Audit 305858

2023-001 The District did not have adequate internal controls with allowable activities and costs, equipment and restricted purpose requirement. Assistance Listing Number and Title: 32.009, COVID-19 – Emergency Connectivity Fund Program Federal Grantor Name: Federal Communication Commission Federal Award/Contract Number: WL21-ECF-47101 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $260,866 Prior Year Audit Finding: 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 2023, the District spent $260,866 in ECF Program funds to purchase laptops for students. 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. Allowable Activities and Costs ECF Program recipients may only seek reimbursement for eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking reimbursement for eligible equipment and services used solely at the school or held for future use (in other words, warehousing). Equipment The Federal Communications Commission (FCC) requires ECF Program recipients to maintain inventories of the devices and services they have purchased with program funds. The FCC also requires inventory records to include specific elements, such as the type of equipment or service provided, equipment make/model and serial number, name of the students or employees provided the equipment or service, dates they used the equipment or service and more. 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-Location and 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, and no more than one fixed broadband connection per location, such as a student’s or employee’s residence. Description of Condition Allowable Activities and Costs/Restricted Purpose – Unmet Need The District estimated unmet need for eligible equipment 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 provided to students. Specifically, the District purchased laptops, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $260,866. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student with unmet need. Equipment The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for all laptops purchased with ECF Program funds, the District did not include names of the students provided or responsible for the equipment and the dates they used it. 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. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. 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. Further, District staff who were authorized to order eligible equipment did not know about the required certifications, stating that the District was only seeking reimbursement for eligible equipment provided to students or employees with unmet need. Equipment The District’s asset inventory system did not track when it assigned the ECF-purchased laptops during the school year. As a result, the District was unable to produce adequate documentation to demonstrate all required information was tracked throughout the audit period. Restricted Purpose – Per-Location and Per-User Limitations Staff said they were unaware of the requirement to maintain documentation showing it only provided one device per student. 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 to students 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 the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students’ 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 Office of the Washington State Auditor 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. Equipment Without maintaining proper asset inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded equipment. Restricted Purpose – Per-Location and Per-User Limitations Because the District did not maintain documentation, it cannot demonstrate compliance with the FCC’s restrictions. Additionally, we cannot determine whether the District only provided one device per user. Recommendation We recommend the District work with the awarding 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 and services provided to students and staff with unmet need, and maintain documentation demonstrating compliance • Maintain inventories that include all required elements to track the use of equipment and services paid with ECF Program funds • Provide no more than one device per student and employee, and no more than one broadband connection per location, in compliance with the ECF Program’s requirements District’s Response Thank you for your comprehensive recommendations regarding our utilization of ECF Program funds. The district concurs with the finding. We acknowledge the importance of ensuring compliance and accountability in our use of these resources. Regarding the recommendation to collaborate with the awarding agency for audit resolution, we will promptly initiate communication to address any outstanding issues and work diligently to resolve them in accordance with regulatory requirements. Additionally, we understand the significance of establishing robust internal controls to safeguard against misuse and ensure adherence to program guidelines. We will take the following actions to strengthen our internal controls: 1. Reimbursement Requests: We will institute a thorough review process to ensure that reimbursement requests are submitted only for eligible equipment and services provided to students and staff with identified unmet need. Documentation demonstrating compliance will be meticulously maintained to facilitate transparency and accountability. 2. Inventory Management: We will enhance our inventory management practices to include all necessary elements for tracking the use of equipment and services procured with ECF Program funds. This will enable us to accurately monitor the allocation and utilization of resources, thereby mitigating the risk of mismanagement or loss. 3. Device and Connection Allocation: To align with the requirements of the ECF Program, we will strictly adhere to the provision of no more than one device per student and employee, as well as no more than one broadband connection per location. This measure will ensure equitable distribution and optimize the impact of the resources allocated. By implementing these measures, we are committed to upholding the integrity of the ECF Program and maximizing its benefits for our students and staff. We appreciate your guidance and will proactively work towards achieving full compliance with program regulations. 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. The State Auditor’s Office 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, the State Auditor’s Office 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.

2023-002 The District did not have adequate controls for ensuring compliance with procurement requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education – Grants to States 84.027 COVID – 19 Special Education – Grants to States 84.173 Special Education – Preschool Grants 84.173 COVID – 19 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: 84.027 - 312301 84.027 - 307757 84.027 - GT-01031 84.173 - 371270 84.173 - 367149 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Special Education program is to ensure students with disabilities receive a free and appropriate public education. The program has specifically designed instruction addressing the unique needs of an eligible student. During fiscal year 2023, the District spent $939,648 in federal funds through its Special Education program. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods and services, governments must apply the more restrictive of federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure services using noncompetitive proposals when the service is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition The District did not follow its policy and federal regulations for formally procuring a contract for personal services costing more than $250,000. Specifically, the District used the sole-source method to waive competitive procurement for language therapy services totaling $287,800 and charged $166,790 to the federal program for these services. The District did not research to evaluate whether this service was limited to a single source. We determined this contract should have been formally procured as there were multiple contractors that could have performed these services. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. Cause of Condition District staff responsible for procuring the professional services did not fully understand federal procurement requirements and District policy. The District posted the language therapist position on its website as a job posting. When a contractor responded to the posting, the District entered into a personal service contract instead of continuing its search for an employee to perform these services. The District completed its sole-source form but did not adequately research to verify if there were other contractors that could have provided these services. Effect of Condition Without competitively procuring the services, the District cannot demonstrate it received the best price for the services it purchased or selected the most qualified contractor. Additionally, the District cannot demonstrate that it complied with federal regulations services. We determined the purchases are allowable under the federal program; therefore, we are not questioning costs. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements, including sole-source evaluations District’s Response Thank you for providing valuable feedback on our procurement practices within the Special Education program. We appreciate the opportunity to address the findings outlined in your report. Upon review of the audit finding indicating inadequate controls for ensuring compliance with procurement requirements, we acknowledge the importance of this matter and are committed to taking immediate corrective actions to rectify the identified deficiencies. Our initial analysis indicates that several factors may have contributed to the lack of adequate controls in procurement compliance within the Special Education program. These include potential gaps in understanding procurement regulations as well as insufficient staff training. To address these issues effectively, we have developed a comprehensive corrective action plan, which includes the following key steps: 1. Staff Training and Capacity Building: We recognize the importance of providing adequate training to staff members involved in procurement within the Special Education program. Training sessions will be conducted to enhance their understanding of procurement regulations, policies, and ethical practices. 2. Enhanced Oversight and Monitoring: We will designate responsible individuals or a team to oversee procurement activities within the Special Education program. Regular monitoring mechanisms will be implemented to review procurement processes and transactions for compliance with established procedures. 3. Strengthening Documentation and Record-keeping: Emphasis will be placed on maintaining accurate and complete documentation throughout the procurement process. Standardized templates and forms will be introduced to streamline documentation and record-keeping practices. 4. Continuous Improvement and Evaluation: We are committed to fostering a culture of continuous improvement by soliciting feedback from stakeholders and conducting periodic evaluations of our procurement processes. Lessons learned will be incorporated into our practices to drive ongoing enhancement. 5. Communication and Transparency: We will communicate the details of our corrective action plan to all relevant stakeholders within the District, fostering transparency and ensuring alignment with our objectives. Regular updates on the progress of implementation will be provided to keep stakeholders informed. We understand the importance of compliance with procurement requirements in safeguarding the integrity of our Special Education program. By diligently implementing our corrective action plan, we are confident in our ability to address the identified deficiencies and strengthen our procurement practices moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 – Methods of procurement to be followed, describes each allowable procurement method.

