Audit 316941

2023-001 The District did not have adequate internal controls for ensuring compliance with federal allowable activities and allowable costs requirements Assistance Listing Number and Title: 10.553—School Breakfast Program 10.555—National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $190,241 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–2023 school year, the District received a total of $2,163,900 in federal funding, including $395,741 in Supply Chain Assistance (SCA) awards to administer these programs. 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. 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 Page 6 by proper documentation that demonstrates costs are allowable. Specifically, for the Supply Chain Assistance funds, the District must use the award exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District’s internal controls were inadequate to ensure it maintained sufficient records to demonstrate that it supported expenditures it claimed and that the District was allowed by SCA to charge them to the program. The District used SCA funds to pay $190,241 to a vendor that provided dairy products to its schools but did not retain support to show which specific products it purchased. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District’s nutrition services department did not understand the requirement to track expenditures and retain supporting documents. The Nutrition Service Department discarded the packing slips that contained itemized details of the dairy products it purchased at each school building. Effect of Condition and Questioned Costs Because the District did not retain sufficient evidence supporting it only paid for specific products SCA allowed, it could not demonstrate compliance with the SCA funding requirements. We identified $190,241 in total payments the District made to one vendor for dairy products without sufficient supporting documentation. Since we cannot confirm the expenditures the District charged to the program were allowable, we are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District does not have sufficient documentation to support expenditures. Recommendation We recommend the District ensure it retains sufficient documentation to demonstrate that costs it charged to the federal program are supported, allowable and comply with program requirements. Office of the Washington State Auditor sao.wa.gov Page 7 District’s Response We appreciate the work of the State Auditor’s Office (SAO) on this year’s audit and the opportunity to submit this response. The District received its initial allocation of federal funding for Supply Chain Assistance (SCA) during the fiscal year 2022-2023. This funding is in response to unprecedented challenges in purchasing and receiving food that operators of USDA Meal Programs are experiencing. Supply Chain Assistance funds must be used to purchase domestic, unprocessed, or minimally processed food products for the school meal programs. Examples include: Fluid milk or other dairy foods such as cheese and yogurt, fruits and vegetables etc. In order to be eligible for the funding, the District signed attestation statement form with OSPI in May 2022. The District used SCA funds to pay a vendor for locally produced dairy products for our schools that complied with the funding requirements. Invoices from the vendor show the total amount for each delivery but did not include item level details. With each delivery, a packing slip was provided to the Food Services Department staff members to confirm the receipt of approved items and reconcile for invoice approval. Once invoices were reconciled and properly approved with a signature indicating review, the District used the official invoice statement for payment processing and the delivery packing slip was no longer retained. To assist with the audit, the District provided auditors with the dairy vendor contract, vendor invoice statements, and an attestation letter from vendor stating the items purchased conformed to the SCA item list. Unfortunately, these documents were deemed insufficient to allow SAO re-performing our internal controls to test its effectiveness. After SAO communicated the necessity for delivery packing slips in their testing, the District enhanced our current practice and began retaining all packing slips to support SAO’s internal control effectiveness review. We welcome any feedback to further strengthen our overall financial management practices moving forward. Auditor’s Remarks We appreciate the steps the District is taking to address this issue. We will review the condition during our next audit. Office of the Washington State Auditor sao.wa.gov Page 8 Office of the Washington State Auditor sao.wa.gov Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs. Title 7 CFR 210.9(b)(17), Agreement with State Agency, which include maintaining documentation demonstrating appropriate use of SCA funds Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, documents requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District did not have adequate internal controls for ensuring compliance with federal allowable activities and allowable costs requirements Assistance Listing Number and Title: 10.553—School Breakfast Program 10.555—National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $190,241 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–2023 school year, the District received a total of $2,163,900 in federal funding, including $395,741 in Supply Chain Assistance (SCA) awards to administer these programs. 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. 