Audit 328694

2023-001 The District charged unallowable costs to the Supply Chain Assistance award of the Child Nutrition Cluster. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,938 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–23 school year, the District received $1,571,422 in federal funding, including $287,371 in Supply Chain Assistance awards, to administer these programs. Federal regulations require school districts to comply with allowable uses of the funds. Specifically, for the Supply Chain Assistance awards, district must use funds exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. While the District had a process to track all food items it claimed under the Supply Chain Assistance award, our audit found the District charged unallowable and unsupported food items to the award. Cause of Condition The Supply Chain Assistance award was new for the Child Nutrition Cluster in the 2022–23 school year. The District did not perform sufficient monitoring and relied on one staff member to ensure allowable costs were applied to the program. Staff were unfamiliar with the restrictive requirements for the award and claimed all food-related expenditures as allowable. Effect of Condition and Questioned Costs We determined the District received reimbursement for 17 unallowed food purchases of processed food products totaling $25,938. We are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. Failure to comply with federal requirements may jeopardize the District’s eligibility for future federal assistance. Recommendation We recommend the District monitor to ensure staff understand program requirements and only charge allowable costs to federal programs in compliance with federal allowable cost requirements. District’s Response The district concurs with the auditors regarding claiming processed items under the Supply Chain Assistance award. Although the district was aware of the restrictions on this award and sought input from others regarding the allowability of the claimed items, there were several processed food products that slipped into the final claim. The disallowed items cost a total of $25,938. The district had an additional list of fruits and vegetables for 2022-23 totaling $75,059.71 that were not included in the original claim, an amount far exceeding the disallowed total. For 2023-24, the district has made multiple checks for processed vs unprocessed foods claimed in the Supply Chain Assistance award. This includes multiple staff reviewing the claimed items and cross-checking against the 2022-23 claim. All items deemed processed have been removed from the2023-24 claim. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, establishes requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District charged unallowable costs to the Supply Chain Assistance award of the Child Nutrition Cluster. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,938 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–23 school year, the District received $1,571,422 in federal funding, including $287,371 in Supply Chain Assistance awards, to administer these programs. Federal regulations require school districts to comply with allowable uses of the funds. Specifically, for the Supply Chain Assistance awards, district must use funds exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. While the District had a process to track all food items it claimed under the Supply Chain Assistance award, our audit found the District charged unallowable and unsupported food items to the award. Cause of Condition The Supply Chain Assistance award was new for the Child Nutrition Cluster in the 2022–23 school year. The District did not perform sufficient monitoring and relied on one staff member to ensure allowable costs were applied to the program. Staff were unfamiliar with the restrictive requirements for the award and claimed all food-related expenditures as allowable. Effect of Condition and Questioned Costs We determined the District received reimbursement for 17 unallowed food purchases of processed food products totaling $25,938. We are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. Failure to comply with federal requirements may jeopardize the District’s eligibility for future federal assistance. Recommendation We recommend the District monitor to ensure staff understand program requirements and only charge allowable costs to federal programs in compliance with federal allowable cost requirements. District’s Response The district concurs with the auditors regarding claiming processed items under the Supply Chain Assistance award. Although the district was aware of the restrictions on this award and sought input from others regarding the allowability of the claimed items, there were several processed food products that slipped into the final claim. The disallowed items cost a total of $25,938. The district had an additional list of fruits and vegetables for 2022-23 totaling $75,059.71 that were not included in the original claim, an amount far exceeding the disallowed total. For 2023-24, the district has made multiple checks for processed vs unprocessed foods claimed in the Supply Chain Assistance award. This includes multiple staff reviewing the claimed items and cross-checking against the 2022-23 claim. All items deemed processed have been removed from the2023-24 claim. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, establishes requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District charged unallowable costs to the Supply Chain Assistance award of the Child Nutrition Cluster. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,938 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–23 school year, the District received $1,571,422 in federal funding, including $287,371 in Supply Chain Assistance awards, to administer these programs. Federal regulations require school districts to comply with allowable uses of the funds. Specifically, for the Supply Chain Assistance awards, district must use funds exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. While the District had a process to track all food items it claimed under the Supply Chain Assistance award, our audit found the District charged unallowable and unsupported food items to the award. Cause of Condition The Supply Chain Assistance award was new for the Child Nutrition Cluster in the 2022–23 school year. The District did not perform sufficient monitoring and relied on one staff member to ensure allowable costs were applied to the program. Staff were unfamiliar with the restrictive requirements for the award and claimed all food-related expenditures as allowable. Effect of Condition and Questioned Costs We determined the District received reimbursement for 17 unallowed food purchases of processed food products totaling $25,938. We