2023-002 The District did not have adequate controls for ensuring compliance with procurement requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education – Grants to States 84.027 COVID – 19 Special Education – Grants to States 84.173 Special Education – Preschool Grants 84.173 COVID – 19 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: 84.027 - 312301 84.027 - 307757 84.027 - GT-01031 84.173 - 371270 84.173 - 367149 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Special Education program is to ensure students with disabilities receive a free and appropriate public education. The program has specifically designed instruction addressing the unique needs of an eligible student. During fiscal year 2023, the District spent $939,648 in federal funds through its Special Education program. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods and services, governments must apply the more restrictive of federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure services using noncompetitive proposals when the service is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition The District did not follow its policy and federal regulations for formally procuring a contract for personal services costing more than $250,000. Specifically, the District used the sole-source method to waive competitive procurement for language therapy services totaling $287,800 and charged $166,790 to the federal program for these services. The District did not research to evaluate whether this service was limited to a single source. We determined this contract should have been formally procured as there were multiple contractors that could have performed these services. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. Cause of Condition District staff responsible for procuring the professional services did not fully understand federal procurement requirements and District policy. The District posted the language therapist position on its website as a job posting. When a contractor responded to the posting, the District entered into a personal service contract instead of continuing its search for an employee to perform these services. The District completed its sole-source form but did not adequately research to verify if there were other contractors that could have provided these services. Effect of Condition Without competitively procuring the services, the District cannot demonstrate it received the best price for the services it purchased or selected the most qualified contractor. Additionally, the District cannot demonstrate that it complied with federal regulations services. We determined the purchases are allowable under the federal program; therefore, we are not questioning costs. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements, including sole-source evaluations District’s Response Thank you for providing valuable feedback on our procurement practices within the Special Education program. We appreciate the opportunity to address the findings outlined in your report. Upon review of the audit finding indicating inadequate controls for ensuring compliance with procurement requirements, we acknowledge the importance of this matter and are committed to taking immediate corrective actions to rectify the identified deficiencies. Our initial analysis indicates that several factors may have contributed to the lack of adequate controls in procurement compliance within the Special Education program. These include potential gaps in understanding procurement regulations as well as insufficient staff training. To address these issues effectively, we have developed a comprehensive corrective action plan, which includes the following key steps: 1. Staff Training and Capacity Building: We recognize the importance of providing adequate training to staff members involved in procurement within the Special Education program. Training sessions will be conducted to enhance their understanding of procurement regulations, policies, and ethical practices. 2. Enhanced Oversight and Monitoring: We will designate responsible individuals or a team to oversee procurement activities within the Special Education program. Regular monitoring mechanisms will be implemented to review procurement processes and transactions for compliance with established procedures. 3. Strengthening Documentation and Record-keeping: Emphasis will be placed on maintaining accurate and complete documentation throughout the procurement process. Standardized templates and forms will be introduced to streamline documentation and record-keeping practices. 4. Continuous Improvement and Evaluation: We are committed to fostering a culture of continuous improvement by soliciting feedback from stakeholders and conducting periodic evaluations of our procurement processes. Lessons learned will be incorporated into our practices to drive ongoing enhancement. 5. Communication and Transparency: We will communicate the details of our corrective action plan to all relevant stakeholders within the District, fostering transparency and ensuring alignment with our objectives. Regular updates on the progress of implementation will be provided to keep stakeholders informed. We understand the importance of compliance with procurement requirements in safeguarding the integrity of our Special Education program. By diligently implementing our corrective action plan, we are confident in our ability to address the identified deficiencies and strengthen our procurement practices moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 – Methods of procurement to be followed, describes each allowable procurement method.

