adequate internal controls for ensuring compliance with wage rate requirements. 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 Pass-through Award/Contract Number: COVID-19, 84.425D-120428 COVID-19, 84.425U-138091 COVID-19, 84.425U-137151 COVID-19, 84.425U-712234 Known Questioned Cost Amount: $0 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 spent a total of $1,560,045 of its ESF awards. This included $608,734 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), and $951,311 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/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. Under federal wage rate requirements, also known as the Davis-Bacon Act, contractors and subcontractors that work on projects financed with more than $2,000 of federal money must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. For construction contracts subject to these wage rate requirements, the District must include a provision that the contractor and subcontractor comply with those requirements and the Department of Labor?s regulations. This includes a requirement for the contractor and its subcontractor to submit to the District weekly, for each week in which any contract work is performed, certified payroll reports. These reports must include a copy of the payroll and a signed statement of compliance. The District may use a contracted project manager to collect certified payroll reports from contractors and subcontractors, but ultimately, it is the District?s responsibility to comply with these requirements and maintain documentation demonstrating compliance. Description of Condition During the 2021-22 school year, the District spent $673,437 from its ESSER II and ESSER III awards to pay a contractor and its subcontractors for installing and upgrading the heating, ventilation and air conditioning systems at its middle and high school buildings. This project was part of the District?s school facility capital improvement efforts to prevent the spread of COVID-19 and enable school operations by facilitating greater air flow and filtration. During the audit period, the District contracted with one project manager to assist in developing the contract between the District and the contractor, as well as collecting weekly certified payroll reports from the contractor and subcontractors. Our audit found the District did not have adequate internal controls for ensuring compliance with federal prevailing wage rate requirements. Specifically, the District did not: ? Include, or ensure the project manager included, the required prevailing wage rate clauses in the contract established with its contractor ? Collect, or ensure the project manager collected, weekly certified payroll reports from the contractor and its subcontractors to confirm they paid laborers proper prevailing wages We consider these deficiencies in internal controls to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition The District relied on the project manager to include the federal prevailing wage rate clause in the contract with the contractor, and District management and staff did not know this language was missing when they reviewed and approved the contract. Additionally, District management did not know about the federal requirement to collect all certified payroll reports from the contractor and its subcontractors each week to confirm they paid laborers proper prevailing wages. Effect of Condition Without adequate internal controls that ensure it includes the prevailing wage rate clauses in its contract and collects all weekly certified payroll reports, the District cannot demonstrate it complied with federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and subcontractors did not pay prevailing wage rates to laborers working on the contract. Recommendation We recommend the District develop internal controls that ensure compliance with federal wage rate requirements. This should include inserting the prevailing wage rate clauses into contracts, as well as implementing effective monitoring processes to collect and review all weekly certified payroll reports timely from contractors and subcontractors. District?s Response All parties contracting services will receive training on prevailing wage compliance. The business manager will review and ensure the requirements are being met. Auditor?s Remarks We appreciate the District?s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District?s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 29 CFR, Section 3.3 ? Weekly statement with respect to payment of wages, and Section 3.4 ? Submission of weekly statements and the preservation and inspection of weekly payroll records, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports. Title 29 CFR, Section 5.5, Contract provisions and related matters, establishes the requirements for the contracting officer to insert in full any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part with federal funds the clauses listed, which includes but is not limited to the minimum wages to be paid and payrolls and basic records to be maintained (submission of weekly certified payrolls)

2020-001 The District did not have adequate controls in place to ensure compliance with federal procurement and suspension and debarment requirements. CFDA Number and Title: 10.553 School Breakfast Program 10.553 COVID-19 ? School Breakfast Program 10.555 National School Lunch Program 10.555 COVID-19 ? 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 Pass-through Award/Contract Number: 207WAWA3N1099 Questioned Cost Amount: $0 Background During fiscal year 2020, the District received $592,101 in funding for the School Breakfast, National School Lunch Program and Summer Food Service Programs. These programs provide funding for free and reduced-price meals for eligible low income students whose households meet specific income requirements set by the U.S. Department of Agriculture. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Procurement When using federal funds to purchase goods or services, governments must apply the more restrictive of federal requirements, state law or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. District policy conforms to the most restrictive laws and requires quotes to be obtained from three or more qualified sources for purchases between $3,500 and $75,000 and formal sealed bids to be obtained for purchases of $75,000 or more. In addition, when the District does not perform these procurement procedures itself, but instead piggybacks on another agency?s contract, it must obtain the procurement documentation to independently verify that the other agency procured the goods or services in accordance with its policy. Suspension and debarment Federal regulations prohibit grant recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the District contracts for goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that contractors have not been suspended or debarred or otherwise excluded. This verification may be accomplished by obtaining a written certification from the contractor or inserting a clause in the contract in which the contractor states it is not suspended or debarred. Alternatively, the District may review the federal Excluded Parties List System (EPLS) issued by the U.S. General Service Administration. The District must meet one of these requirements before entering into a contact with the contractor. When piggybacking on another district?s contract, the District must either obtain support showing the agency?s verification of the contractor?s status or independently verify that the contractor is not suspended or debarred before using the contract. Description of Condition Procurement The District piggybacked on another school district?s procurement of a food service contract but did not obtain and review the procurement documentation to confirm the other agency procured the contract in accordance with the applicable requirements, prior to using the contract. Additionally, the District did not have effective controls to comply with federal requirements and its own policy to obtain quotes for the purchase of about $17,000 in produce from one contractor during the year. Suspension and debarment The District did not obtain and review the district?s suspension and debarment verification or independently verify that the contractor was not suspended or debarred prior to using the food service contract. The District paid the contractor about $230,000 during the period. We consider these internal control deficiencies to be a material weakness that led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition For its produce purchases, District staff did not have an adequate understanding of District policy, and were unaware that the produce purchase required quotes. For the food services contract, the District experienced turnover and prior staff were either unaware of the requirement to independently verify the other agency?s compliance with procurement and suspension and debarment requirements or did not retain documentation demonstrating that the District performed these verifications. Effect of Condition Procurement Without effective internal controls, the District cannot ensure it received the best price or value for its purchases and cannot demonstrate that it complied with federal regulations for procuring food products. Suspension and debarment Additionally, without effective internal controls, the District cannot ensure it only pays federal funds to contractors that are eligible to participate in federal programs. Any payments to ineligible contractors would be unallowable and subject to recovery by the funding agency. We confirmed that the contractor was not suspended or debarred. Therefore, we are not questioning these payments. Recommendation We recommend the District establish and follow internal controls that are effective to ensure: ? Employees understand applicable procurement and suspension and debarment requirements ? All applicable purchases and contracts comply with those requirements ? Records are kept that demonstrate compliance with those requirements District?s Response Warden School District acknowledges that effective controls were not in place to ensure compliance with federal procurement and suspension and debarment requirements. The Warden School District will establish controls to rectify the identified issues, including training as well as develop a multiple verification that all compliances will be meet in the future effective August 31, 2021. Auditor?s Remarks We appreciate the District?s commitment to resolving the issues noted, and will follow up during the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. 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 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal 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 Orders 12549 and 12689.

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