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 Page 6 by proper documentation that demonstrates costs are allowable. Specifically, for the Supply Chain Assistance funds, the District must use the award exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District’s internal controls were inadequate to ensure it maintained sufficient records to demonstrate that it supported expenditures it claimed and that the District was allowed by SCA to charge them to the program. The District used SCA funds to pay $190,241 to a vendor that provided dairy products to its schools but did not retain support to show which specific products it purchased. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District’s nutrition services department did not understand the requirement to track expenditures and retain supporting documents. The Nutrition Service Department discarded the packing slips that contained itemized details of the dairy products it purchased at each school building. Effect of Condition and Questioned Costs Because the District did not retain sufficient evidence supporting it only paid for specific products SCA allowed, it could not demonstrate compliance with the SCA funding requirements. We identified $190,241 in total payments the District made to one vendor for dairy products without sufficient supporting documentation. Since we cannot confirm the expenditures the District charged to the program were allowable, we are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District does not have sufficient documentation to support expenditures. Recommendation We recommend the District ensure it retains sufficient documentation to demonstrate that costs it charged to the federal program are supported, allowable and comply with program requirements. Office of the Washington State Auditor sao.wa.gov Page 7 District’s Response We appreciate the work of the State Auditor’s Office (SAO) on this year’s audit and the opportunity to submit this response. The District received its initial allocation of federal funding for Supply Chain Assistance (SCA) during the fiscal year 2022-2023. This funding is in response to unprecedented challenges in purchasing and receiving food that operators of USDA Meal Programs are experiencing. Supply Chain Assistance funds must be used to purchase domestic, unprocessed, or minimally processed food products for the school meal programs. Examples include: Fluid milk or other dairy foods such as cheese and yogurt, fruits and vegetables etc. In order to be eligible for the funding, the District signed attestation statement form with OSPI in May 2022. The District used SCA funds to pay a vendor for locally produced dairy products for our schools that complied with the funding requirements. Invoices from the vendor show the total amount for each delivery but did not include item level details. With each delivery, a packing slip was provided to the Food Services Department staff members to confirm the receipt of approved items and reconcile for invoice approval. Once invoices were reconciled and properly approved with a signature indicating review, the District used the official invoice statement for payment processing and the delivery packing slip was no longer retained. To assist with the audit, the District provided auditors with the dairy vendor contract, vendor invoice statements, and an attestation letter from vendor stating the items purchased conformed to the SCA item list. Unfortunately, these documents were deemed insufficient to allow SAO re-performing our internal controls to test its effectiveness. After SAO communicated the necessity for delivery packing slips in their testing, the District enhanced our current practice and began retaining all packing slips to support SAO’s internal control effectiveness review. We welcome any feedback to further strengthen our overall financial management practices moving forward. Auditor’s Remarks We appreciate the steps the District is taking to address this issue. We will review the condition during our next audit. Office of the Washington State Auditor sao.wa.gov Page 8 Office of the Washington State Auditor sao.wa.gov Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs. Title 7 CFR 210.9(b)(17), Agreement with State Agency, which include maintaining documentation demonstrating appropriate use of SCA funds Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, documents requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District did not have adequate internal controls for ensuring compliance with federal allowable activities and allowable costs requirements Assistance Listing Number and Title: 10.553—School Breakfast Program 10.555—National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $190,241 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–2023 school year, the District received a total of $2,163,900 in federal funding, including $395,741 in Supply Chain Assistance (SCA) awards to administer these programs. 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. 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 Page 6 by proper documentation that demonstrates costs are allowable. Specifically, for the Supply Chain Assistance funds, the District must use the award exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District’s internal controls were inadequate to ensure it maintained sufficient records to demonstrate that it supported expenditures it claimed and that the District was allowed by SCA to charge them to the program. The District used SCA funds to pay $190,241 to a vendor that provided dairy products to its schools but did not retain support to show which specific products it purchased. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District’s nutrition services department did not understand the requirement to track expenditures and retain supporting documents. The Nutrition Service Department discarded the packing slips that contained itemized details of the dairy products it purchased at each school building. Effect of Condition and Questioned Costs Because the District did not retain sufficient evidence supporting it only paid for specific products SCA allowed, it could not demonstrate compliance with the SCA funding requirements. We identified $190,241 in total payments the District made to one vendor for dairy products without sufficient supporting documentation. Since we cannot confirm the expenditures the District charged to the program were allowable, we are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District does not have sufficient documentation to support expenditures. Recommendation We recommend the District ensure it retains sufficient documentation to demonstrate that costs it charged to the federal program are supported, allowable and comply with program requirements. Office of the Washington State Auditor sao.wa.gov Page 7 District’s Response We appreciate the work of the State Auditor’s Office (SAO) on this year’s audit and the opportunity to submit this response. The District received its initial allocation of federal funding for Supply Chain Assistance (SCA) during the fiscal year 2022-2023. This funding is in response to unprecedented challenges in purchasing and receiving food that operators of USDA Meal Programs are experiencing. Supply Chain Assistance funds must be used to purchase domestic, unprocessed, or minimally processed food products for the school meal programs. Examples include: Fluid milk or other dairy foods such as cheese and yogurt, fruits and vegetables etc. In order to be eligible for the funding, the District signed attestation statement form with OSPI in May 2022. The District used SCA funds to pay a vendor for locally produced dairy products for our schools that complied with the funding requirements. Invoices from the vendor show the total amount for each delivery but did not include item level details. With each delivery, a packing slip was provided to the Food Services Department staff members to confirm the receipt of approved items and reconcile for invoice approval. Once invoices were reconciled and properly approved with a signature indicating review, the District used the official invoice statement for payment processing and the delivery packing slip was no longer retained. To assist with the audit, the District provided auditors with the dairy vendor contract, vendor invoice statements, and an attestation letter from vendor stating the items purchased conformed to the SCA item list. Unfortunately, these documents were deemed insufficient to allow SAO re-performing our internal controls to test its effectiveness. After SAO communicated the necessity for delivery packing slips in their testing, the District enhanced our current practice and began retaining all packing slips to support SAO’s internal control effectiveness review. We welcome any feedback to further strengthen our overall financial management practices moving forward. Auditor’s Remarks We appreciate the steps the District is taking to address this issue. We will review the condition during our next audit. Office of the Washington State Auditor sao.wa.gov Page 8 Office of the Washington State Auditor sao.wa.gov Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs. Title 7 CFR 210.9(b)(17), Agreement with State Agency, which include maintaining documentation demonstrating appropriate use of SCA funds Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, documents requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District did not have adequate internal controls for ensuring compliance with federal allowable activities and allowable costs requirements Assistance Listing Number and Title: 10.553—School Breakfast Program 10.555—National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $190,241 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–2023 school year, the District received a total of $2,163,900 in federal funding, including $395,741 in Supply Chain Assistance (SCA) awards to administer these programs. 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. 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 Page 6 by proper documentation that demonstrates costs are allowable. Specifically, for the Supply Chain Assistance funds, the District must use the award exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District’s internal controls were inadequate to ensure it maintained sufficient records to demonstrate that it supported expenditures it claimed and that the District was allowed by SCA to charge them to the program. The District used SCA funds to pay $190,241 to a vendor that provided dairy products to its schools but did not retain support to show which specific products it purchased. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District’s nutrition services department did not understand the requirement to track expenditures and retain supporting documents. The Nutrition Service Department discarded the packing slips that contained itemized details of the dairy products it purchased at each school building. Effect of Condition and Questioned Costs Because the District did not retain sufficient evidence supporting it only paid for specific products SCA allowed, it could not demonstrate compliance with the SCA funding requirements. We identified $190,241 in total payments the District made to one vendor for dairy products without sufficient supporting documentation. Since we cannot confirm the expenditures the District charged to the program were allowable, we are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District does not have sufficient documentation to support expenditures. Recommendation