2023-002 The District did not have adequate controls for ensuring compliance with procurement requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education – Grants to States 84.027 COVID – 19 Special Education – Grants to States 84.173 Special Education – Preschool Grants 84.173 COVID – 19 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: 84.027 - 312301 84.027 - 307757 84.027 - GT-01031 84.173 - 371270 84.173 - 367149 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Special Education program is to ensure students with disabilities receive a free and appropriate public education. The program has specifically designed instruction addressing the unique needs of an eligible student. During fiscal year 2023, the District spent $939,648 in federal funds through its Special Education program. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods and services, governments must apply the more restrictive of federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure services using noncompetitive proposals when the service is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition The District did not follow its policy and federal regulations for formally procuring a contract for personal services costing more than $250,000. Specifically, the District used the sole-source method to waive competitive procurement for language therapy services totaling $287,800 and charged $166,790 to the federal program for these services. The District did not research to evaluate whether this service was limited to a single source. We determined this contract should have been formally procured as there were multiple contractors that could have performed these services. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. Cause of Condition District staff responsible for procuring the professional services did not fully understand federal procurement requirements and District policy. The District posted the language therapist position on its website as a job posting. When a contractor responded to the posting, the District entered into a personal service contract instead of continuing its search for an employee to perform these services. The District completed its sole-source form but did not adequately research to verify if there were other contractors that could have provided these services. Effect of Condition Without competitively procuring the services, the District cannot demonstrate it received the best price for the services it purchased or selected the most qualified contractor. Additionally, the District cannot demonstrate that it complied with federal regulations services. We determined the purchases are allowable under the federal program; therefore, we are not questioning costs. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements, including sole-source evaluations District’s Response Thank you for providing valuable feedback on our procurement practices within the Special Education program. We appreciate the opportunity to address the findings outlined in your report. Upon review of the audit finding indicating inadequate controls for ensuring compliance with procurement requirements, we acknowledge the importance of this matter and are committed to taking immediate corrective actions to rectify the identified deficiencies. Our initial analysis indicates that several factors may have contributed to the lack of adequate controls in procurement compliance within the Special Education program. These include potential gaps in understanding procurement regulations as well as insufficient staff training. To address these issues effectively, we have developed a comprehensive corrective action plan, which includes the following key steps: 1. Staff Training and Capacity Building: We recognize the importance of providing adequate training to staff members involved in procurement within the Special Education program. Training sessions will be conducted to enhance their understanding of procurement regulations, policies, and ethical practices. 2. Enhanced Oversight and Monitoring: We will designate responsible individuals or a team to oversee procurement activities within the Special Education program. Regular monitoring mechanisms will be implemented to review procurement processes and transactions for compliance with established procedures. 3. Strengthening Documentation and Record-keeping: Emphasis will be placed on maintaining accurate and complete documentation throughout the procurement process. Standardized templates and forms will be introduced to streamline documentation and record-keeping practices. 4. Continuous Improvement and Evaluation: We are committed to fostering a culture of continuous improvement by soliciting feedback from stakeholders and conducting periodic evaluations of our procurement processes. Lessons learned will be incorporated into our practices to drive ongoing enhancement. 5. Communication and Transparency: We will communicate the details of our corrective action plan to all relevant stakeholders within the District, fostering transparency and ensuring alignment with our objectives. Regular updates on the progress of implementation will be provided to keep stakeholders informed. We understand the importance of compliance with procurement requirements in safeguarding the integrity of our Special Education program. By diligently implementing our corrective action plan, we are confident in our ability to address the identified deficiencies and strengthen our procurement practices moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 – Methods of procurement to be followed, describes each allowable procurement method.

2023-002 The District did not have adequate controls for ensuring compliance with procurement requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education – Grants to States 84.027 COVID – 19 Special Education – Grants to States 84.173 Special Education – Preschool Grants 84.173 COVID – 19 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: 84.027 - 312301 84.027 - 307757 84.027 - GT-01031 84.173 - 371270 84.173 - 367149 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Special Education program is to ensure students with disabilities receive a free and appropriate public education. The program has specifically designed instruction addressing the unique needs of an eligible student. During fiscal year 2023, the District spent $939,648 in federal funds through its Special Education program. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods and services, governments must apply the more restrictive of federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure services using noncompetitive proposals when the service is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition The District did not follow its policy and federal regulations for formally procuring a contract for personal services costing more than $250,000. Specifically, the District used the sole-source method to waive competitive procurement for language therapy services totaling $287,800 and charged $166,790 to the federal program for these services. The District did not research to evaluate whether this service was limited to a single source. We determined this contract should have been formally procured as there were multiple contractors that could have performed these services. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. Cause of Condition District staff responsible for procuring the professional services did not fully understand federal procurement requirements and District policy. The District posted the language therapist position on its website as a job posting. When a contractor responded to the posting, the District entered into a personal service contract instead of continuing its search for an employee to perform these services. The District completed its sole-source form but did not adequately research to verify if there were other contractors that could have provided these services. Effect of Condition Without competitively procuring the services, the District cannot demonstrate it received the best price for the services it purchased or selected the most qualified contractor. Additionally, the District cannot demonstrate that it complied with federal regulations services. We determined the purchases are allowable under the federal program; therefore, we are not questioning costs. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements, including sole-source evaluations District’s Response Thank you for providing valuable feedback on our procurement practices within the Special Education program. We appreciate the opportunity to address the findings outlined in your report. Upon review of the audit finding indicating inadequate controls for ensuring compliance with procurement requirements, we acknowledge the importance of this matter and are committed to taking immediate corrective actions to rectify the identified deficiencies. Our initial analysis indicates that several factors may have contributed to the lack of adequate controls in procurement compliance within the Special Education program. These include potential gaps in understanding procurement regulations as well as insufficient staff training. To address these issues effectively, we have developed a comprehensive corrective action plan, which includes the following key steps: 1. Staff Training and Capacity Building: We recognize the importance of providing adequate training to staff members involved in procurement within the Special Education program. Training sessions will be conducted to enhance their understanding of procurement regulations, policies, and ethical practices. 2. Enhanced Oversight and Monitoring: We will designate responsible individuals or a team to oversee procurement activities within the Special Education program. Regular monitoring mechanisms will be implemented to review procurement processes and transactions for compliance with established procedures. 3. Strengthening Documentation and Record-keeping: Emphasis will be placed on maintaining accurate and complete documentation throughout the procurement process. Standardized templates and forms will be introduced to streamline documentation and record-keeping practices. 4. Continuous Improvement and Evaluation: We are committed to fostering a culture of continuous improvement by soliciting feedback from stakeholders and conducting periodic evaluations of our procurement processes. Lessons learned will be incorporated into our practices to drive ongoing enhancement. 5. Communication and Transparency: We will communicate the details of our corrective action plan to all relevant stakeholders within the District, fostering transparency and ensuring alignment with our objectives. Regular updates on the progress of implementation will be provided to keep stakeholders informed. We understand the importance of compliance with procurement requirements in safeguarding the integrity of our Special Education program. By diligently implementing our corrective action plan, we are confident in our ability to address the identified deficiencies and strengthen our procurement practices moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 – Methods of procurement to be followed, describes each allowable procurement method.