are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. Failure to comply with federal requirements may jeopardize the District’s eligibility for future federal assistance. Recommendation We recommend the District monitor to ensure staff understand program requirements and only charge allowable costs to federal programs in compliance with federal allowable cost requirements. District’s Response The district concurs with the auditors regarding claiming processed items under the Supply Chain Assistance award. Although the district was aware of the restrictions on this award and sought input from others regarding the allowability of the claimed items, there were several processed food products that slipped into the final claim. The disallowed items cost a total of $25,938. The district had an additional list of fruits and vegetables for 2022-23 totaling $75,059.71 that were not included in the original claim, an amount far exceeding the disallowed total. For 2023-24, the district has made multiple checks for processed vs unprocessed foods claimed in the Supply Chain Assistance award. This includes multiple staff reviewing the claimed items and cross-checking against the 2022-23 claim. All items deemed processed have been removed from the2023-24 claim. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, establishes requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District charged unallowable costs to the Supply Chain Assistance award of the Child Nutrition Cluster. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,938 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–23 school year, the District received $1,571,422 in federal funding, including $287,371 in Supply Chain Assistance awards, to administer these programs. Federal regulations require school districts to comply with allowable uses of the funds. Specifically, for the Supply Chain Assistance awards, district must use funds exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. While the District had a process to track all food items it claimed under the Supply Chain Assistance award, our audit found the District charged unallowable and unsupported food items to the award. Cause of Condition The Supply Chain Assistance award was new for the Child Nutrition Cluster in the 2022–23 school year. The District did not perform sufficient monitoring and relied on one staff member to ensure allowable costs were applied to the program. Staff were unfamiliar with the restrictive requirements for the award and claimed all food-related expenditures as allowable. Effect of Condition and Questioned Costs We determined the District received reimbursement for 17 unallowed food purchases of processed food products totaling $25,938. We are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. Failure to comply with federal requirements may jeopardize the District’s eligibility for future federal assistance. Recommendation We recommend the District monitor to ensure staff understand program requirements and only charge allowable costs to federal programs in compliance with federal allowable cost requirements. District’s Response The district concurs with the auditors regarding claiming processed items under the Supply Chain Assistance award. Although the district was aware of the restrictions on this award and sought input from others regarding the allowability of the claimed items, there were several processed food products that slipped into the final claim. The disallowed items cost a total of $25,938. The district had an additional list of fruits and vegetables for 2022-23 totaling $75,059.71 that were not included in the original claim, an amount far exceeding the disallowed total. For 2023-24, the district has made multiple checks for processed vs unprocessed foods claimed in the Supply Chain Assistance award. This includes multiple staff reviewing the claimed items and cross-checking against the 2022-23 claim. All items deemed processed have been removed from the2023-24 claim. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, establishes requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District charged unallowable costs to the Supply Chain Assistance award of the Child Nutrition Cluster. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,938 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–23 school year, the District received $1,571,422 in federal funding, including $287,371 in Supply Chain Assistance awards, to administer these programs. Federal regulations require school districts to comply with allowable uses of the funds. Specifically, for the Supply Chain Assistance awards, district must use funds exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. While the District had a process to track all food items it claimed under the Supply Chain Assistance award, our audit found the District charged unallowable and unsupported food items to the award. Cause of Condition The Supply Chain Assistance award was new for the Child Nutrition Cluster in the 2022–23 school year. The District did not perform sufficient monitoring and relied on one staff member to ensure allowable costs were applied to the program. Staff were unfamiliar with the restrictive requirements for the award and claimed all food-related expenditures as allowable. Effect of Condition and Questioned Costs We determined the District received reimbursement for 17 unallowed food purchases of processed food products totaling $25,938. We are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. Failure to comply with federal requirements may jeopardize the District’s eligibility for future federal assistance. Recommendation We recommend the District monitor to ensure staff understand program requirements and only charge allowable costs to federal programs in compliance with federal allowable cost requirements. District’s Response The district concurs with the auditors regarding claiming processed items under the Supply Chain Assistance award. Although the district was aware of the restrictions on this award and sought input from others regarding the allowability of the claimed items, there were several processed food products that slipped into the final claim. The disallowed items cost a total of $25,938. The district had an additional list of fruits and vegetables for 2022-23 totaling $75,059.71 that were not included in the original claim, an amount far exceeding the disallowed total. For 2023-24, the district has made multiple checks for processed vs unprocessed foods claimed in the Supply Chain Assistance award. This includes multiple staff reviewing the claimed items and cross-checking against the 2022-23 claim. All items deemed processed have been removed from the2023-24 claim. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, establishes requirements for allowable use of Supply Chain Assistance funds.