We recommend the District ensure it retains sufficient documentation to demonstrate that costs it charged to the federal program are supported, allowable and comply with program requirements. Office of the Washington State Auditor sao.wa.gov Page 7 District’s Response We appreciate the work of the State Auditor’s Office (SAO) on this year’s audit and the opportunity to submit this response. The District received its initial allocation of federal funding for Supply Chain Assistance (SCA) during the fiscal year 2022-2023. This funding is in response to unprecedented challenges in purchasing and receiving food that operators of USDA Meal Programs are experiencing. Supply Chain Assistance funds must be used to purchase domestic, unprocessed, or minimally processed food products for the school meal programs. Examples include: Fluid milk or other dairy foods such as cheese and yogurt, fruits and vegetables etc. In order to be eligible for the funding, the District signed attestation statement form with OSPI in May 2022. The District used SCA funds to pay a vendor for locally produced dairy products for our schools that complied with the funding requirements. Invoices from the vendor show the total amount for each delivery but did not include item level details. With each delivery, a packing slip was provided to the Food Services Department staff members to confirm the receipt of approved items and reconcile for invoice approval. Once invoices were reconciled and properly approved with a signature indicating review, the District used the official invoice statement for payment processing and the delivery packing slip was no longer retained. To assist with the audit, the District provided auditors with the dairy vendor contract, vendor invoice statements, and an attestation letter from vendor stating the items purchased conformed to the SCA item list. Unfortunately, these documents were deemed insufficient to allow SAO re-performing our internal controls to test its effectiveness. After SAO communicated the necessity for delivery packing slips in their testing, the District enhanced our current practice and began retaining all packing slips to support SAO’s internal control effectiveness review. We welcome any feedback to further strengthen our overall financial management practices moving forward. Auditor’s Remarks We appreciate the steps the District is taking to address this issue. We will review the condition during our next audit. Office of the Washington State Auditor sao.wa.gov Page 8 Office of the Washington State Auditor sao.wa.gov Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs. Title 7 CFR 210.9(b)(17), Agreement with State Agency, which include maintaining documentation demonstrating appropriate use of SCA funds Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, documents requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District did not have adequate internal controls for ensuring compliance with federal allowable activities and allowable costs requirements Assistance Listing Number and Title: 10.553—School Breakfast Program 10.555—National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $190,241 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–2023 school year, the District received a total of $2,163,900 in federal funding, including $395,741 in Supply Chain Assistance (SCA) awards to administer these programs. 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. 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 Page 6 by proper documentation that demonstrates costs are allowable. Specifically, for the Supply Chain Assistance funds, the District must use the award exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District’s internal controls were inadequate to ensure it maintained sufficient records to demonstrate that it supported expenditures it claimed and that the District was allowed by SCA to charge them to the program. The District used SCA funds to pay $190,241 to a vendor that provided dairy products to its schools but did not retain support to show which specific products it purchased. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District’s nutrition services department did not understand the requirement to track expenditures and retain supporting documents. The Nutrition Service Department discarded the packing slips that contained itemized details of the dairy products it purchased at each school building. Effect of Condition and Questioned Costs Because the District did not retain sufficient evidence supporting it only paid for specific products SCA allowed, it could not demonstrate compliance with the SCA funding requirements. We identified $190,241 in total payments the District made to one vendor for dairy products without sufficient supporting documentation. Since we cannot confirm the expenditures the District charged to the program were allowable, we are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District does not have sufficient documentation to support expenditures. Recommendation We recommend the District ensure it retains sufficient documentation to demonstrate that costs it charged to the federal program are supported, allowable and comply with program requirements. Office of the Washington State Auditor sao.wa.gov Page 7 District’s Response We appreciate the work of the State Auditor’s Office (SAO) on this year’s audit and the opportunity to submit this response. The District received its initial allocation of federal funding for Supply Chain Assistance (SCA) during the fiscal year 2022-2023. This funding is in response to unprecedented challenges in purchasing and receiving food that operators of USDA Meal Programs are experiencing. Supply Chain Assistance funds must be used to