2023-002 The District did not have adequate controls for ensuring compliance with procurement requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education – Grants to States 84.027 COVID – 19 Special Education – Grants to States 84.173 Special Education – Preschool Grants 84.173 COVID – 19 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: 84.027 - 312301 84.027 - 307757 84.027 - GT-01031 84.173 - 371270 84.173 - 367149 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Special Education program is to ensure students with disabilities receive a free and appropriate public education. The program has specifically designed instruction addressing the unique needs of an eligible student. During fiscal year 2023, the District spent $939,648 in federal funds through its Special Education program. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods and services, governments must apply the more restrictive of federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure services using noncompetitive proposals when the service is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition The District did not follow its policy and federal regulations for formally procuring a contract for personal services costing more than $250,000. Specifically, the District used the sole-source method to waive competitive procurement for language therapy services totaling $287,800 and charged $166,790 to the federal program for these services. The District did not research to evaluate whether this service was limited to a single source. We determined this contract should have been formally procured as there were multiple contractors that could have performed these services. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. Cause of Condition District staff responsible for procuring the professional services did not fully understand federal procurement requirements and District policy. The District posted the language therapist position on its website as a job posting. When a contractor responded to the posting, the District entered into a personal service contract instead of continuing its search for an employee to perform these services. The District completed its sole-source form but did not adequately research to verify if there were other contractors that could have provided these services. Effect of Condition Without competitively procuring the services, the District cannot demonstrate it received the best price for the services it purchased or selected the most qualified contractor. Additionally, the District cannot demonstrate that it complied with federal regulations services. We determined the purchases are allowable under the federal program; therefore, we are not questioning costs. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements, including sole-source evaluations District’s Response Thank you for providing valuable feedback on our procurement practices within the Special Education program. We appreciate the opportunity to address the findings outlined in your report. Upon review of the audit finding indicating inadequate controls for ensuring compliance with procurement requirements, we acknowledge the importance of this matter and are committed to taking immediate corrective actions to rectify the identified deficiencies. Our initial analysis indicates that several factors may have contributed to the lack of adequate controls in procurement compliance within the Special Education program. These include potential gaps in understanding procurement regulations as well as insufficient staff training. To address these issues effectively, we have developed a comprehensive corrective action plan, which includes the following key steps: 1. Staff Training and Capacity Building: We recognize the importance of providing adequate training to staff members involved in procurement within the Special Education program. Training sessions will be conducted to enhance their understanding of procurement regulations, policies, and ethical practices. 2. Enhanced Oversight and Monitoring: We will designate responsible individuals or a team to oversee procurement activities within the Special Education program. Regular monitoring mechanisms will be implemented to review procurement processes and transactions for compliance with established procedures. 3. Strengthening Documentation and Record-keeping: Emphasis will be placed on maintaining accurate and complete documentation throughout the procurement process. Standardized templates and forms will be introduced to streamline documentation and record-keeping practices. 4. Continuous Improvement and Evaluation: We are committed to fostering a culture of continuous improvement by soliciting feedback from stakeholders and conducting periodic evaluations of our procurement processes. Lessons learned will be incorporated into our practices to drive ongoing enhancement. 5. Communication and Transparency: We will communicate the details of our corrective action plan to all relevant stakeholders within the District, fostering transparency and ensuring alignment with our objectives. Regular updates on the progress of implementation will be provided to keep stakeholders informed. We understand the importance of compliance with procurement requirements in safeguarding the integrity of our Special Education program. By diligently implementing our corrective action plan, we are confident in our ability to address the identified deficiencies and strengthen our procurement practices moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 – Methods of procurement to be followed, describes each allowable procurement method.

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-001 The District did not have adequate internal controls with allowable activities and costs, equipment and restricted purpose requirement. Assistance Listing Number and Title: 32.009, COVID-19 – Emergency Connectivity Fund Program Federal Grantor Name: Federal Communication Commission Federal Award/Contract Number: WL21-ECF-47101 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $260,866 Prior Year Audit Finding: 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 2023, the District spent $260,866 in ECF Program funds to purchase laptops for students. 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. Allowable Activities and Costs ECF Program recipients may only seek reimbursement for eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking reimbursement for eligible equipment and services used solely at the school or held for future use (in other words, warehousing). Equipment The Federal Communications Commission (FCC) requires ECF Program recipients to maintain inventories of the devices and services they have purchased with program funds. The FCC also requires inventory records to include specific elements, such as the type of equipment or service provided, equipment make/model and serial number, name of the students or employees provided the equipment or service, dates they used the equipment or service and more. 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-Location and 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, and no more than one fixed broadband connection per location, such as a student’s or employee’s residence. Description of Condition Allowable Activities and Costs/Restricted Purpose – Unmet Need The District estimated unmet need for eligible equipment 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 provided to students. Specifically, the District purchased laptops, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $260,866. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student with unmet need. Equipment The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for all laptops purchased with ECF Program funds, the District did not include names of the students provided or responsible for the equipment and the dates they used it. 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. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. 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. Further, District staff who were authorized to order eligible equipment did not know about the required certifications, stating that the District was only seeking reimbursement for eligible equipment provided to students or employees with unmet need. Equipment The District’s asset inventory system did not track when it assigned the ECF-purchased laptops during the school year. As a result, the District was unable to produce adequate documentation to demonstrate all required information was tracked throughout the audit period. Restricted Purpose – Per-Location and Per-User Limitations Staff said they were unaware of the requirement to maintain documentation showing it only provided one device per student. 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 to students 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 the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students’ 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 Office of the Washington State Auditor 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. Equipment Without maintaining proper asset inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded equipment. Restricted Purpose – Per-Location and Per-User Limitations Because the District did not maintain documentation, it cannot demonstrate compliance with the FCC’s restrictions. Additionally, we cannot determine whether the District only provided one device per user. Recommendation We recommend the District work with the awarding 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 and services provided to students and staff with unmet need, and maintain documentation demonstrating compliance • Maintain inventories that include all required elements to track the use of equipment and services paid with ECF Program funds • Provide no more than one device per student and employee, and no more than one broadband connection per location, in compliance with the ECF Program’s requirements District’s Response Thank you for your comprehensive recommendations regarding our utilization of ECF Program funds. The district concurs with the finding. We acknowledge the importance of ensuring compliance and accountability in our use of these resources. Regarding the recommendation to collaborate with the awarding agency for audit resolution, we will promptly initiate communication to address any outstanding issues and work diligently to resolve them in accordance with regulatory requirements. Additionally, we understand the significance of establishing robust internal controls to safeguard against misuse and ensure adherence to program guidelines. We will take the following actions to strengthen our internal controls: 1. Reimbursement Requests: We will institute a thorough review process to ensure that reimbursement requests are submitted only for eligible equipment and services provided to students and staff with identified unmet need. Documentation demonstrating compliance will be meticulously maintained to facilitate transparency and accountability. 2. Inventory Management: We will enhance our inventory management practices to include all necessary elements for tracking the use of equipment and services procured with ECF Program funds. This will enable us to accurately monitor the allocation and utilization of resources, thereby mitigating the risk of mismanagement or loss. 3. Device and Connection Allocation: To align with the requirements of the ECF Program, we will strictly adhere to the provision of no more than one device per student and employee, as well as no more than one broadband connection per location. This measure will ensure equitable distribution and optimize the impact of the resources allocated. By implementing these measures, we are committed to upholding the integrity of the ECF Program and maximizing its benefits for our students and staff. We appreciate your guidance and will proactively work towards achieving full compliance with program regulations. 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. The State Auditor’s Office 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, the State Auditor’s Office 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.