2023-002 The District’s internal controls were inadequate for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 21.027 – COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: City of Snohomish, Snohomish County Pass-through Award/Contract Number: BH-22-AR-03-242, EL-22-AR-26-034 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2023, the District spent $292,149 in federal funds from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program to provide mental health counseling, community resource navigation and early learning services. The objective of the program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected and make necessary investments in water, sewer or broadband infrastructure. 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 program controls. When using federal funds to purchase services, governments must apply the most restrictive of federal requirements, state laws or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. District policy conforms to the most restrictive laws and requires that it must obtain price or rate quotations from a reasonable number (for example, more than one) of qualified sources for personal services costing between $10,000 and $250,000. Description of Condition The District contracted with an external staffing agency to obtain three mental health counselors’ services. The District entered into three separate contracts with the staffing agency for these services. The District paid the staffing agency, which then paid the counselors for their work. The District’s internal controls were not effective for ensuring it complied with federal procurement requirements. Specifically, the District did not follow its policy for procuring and awarding the contracts to the staffing agency. The District paid the external staffing agency $184,680 for mental health counselor services and charged these costs to the federal program. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition District staff misunderstood federal procurement requirements and believed that these services were for unique staffing situations and therefore exempt from competitive procurement. As a result, the District did not obtain more than one quote for staffing agency services as required. Effect of Condition Without soliciting more than one quote as required, the District cannot demonstrate that it complied with its policy and federal regulations and received the best price for the staffing agency services or selected the most qualified contractor. Recommendation We recommend the District strengthen internal controls to ensure staff responsible for procuring services understand and follow federal procurement requirements and the District’s own procurement policies and procedures. District’s Response The District agrees that it should have followed policy 6220, which requires the District to obtain price or rate quotations from a reasonable number of qualified sources for personal services costing between $10,000 and $250,000. The District will follow it’s policy for services purchased with Federal Funds in the future. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures and requirements for maintaining records sufficient to detail the history of procurement. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities.

2023-002 The District’s internal controls were inadequate for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 21.027 – COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: City of Snohomish, Snohomish County Pass-through Award/Contract Number: BH-22-AR-03-242, EL-22-AR-26-034 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2023, the District spent $292,149 in federal funds from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program to provide mental health counseling, community resource navigation and early learning services. The objective of the program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected and make necessary investments in water, sewer or broadband infrastructure. 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 program controls. When using federal funds to purchase services, governments must apply the most restrictive of federal requirements, state laws or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. District policy conforms to the most restrictive laws and requires that it must obtain price or rate quotations from a reasonable number (for example, more than one) of qualified sources for personal services costing between $10,000 and $250,000. Description of Condition The District contracted with an external staffing agency to obtain three mental health counselors’ services. The District entered into three separate contracts with the staffing agency for these services. The District paid the staffing agency, which then paid the counselors for their work. The District’s internal controls were not effective for ensuring it complied with federal procurement requirements. Specifically, the District did not follow its policy for procuring and awarding the contracts to the staffing agency. The District paid the external staffing agency $184,680 for mental health counselor services and charged these costs to the federal program. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition District staff misunderstood federal procurement requirements and believed that these services were for unique staffing situations and therefore exempt from competitive procurement. As a result, the District did not obtain more than one quote for staffing agency services as required. Effect of Condition Without soliciting more than one quote as required, the District cannot demonstrate that it complied with its policy and federal regulations and received the best price for the staffing agency services or selected the most qualified contractor. Recommendation We recommend the District strengthen internal controls to ensure staff responsible for procuring services understand and follow federal procurement requirements and the District’s own procurement policies and procedures. District’s Response The District agrees that it should have followed policy 6220, which requires the District to obtain price or rate quotations from a reasonable number of qualified sources for personal services costing between $10,000 and $250,000. The District will follow it’s policy for services purchased with Federal Funds in the future. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures and requirements for maintaining records sufficient to detail the history of procurement. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities.