purchase domestic, unprocessed, or minimally processed food products for the school meal programs. Examples include: Fluid milk or other dairy foods such as cheese and yogurt, fruits and vegetables etc. In order to be eligible for the funding, the District signed attestation statement form with OSPI in May 2022. The District used SCA funds to pay a vendor for locally produced dairy products for our schools that complied with the funding requirements. Invoices from the vendor show the total amount for each delivery but did not include item level details. With each delivery, a packing slip was provided to the Food Services Department staff members to confirm the receipt of approved items and reconcile for invoice approval. Once invoices were reconciled and properly approved with a signature indicating review, the District used the official invoice statement for payment processing and the delivery packing slip was no longer retained. To assist with the audit, the District provided auditors with the dairy vendor contract, vendor invoice statements, and an attestation letter from vendor stating the items purchased conformed to the SCA item list. Unfortunately, these documents were deemed insufficient to allow SAO re-performing our internal controls to test its effectiveness. After SAO communicated the necessity for delivery packing slips in their testing, the District enhanced our current practice and began retaining all packing slips to support SAO’s internal control effectiveness review. We welcome any feedback to further strengthen our overall financial management practices moving forward. Auditor’s Remarks We appreciate the steps the District is taking to address this issue. We will review the condition during our next audit. Office of the Washington State Auditor sao.wa.gov Page 8 Office of the Washington State Auditor sao.wa.gov Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs. Title 7 CFR 210.9(b)(17), Agreement with State Agency, which include maintaining documentation demonstrating appropriate use of SCA funds Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, documents requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District did not have adequate internal controls for ensuring compliance with federal allowable activities and allowable costs requirements Assistance Listing Number and Title: 10.553—School Breakfast Program 10.555—National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $190,241 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–2023 school year, the District received a total of $2,163,900 in federal funding, including $395,741 in Supply Chain Assistance (SCA) awards to administer these programs. 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. 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 Page 6 by proper documentation that demonstrates costs are allowable. Specifically, for the Supply Chain Assistance funds, the District must use the award exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District’s internal controls were inadequate to ensure it maintained sufficient records to demonstrate that it supported expenditures it claimed and that the District was allowed by SCA to charge them to the program. The District used SCA funds to pay $190,241 to a vendor that provided dairy products to its schools but did not retain support to show which specific products it purchased. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District’s nutrition services department did not understand the requirement to track expenditures and retain supporting documents. The Nutrition Service Department discarded the packing slips that contained itemized details of the dairy products it purchased at each school building. Effect of Condition and Questioned Costs Because the District did not retain sufficient evidence supporting it only paid for specific products SCA allowed, it could not demonstrate compliance with the SCA funding requirements. We identified $190,241 in total payments the District made to one vendor for dairy products without sufficient supporting documentation. Since we cannot confirm the expenditures the District charged to the program were allowable, we are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District does not have sufficient documentation to support expenditures. Recommendation We recommend the District ensure it retains sufficient documentation to demonstrate that costs it charged to the federal program are supported, allowable and comply with program requirements. Office of the Washington State Auditor sao.wa.gov Page 7 District’s Response We appreciate the work of the State Auditor’s Office (SAO) on this year’s audit and the opportunity to submit this response. The District received its initial allocation of federal funding for Supply Chain Assistance (SCA) during the fiscal year 2022-2023. This funding is in response to unprecedented challenges in purchasing and receiving food that operators of USDA Meal Programs are experiencing. Supply Chain Assistance funds must be used to purchase domestic, unprocessed, or minimally processed food products for the school meal programs. Examples include: Fluid milk or other dairy foods such as cheese and yogurt, fruits and vegetables etc. In order to be eligible for the funding, the District signed attestation statement form with OSPI in May 2022. The District used SCA funds to pay a vendor for locally produced dairy products for our schools that complied with the funding requirements. Invoices from the vendor show the total amount for each delivery but did not include item level details. With each delivery, a packing slip was provided to the Food Services Department staff members to confirm the receipt of approved items and reconcile for invoice approval. Once