2023-002 The District did not have adequate controls for ensuring compliance with procurement requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education – Grants to States 84.027 COVID – 19 Special Education – Grants to States 84.173 Special Education – Preschool Grants 84.173 COVID – 19 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: 84.027 - 312301 84.027 - 307757 84.027 - GT-01031 84.173 - 371270 84.173 - 367149 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Special Education program is to ensure students with disabilities receive a free and appropriate public education. The program has specifically designed instruction addressing the unique needs of an eligible student. During fiscal year 2023, the District spent $939,648 in federal funds through its Special Education program. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods and services, governments must apply the more restrictive of federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure services using noncompetitive proposals when the service is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition The District did not follow its policy and federal regulations for formally procuring a contract for personal services costing more than $250,000. Specifically, the District used the sole-source method to waive competitive procurement for language therapy services totaling $287,800 and charged $166,790 to the federal program for these services. The District did not research to evaluate whether this service was limited to a single source. We determined this contract should have been formally procured as there were multiple contractors that could have performed these services. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. Cause of Condition District staff responsible for procuring the professional services did not fully understand federal procurement requirements and District policy. The District posted the language therapist position on its website as a job posting. When a contractor responded to the posting, the District entered into a personal service contract instead of continuing its search for an employee to perform these services. The District completed its sole-source form but did not adequately research to verify if there were other contractors that could have provided these services. Effect of Condition Without competitively procuring the services, the District cannot demonstrate it received the best price for the services it purchased or selected the most qualified contractor. Additionally, the District cannot demonstrate that it complied with federal regulations services. We determined the purchases are allowable under the federal program; therefore, we are not questioning costs. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements, including sole-source evaluations District’s Response Thank you for providing valuable feedback on our procurement practices within the Special Education program. We appreciate the opportunity to address the findings outlined in your report. Upon review of the audit finding indicating inadequate controls for ensuring compliance with procurement requirements, we acknowledge the importance of this matter and are committed to taking immediate corrective actions to rectify the identified deficiencies. Our initial analysis indicates that several factors may have contributed to the lack of adequate controls in procurement compliance within the Special Education program. These include potential gaps in understanding procurement regulations as well as insufficient staff training. To address these issues effectively, we have developed a comprehensive corrective action plan, which includes the following key steps: 1. Staff Training and Capacity Building: We recognize the importance of providing adequate training to staff members involved in procurement within the Special Education program. Training sessions will be conducted to enhance their understanding of procurement regulations, policies, and ethical practices. 2. Enhanced Oversight and Monitoring: We will designate responsible individuals or a team to oversee procurement activities within the Special Education program. Regular monitoring mechanisms will be implemented to review procurement processes and transactions for compliance with established procedures. 3. Strengthening Documentation and Record-keeping: Emphasis will be placed on maintaining accurate and complete documentation throughout the procurement process. Standardized templates and forms will be introduced to streamline documentation and record-keeping practices. 4. Continuous Improvement and Evaluation: We are committed to fostering a culture of continuous improvement by soliciting feedback from stakeholders and conducting periodic evaluations of our procurement processes. Lessons learned will be incorporated into our practices to drive ongoing enhancement. 5. Communication and Transparency: We will communicate the details of our corrective action plan to all relevant stakeholders within the District, fostering transparency and ensuring alignment with our objectives. Regular updates on the progress of implementation will be provided to keep stakeholders informed. We understand the importance of compliance with procurement requirements in safeguarding the integrity of our Special Education program. By diligently implementing our corrective action plan, we are confident in our ability to address the identified deficiencies and strengthen our procurement practices moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 – Methods of procurement to be followed, describes each allowable procurement method.

2023-002 The District did not have adequate controls for ensuring compliance with procurement requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education – Grants to States 84.027 COVID – 19 Special Education – Grants to States 84.173 Special Education – Preschool Grants 84.173 COVID – 19 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: 84.027 - 312301 84.027 - 307757 84.027 - GT-01031 84.173 - 371270 84.173 - 367149 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Special Education program is to ensure students with disabilities receive a free and appropriate public education. The program has specifically designed instruction addressing the unique needs of an eligible student. During fiscal year 2023, the District spent $939,648 in federal funds through its Special Education program. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods and services, governments must apply the more restrictive of federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure services using noncompetitive proposals when the service is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition The District did not follow its policy and federal regulations for formally procuring a contract for personal services costing more than $250,000. Specifically, the District used the sole-source method to waive competitive procurement for language therapy services totaling $287,800 and charged $166,790 to the federal program for these services. The District did not research to evaluate whether this service was limited to a single source. We determined this contract should have been formally procured as there were multiple contractors that could have performed these services. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. Cause of Condition District staff responsible for procuring the professional services did not fully understand federal procurement requirements and District policy. The District posted the language therapist position on its website as a job posting. When a contractor responded to the posting, the District entered into a personal service contract instead of continuing its search for an employee to perform these services. The District completed its sole-source form but did not adequately research to verify if there were other contractors that could have provided these services. Effect of Condition Without competitively procuring the services, the District cannot demonstrate it received the best price for the services it purchased or selected the most qualified contractor. Additionally, the District cannot demonstrate that it complied with federal regulations services. We determined the purchases are allowable under the federal program; therefore, we are not questioning costs. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements, including sole-source evaluations District’s Response Thank you for providing valuable feedback on our procurement practices within the Special Education program. We appreciate the opportunity to address the findings outlined in your report. Upon review of the audit finding indicating inadequate controls for ensuring compliance with procurement requirements, we acknowledge the importance of this matter and are committed to taking immediate corrective actions to rectify the identified deficiencies. Our initial analysis indicates that several factors may have contributed to the lack of adequate controls in procurement compliance within the Special Education program. These include potential gaps in understanding procurement regulations as well as insufficient staff training. To address these issues effectively, we have developed a comprehensive corrective action plan, which includes the following key steps: 1. Staff Training and Capacity Building: We recognize the importance of providing adequate training to staff members involved in procurement within the Special Education program. Training sessions will be conducted to enhance their understanding of procurement regulations, policies, and ethical practices. 2. Enhanced Oversight and Monitoring: We will designate responsible individuals or a team to oversee procurement activities within the Special Education program. Regular monitoring mechanisms will be implemented to review procurement processes and transactions for compliance with established procedures. 3. Strengthening Documentation and Record-keeping: Emphasis will be placed on maintaining accurate and complete documentation throughout the procurement process. Standardized templates and forms will be introduced to streamline documentation and record-keeping practices. 4. Continuous Improvement and Evaluation: We are committed to fostering a culture of continuous improvement by soliciting feedback from stakeholders and conducting periodic evaluations of our procurement processes. Lessons learned will be incorporated into our practices to drive ongoing enhancement. 5. Communication and Transparency: We will communicate the details of our corrective action plan to all relevant stakeholders within the District, fostering transparency and ensuring alignment with our objectives. Regular updates on the progress of implementation will be provided to keep stakeholders informed. We understand the importance of compliance with procurement requirements in safeguarding the integrity of our Special Education program. By diligently implementing our corrective action plan, we are confident in our ability to address the identified deficiencies and strengthen our procurement practices moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 – Methods of procurement to be followed, describes each allowable procurement method.

2023-002 The District did not have adequate controls for ensuring compliance with procurement requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education – Grants to States 84.027 COVID – 19 Special Education – Grants to States 84.173 Special Education – Preschool Grants 84.173 COVID – 19 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: 84.027 - 312301 84.027 - 307757 84.027 - GT-01031 84.173 - 371270 84.173 - 367149 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Special Education program is to ensure students with disabilities receive a free and appropriate public education. The program has specifically designed instruction addressing the unique needs of an eligible student. During fiscal year 2023, the District spent $939,648 in federal funds through its Special Education program. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods and services, governments must apply the more restrictive of federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure services using noncompetitive proposals when the service is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition The District did not follow its policy and federal regulations for formally procuring a contract for personal services costing more than $250,000. Specifically, the District used the sole-source method to waive competitive procurement for language therapy services totaling $287,800 and charged $166,790 to the federal program for these services. The District did not research to evaluate whether this service was limited to a single source. We determined this contract should have been formally procured as there were multiple contractors that could have performed these services. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. Cause of Condition District staff responsible for procuring the professional services did not fully understand federal procurement requirements and District policy. The District posted the language therapist position on its website as a job posting. When a contractor responded to the posting, the District entered into a personal service contract instead of continuing its search for an employee to perform these services. The District completed its sole-source form but did not adequately research to verify if there were other contractors that could have provided these services. Effect of Condition Without competitively procuring the services, the District cannot demonstrate it received the best price for the services it purchased or selected the most qualified contractor. Additionally, the District cannot demonstrate that it complied with federal regulations services. We determined the purchases are allowable under the federal program; therefore, we are not questioning costs. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements, including sole-source evaluations District’s Response Thank you for providing valuable feedback on our procurement practices within the Special Education program. We appreciate the opportunity to address the findings outlined in your report. Upon review of the audit finding indicating inadequate controls for ensuring compliance with procurement requirements, we acknowledge the importance of this matter and are committed to taking immediate corrective actions to rectify the identified deficiencies. Our initial analysis indicates that several factors may have contributed to the lack of adequate controls in procurement compliance within the Special Education program. These include potential gaps in understanding procurement regulations as well as insufficient staff training. To address these issues effectively, we have developed a comprehensive corrective action plan, which includes the following key steps: 1. Staff Training and Capacity Building: We recognize the importance of providing adequate training to staff members involved in procurement within the Special Education program. Training sessions will be conducted to enhance their understanding of procurement regulations, policies, and ethical practices. 2. Enhanced Oversight and Monitoring: We will designate responsible individuals or a team to oversee procurement activities within the Special Education program. Regular monitoring mechanisms will be implemented to review procurement processes and transactions for compliance with established procedures. 3. Strengthening Documentation and Record-keeping: Emphasis will be placed on maintaining accurate and complete documentation throughout the procurement process. Standardized templates and forms will be introduced to streamline documentation and record-keeping practices. 4. Continuous Improvement and Evaluation: We are committed to fostering a culture of continuous improvement by soliciting feedback from stakeholders and conducting periodic evaluations of our procurement processes. Lessons learned will be incorporated into our practices to drive ongoing enhancement. 5. Communication and Transparency: We will communicate the details of our corrective action plan to all relevant stakeholders within the District, fostering transparency and ensuring alignment with our objectives. Regular updates on the progress of implementation will be provided to keep stakeholders informed. We understand the importance of compliance with procurement requirements in safeguarding the integrity of our Special Education program. By diligently implementing our corrective action plan, we are confident in our ability to address the identified deficiencies and strengthen our procurement practices moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 – Methods of procurement to be followed, describes each allowable procurement method.