invoices were reconciled and properly approved with a signature indicating review, the District used the official invoice statement for payment processing and the delivery packing slip was no longer retained. To assist with the audit, the District provided auditors with the dairy vendor contract, vendor invoice statements, and an attestation letter from vendor stating the items purchased conformed to the SCA item list. Unfortunately, these documents were deemed insufficient to allow SAO re-performing our internal controls to test its effectiveness. After SAO communicated the necessity for delivery packing slips in their testing, the District enhanced our current practice and began retaining all packing slips to support SAO’s internal control effectiveness review. We welcome any feedback to further strengthen our overall financial management practices moving forward. Auditor’s Remarks We appreciate the steps the District is taking to address this issue. We will review the condition during our next audit. Office of the Washington State Auditor sao.wa.gov Page 8 Office of the Washington State Auditor sao.wa.gov Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs. Title 7 CFR 210.9(b)(17), Agreement with State Agency, which include maintaining documentation demonstrating appropriate use of SCA funds Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, documents requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District did not have adequate internal controls for ensuring compliance with federal allowable activities and allowable costs requirements Assistance Listing Number and Title: 10.553—School Breakfast Program 10.555—National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $190,241 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–2023 school year, the District received a total of $2,163,900 in federal funding, including $395,741 in Supply Chain Assistance (SCA) awards to administer these programs. 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. 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 Page 6 by proper documentation that demonstrates costs are allowable. Specifically, for the Supply Chain Assistance funds, the District must use the award exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District’s internal controls were inadequate to ensure it maintained sufficient records to demonstrate that it supported expenditures it claimed and that the District was allowed by SCA to charge them to the program. The District used SCA funds to pay $190,241 to a vendor that provided dairy products to its schools but did not retain support to show which specific products it purchased. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District’s nutrition services department did not understand the requirement to track expenditures and retain supporting documents. The Nutrition Service Department discarded the packing slips that contained itemized details of the dairy products it purchased at each school building. Effect of Condition and Questioned Costs Because the District did not retain sufficient evidence supporting it only paid for specific products SCA allowed, it could not demonstrate compliance with the SCA funding requirements. We identified $190,241 in total payments the District made to one vendor for dairy products without sufficient supporting documentation. Since we cannot confirm the expenditures the District charged to the program were allowable, we are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District does not have sufficient documentation to support expenditures. Recommendation We recommend the District ensure it retains sufficient documentation to demonstrate that costs it charged to the federal program are supported, allowable and comply with program requirements. Office of the Washington State Auditor sao.wa.gov Page 7 District’s Response We appreciate the work of the State Auditor’s Office (SAO) on this year’s audit and the opportunity to submit this response. The District received its initial allocation of federal funding for Supply Chain Assistance (SCA) during the fiscal year 2022-2023. This funding is in response to unprecedented challenges in purchasing and receiving food that operators of USDA Meal Programs are experiencing. Supply Chain Assistance funds must be used to purchase domestic, unprocessed, or minimally processed food products for the school meal programs. Examples include: Fluid milk or other dairy foods such as cheese and yogurt, fruits and vegetables etc. In order to be eligible for the funding, the District signed attestation statement form with OSPI in May 2022. The District used SCA funds to pay a vendor for locally produced dairy products for our schools that complied with the funding requirements. Invoices from the vendor show the total amount for each delivery but did not include item level details. With each delivery, a packing slip was provided to the Food Services Department staff members to confirm the receipt of approved items and reconcile for invoice approval. Once invoices were reconciled and properly approved with a signature indicating review, the District used the official invoice statement for payment processing and the delivery packing slip was no longer retained. To assist with the audit, the District provided auditors with the dairy vendor contract, vendor invoice statements, and an attestation letter from vendor stating the items purchased conformed to the SCA item list. Unfortunately, these documents were deemed insufficient to allow SAO re-performing our internal controls to test its effectiveness. After SAO communicated the necessity for delivery packing slips in their testing, the District enhanced our current practice and began retaining all packing slips to