2023-002 The District did not have adequate controls for ensuring compliance with procurement requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education – Grants to States 84.027 COVID – 19 Special Education – Grants to States 84.173 Special Education – Preschool Grants 84.173 COVID – 19 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: 84.027 - 312301 84.027 - 307757 84.027 - GT-01031 84.173 - 371270 84.173 - 367149 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Special Education program is to ensure students with disabilities receive a free and appropriate public education. The program has specifically designed instruction addressing the unique needs of an eligible student. During fiscal year 2023, the District spent $939,648 in federal funds through its Special Education program. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods and services, governments must apply the more restrictive of federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure services using noncompetitive proposals when the service is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition The District did not follow its policy and federal regulations for formally procuring a contract for personal services costing more than $250,000. Specifically, the District used the sole-source method to waive competitive procurement for language therapy services totaling $287,800 and charged $166,790 to the federal program for these services. The District did not research to evaluate whether this service was limited to a single source. We determined this contract should have been formally procured as there were multiple contractors that could have performed these services. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. Cause of Condition District staff responsible for procuring the professional services did not fully understand federal procurement requirements and District policy. The District posted the language therapist position on its website as a job posting. When a contractor responded to the posting, the District entered into a personal service contract instead of continuing its search for an employee to perform these services. The District completed its sole-source form but did not adequately research to verify if there were other contractors that could have provided these services. Effect of Condition Without competitively procuring the services, the District cannot demonstrate it received the best price for the services it purchased or selected the most qualified contractor. Additionally, the District cannot demonstrate that it complied with federal regulations services. We determined the purchases are allowable under the federal program; therefore, we are not questioning costs. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements, including sole-source evaluations District’s Response Thank you for providing valuable feedback on our procurement practices within the Special Education program. We appreciate the opportunity to address the findings outlined in your report. Upon review of the audit finding indicating inadequate controls for ensuring compliance with procurement requirements, we acknowledge the importance of this matter and are committed to taking immediate corrective actions to rectify the identified deficiencies. Our initial analysis indicates that several factors may have contributed to the lack of adequate controls in procurement compliance within the Special Education program. These include potential gaps in understanding procurement regulations as well as insufficient staff training. To address these issues effectively, we have developed a comprehensive corrective action plan, which includes the following key steps: 1. Staff Training and Capacity Building: We recognize the importance of providing adequate training to staff members involved in procurement within the Special Education program. Training sessions will be conducted to enhance their understanding of procurement regulations, policies, and ethical practices. 2. Enhanced Oversight and Monitoring: We will designate responsible individuals or a team to oversee procurement activities within the Special Education program. Regular monitoring mechanisms will be implemented to review procurement processes and transactions for compliance with established procedures. 3. Strengthening Documentation and Record-keeping: Emphasis will be placed on maintaining accurate and complete documentation throughout the procurement process. Standardized templates and forms will be introduced to streamline documentation and record-keeping practices. 4. Continuous Improvement and Evaluation: We are committed to fostering a culture of continuous improvement by soliciting feedback from stakeholders and conducting periodic evaluations of our procurement processes. Lessons learned will be incorporated into our practices to drive ongoing enhancement. 5. Communication and Transparency: We will communicate the details of our corrective action plan to all relevant stakeholders within the District, fostering transparency and ensuring alignment with our objectives. Regular updates on the progress of implementation will be provided to keep stakeholders informed. We understand the importance of compliance with procurement requirements in safeguarding the integrity of our Special Education program. By diligently implementing our corrective action plan, we are confident in our ability to address the identified deficiencies and strengthen our procurement practices moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 – Methods of procurement to be followed, describes each allowable procurement method.

2023-002 The District did not have adequate controls for ensuring compliance with procurement requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education – Grants to States 84.027 COVID – 19 Special Education – Grants to States 84.173 Special Education – Preschool Grants 84.173 COVID – 19 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: 84.027 - 312301 84.027 - 307757 84.027 - GT-01031 84.173 - 371270 84.173 - 367149 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Special Education program is to ensure students with disabilities receive a free and appropriate public education. The program has specifically designed instruction addressing the unique needs of an eligible student. During fiscal year 2023, the District spent $939,648 in federal funds through its Special Education program. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods and services, governments must apply the more restrictive of federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure services using noncompetitive proposals when the service is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition The District did not follow its policy and federal regulations for formally procuring a contract for personal services costing more than $250,000. Specifically, the District used the sole-source method to waive competitive procurement for language therapy services totaling $287,800 and charged $166,790 to the federal program for these services. The District did not research to evaluate whether this service was limited to a single source. We determined this contract should have been formally procured as there were multiple contractors that could have performed these services. We consider this deficiency in internal controls to be material weakness that led to material noncompliance. Cause of Condition District staff responsible for procuring the professional services did not fully understand federal procurement requirements and District policy. The District posted the language therapist position on its website as a job posting. When a contractor responded to the posting, the District entered into a personal service contract instead of continuing its search for an employee to perform these services. The District completed its sole-source form but did not adequately research to verify if there were other contractors that could have provided these services. Effect of Condition Without competitively procuring the services, the District cannot demonstrate it received the best price for the services it purchased or selected the most qualified contractor. Additionally, the District cannot demonstrate that it complied with federal regulations services. We determined the purchases are allowable under the federal program; therefore, we are not questioning costs. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements, including sole-source evaluations District’s Response Thank you for providing valuable feedback on our procurement practices within the Special Education program. We appreciate the opportunity to address the findings outlined in your report. Upon review of the audit finding indicating inadequate controls for ensuring compliance with procurement requirements, we acknowledge the importance of this matter and are committed to taking immediate corrective actions to rectify the identified deficiencies. Our initial analysis indicates that several factors may have contributed to the lack of adequate controls in procurement compliance within the Special Education program. These include potential gaps in understanding procurement regulations as well as insufficient staff training. To address these issues effectively, we have developed a comprehensive corrective action plan, which includes the following key steps: 1. Staff Training and Capacity Building: We recognize the importance of providing adequate training to staff members involved in procurement within the Special Education program. Training sessions will be conducted to enhance their understanding of procurement regulations, policies, and ethical practices. 2. Enhanced Oversight and Monitoring: We will designate responsible individuals or a team to oversee procurement activities within the Special Education program. Regular monitoring mechanisms will be implemented to review procurement processes and transactions for compliance with established procedures. 3. Strengthening Documentation and Record-keeping: Emphasis will be placed on maintaining accurate and complete documentation throughout the procurement process. Standardized templates and forms will be introduced to streamline documentation and record-keeping practices. 4. Continuous Improvement and Evaluation: We are committed to fostering a culture of continuous improvement by soliciting feedback from stakeholders and conducting periodic evaluations of our procurement processes. Lessons learned will be incorporated into our practices to drive ongoing enhancement. 5. Communication and Transparency: We will communicate the details of our corrective action plan to all relevant stakeholders within the District, fostering transparency and ensuring alignment with our objectives. Regular updates on the progress of implementation will be provided to keep stakeholders informed. We understand the importance of compliance with procurement requirements in safeguarding the integrity of our Special Education program. By diligently implementing our corrective action plan, we are confident in our ability to address the identified deficiencies and strengthen our procurement practices moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Section 320 – Methods of procurement to be followed, describes each allowable procurement method.

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).

2023-003 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs and federal 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: 84.425U-137210 84.425U-138191 84.425W-459040 84.425U-144921 84.425U-140056 84.425D-135507 84.425D-140546 84.425D-144566 Known Questioned Cost Amount: $36,441 Prior Year Audit Finding: Yes, Finding 2022-003 Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In the fiscal year 2023, the District spent a total of $3,087,660 of its ESF awards. This included $196,669 in the Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (84.425D), $2,848,767 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER/ESSER III) subprogram (84.425U) and $42,224 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCY) subprogram (84.425W). 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. Activities Allowed/Allowable Costs Federal regulations also establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and be supported by proper documentation that demonstrates costs are allowable. Federal Wage Rate Requirements 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 funds 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 contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractors and its subcontractors 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. Description of Condition Activities Allowed/Allowable Costs Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District did not ensure that all expenditures claimed were supported and allowed to be charged to the program. Our audit found that the District requested reimbursement for $36,441 more than its expenses for its ESSER III award (84.425U).   Federal Wage Rate Requirements During the 2023 school year, the District spent $384,089 for payments to one contractor for a security camera system project. 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 the required prevailing wage provisions in the contract • Collect weekly certified payroll reports from the contractor and subcontractors to confirm they paid laborers the proper prevailing wages We consider these deficiencies in internal controls over federal wage rate requirements to be material weaknesses that led to material noncompliance. Cause of Condition Activities Allowed/Allowable Costs The District moved expenses out of the program after requesting reimbursement and did not update its reimbursement request. Federal Wage Rate Requirements District staff were not aware of federal prevailing wage requirements and were unaware of the requirement to obtain and review certified payroll reports each week prior to payment until after the project was complete. Effect of Condition and Questioned Costs Activities Allowed/Allowable Costs We found that the District requested reimbursement for $35,269 of direct and $1,172 of indirect costs through its ESSER III award (84.425U) that were not supported by allowable expenditures. 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. Federal Wage Rate Requirements Without adequate internal controls to ensure it includes the prevailing wage rate clauses in its contracts 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. The District did not include federal prevailing wage provisions in its contracts and did not collect weekly certified payroll reports for the contractor and subcontractors. Recommendation We recommend the District ensure only allowable costs are charged to federal awards. We further recommend the District design internal controls to ensure compliance with federal prevailing wage rate requirements. This should include inserting 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. Additionally, we recommend the District provide additional training to ensure staff overseeing compliance with the federal programs are aware of all applicable requirements. District’s Response Wahluke School District is currently working on implementing adequate internal controls for prevailing wages. We now have new staff in place, so we are currently creating internal controls over prevailing wage requirements by doing the following: 1. Policy and Procedure Documentation: Establish clear policies and procedures outlining the school district's commitment to complying with prevailing wage requirements. 2. Training and Education: Provide training to relevant staff members responsible for payroll, human resources, and project management on prevailing wage requirements. 3. Vendor and Contractor Oversight: Require contractors to provide certified payroll reports regularly, detailing wages paid to each worker on prevailing wage projects. 4. Recordkeeping and Documentation: Maintain detailed records of all labor costs associated with prevailing wage projects. This includes employee time cards, payroll records, fringe benefit payments, and any other documentation required by state law. 5. Segregation of Duties: Implement segregation of duties to prevent one individual from having sole control over the entire process. For example, separate individuals should be responsible for approving timecards, preparing payroll, and reconciling payroll records. 6. Regular Audits and Reviews: Conduct regular internal audits or reviews of payroll records to ensure compliance with prevailing wage requirements. This can help identify any discrepancies or errors that need to be addressed promptly. 7. Monitoring and Enforcement: Establish mechanisms for monitoring compliance with prevailing wage requirements. Enforce consequences for non-compliance, such as withholding payments until issues are resolved or terminating contracts with repeat offenders. 8. Communication Channels: Maintain open lines of communication with employees, contractors, and relevant government agencies regarding prevailing wage requirements. 9. External Assistance: Consider engaging external consultants or legal counsel with expertise in prevailing wage compliance to provide guidance and assistance as needed. By implementing these internal controls, Wahluke School District can help ensure that it meets its obligations under prevailing wage laws, minimizes the risk of non-compliance, and maintains transparency and accountability in its operations. The Wahluke School District has established internal controls to track expenses diligently and ensure that the claims submitted are only for allowable activities and cost. Program Directors and Building Administrators receive weekly budget reports that they review for accuracy to ensure that only allowable activities are charged to their grants. The district has also included the Grants Manager in the review and approval of requisitions and time cards. This ensures that all proposed expenditures and time worked is allowable and aligns with the grant spending plan. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations 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. 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 in 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).