support SAO’s internal control effectiveness review. We welcome any feedback to further strengthen our overall financial management practices moving forward. Auditor’s Remarks We appreciate the steps the District is taking to address this issue. We will review the condition during our next audit. Office of the Washington State Auditor sao.wa.gov Page 8 Office of the Washington State Auditor sao.wa.gov Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs. Title 7 CFR 210.9(b)(17), Agreement with State Agency, which include maintaining documentation demonstrating appropriate use of SCA funds Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, documents requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District did not have adequate internal controls for ensuring compliance with federal allowable activities and allowable costs requirements Assistance Listing Number and Title: 10.553—School Breakfast Program 10.555—National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $190,241 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–2023 school year, the District received a total of $2,163,900 in federal funding, including $395,741 in Supply Chain Assistance (SCA) awards to administer these programs. 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. 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 Page 6 by proper documentation that demonstrates costs are allowable. Specifically, for the Supply Chain Assistance funds, the District must use the award exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District’s internal controls were inadequate to ensure it maintained sufficient records to demonstrate that it supported expenditures it claimed and that the District was allowed by SCA to charge them to the program. The District used SCA funds to pay $190,241 to a vendor that provided dairy products to its schools but did not retain support to show which specific products it purchased. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District’s nutrition services department did not understand the requirement to track expenditures and retain supporting documents. The Nutrition Service Department discarded the packing slips that contained itemized details of the dairy products it purchased at each school building. Effect of Condition and Questioned Costs Because the District did not retain sufficient evidence supporting it only paid for specific products SCA allowed, it could not demonstrate compliance with the SCA funding requirements. We identified $190,241 in total payments the District made to one vendor for dairy products without sufficient supporting documentation. Since we cannot confirm the expenditures the District charged to the program were allowable, we are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District does not have sufficient documentation to support expenditures. Recommendation We recommend the District ensure it retains sufficient documentation to demonstrate that costs it charged to the federal program are supported, allowable and comply with program requirements. Office of the Washington State Auditor sao.wa.gov Page 7 District’s Response We appreciate the work of the State Auditor’s Office (SAO) on this year’s audit and the opportunity to submit this response. The District received its initial allocation of federal funding for Supply Chain Assistance (SCA) during the fiscal year 2022-2023. This funding is in response to unprecedented challenges in purchasing and receiving food that operators of USDA Meal Programs are experiencing. Supply Chain Assistance funds must be used to purchase domestic, unprocessed, or minimally processed food products for the school meal programs. Examples include: Fluid milk or other dairy foods such as cheese and yogurt, fruits and vegetables etc. In order to be eligible for the funding, the District signed attestation statement form with OSPI in May 2022. The District used SCA funds to pay a vendor for locally produced dairy products for our schools that complied with the funding requirements. Invoices from the vendor show the total amount for each delivery but did not include item level details. With each delivery, a packing slip was provided to the Food Services Department staff members to confirm the receipt of approved items and reconcile for invoice approval. Once invoices were reconciled and properly approved with a signature indicating review, the District used the official invoice statement for payment processing and the delivery packing slip was no longer retained. To assist with the audit, the District provided auditors with the dairy vendor contract, vendor invoice statements, and an attestation letter from vendor stating the items purchased conformed to the SCA item list. Unfortunately, these documents were deemed insufficient to allow SAO re-performing our internal controls to test its effectiveness. After SAO communicated the necessity for delivery packing slips in their testing, the District enhanced our current practice and began retaining all packing slips to support SAO’s internal control effectiveness review. We welcome any feedback to further strengthen our overall financial management practices moving forward. Auditor’s Remarks We appreciate the steps the District is taking to address this issue. We will review the condition during our next audit. Office of the Washington State Auditor sao.wa.gov Page 8 Office of the Washington State Auditor sao.wa.gov Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs. Title 7 CFR 210.9(b)(17), Agreement with State Agency, which include maintaining documentation demonstrating appropriate use of SCA funds Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, documents requirements for allowable use of Supply Chain Assistance funds.