2023-001 The District charged unallowable costs to the Supply Chain Assistance award of the Child Nutrition Cluster. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,938 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–23 school year, the District received $1,571,422 in federal funding, including $287,371 in Supply Chain Assistance awards, to administer these programs. Federal regulations require school districts to comply with allowable uses of the funds. Specifically, for the Supply Chain Assistance awards, district must use funds exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. While the District had a process to track all food items it claimed under the Supply Chain Assistance award, our audit found the District charged unallowable and unsupported food items to the award. Cause of Condition The Supply Chain Assistance award was new for the Child Nutrition Cluster in the 2022–23 school year. The District did not perform sufficient monitoring and relied on one staff member to ensure allowable costs were applied to the program. Staff were unfamiliar with the restrictive requirements for the award and claimed all food-related expenditures as allowable. Effect of Condition and Questioned Costs We determined the District received reimbursement for 17 unallowed food purchases of processed food products totaling $25,938. We are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. Failure to comply with federal requirements may jeopardize the District’s eligibility for future federal assistance. Recommendation We recommend the District monitor to ensure staff understand program requirements and only charge allowable costs to federal programs in compliance with federal allowable cost requirements. District’s Response The district concurs with the auditors regarding claiming processed items under the Supply Chain Assistance award. Although the district was aware of the restrictions on this award and sought input from others regarding the allowability of the claimed items, there were several processed food products that slipped into the final claim. The disallowed items cost a total of $25,938. The district had an additional list of fruits and vegetables for 2022-23 totaling $75,059.71 that were not included in the original claim, an amount far exceeding the disallowed total. For 2023-24, the district has made multiple checks for processed vs unprocessed foods claimed in the Supply Chain Assistance award. This includes multiple staff reviewing the claimed items and cross-checking against the 2022-23 claim. All items deemed processed have been removed from the2023-24 claim. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, establishes requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District charged unallowable costs to the Supply Chain Assistance award of the Child Nutrition Cluster. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,938 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–23 school year, the District received $1,571,422 in federal funding, including $287,371 in Supply Chain Assistance awards, to administer these programs. Federal regulations require school districts to comply with allowable uses of the funds. Specifically, for the Supply Chain Assistance awards, district must use funds exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. While the District had a process to track all food items it claimed under the Supply Chain Assistance award, our audit found the District charged unallowable and unsupported food items to the award. Cause of Condition The Supply Chain Assistance award was new for the Child Nutrition Cluster in the 2022–23 school year. The District did not perform sufficient monitoring and relied on one staff member to ensure allowable costs were applied to the program. Staff were unfamiliar with the restrictive requirements for the award and claimed all food-related expenditures as allowable. Effect of Condition and Questioned Costs We determined the District received reimbursement for 17 unallowed food purchases of processed food products totaling $25,938. We are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. Failure to comply with federal requirements may jeopardize the District’s eligibility for future federal assistance. Recommendation We recommend the District monitor to ensure staff understand program requirements and only charge allowable costs to federal programs in compliance with federal allowable cost requirements. District’s Response The district concurs with the auditors regarding claiming processed items under the Supply Chain Assistance award. Although the district was aware of the restrictions on this award and sought input from others regarding the allowability of the claimed items, there were several processed food products that slipped into the final claim. The disallowed items cost a total of $25,938. The district had an additional list of fruits and vegetables for 2022-23 totaling $75,059.71 that were not included in the original claim, an amount far exceeding the disallowed total. For 2023-24, the district has made multiple checks for processed vs unprocessed foods claimed in the Supply Chain Assistance award. This includes multiple staff reviewing the claimed items and cross-checking against the 2022-23 claim. All items deemed processed have been removed from the2023-24 claim. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, establishes requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District charged unallowable costs to the Supply Chain Assistance award of the Child Nutrition Cluster. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,938 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–23 school year, the District received $1,571,422 in federal funding, including $287,371 in Supply Chain Assistance awards, to administer these programs. Federal regulations require school districts to comply with allowable uses of the funds. Specifically, for the Supply Chain Assistance awards, district must use funds exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. While the District had a process to track all food items it claimed under the Supply Chain Assistance award, our audit found the District charged unallowable and unsupported food items to the award. Cause of Condition The Supply Chain Assistance award was new for the Child Nutrition Cluster in the 2022–23 school year. The District did not perform sufficient monitoring and relied on one staff member to ensure allowable costs were applied to the program. Staff were unfamiliar with the restrictive requirements for the award and claimed all food-related expenditures as allowable. Effect of Condition and Questioned Costs We determined the District received reimbursement for 17 unallowed food purchases of processed food products totaling $25,938. We are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. Failure to comply with federal requirements may jeopardize the District’s eligibility for future federal assistance. Recommendation We recommend the District monitor to ensure staff understand program requirements and only charge allowable costs to federal programs in compliance with federal allowable cost requirements. District’s Response The district concurs with the auditors regarding claiming processed items under the Supply Chain Assistance award. Although the district was aware of the restrictions on this award and sought input from others regarding the allowability of the claimed items, there were several processed food products that slipped into the final claim. The disallowed items cost a total of $25,938. The district had an additional list of fruits and vegetables for 2022-23 totaling $75,059.71 that were not included in the original claim, an amount far exceeding the disallowed total. For 2023-24, the district has made multiple checks for processed vs unprocessed foods claimed in the Supply Chain Assistance award. This includes multiple staff reviewing the claimed items and cross-checking against the 2022-23 claim. All items deemed processed have been removed from the2023-24 claim. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, establishes requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District charged unallowable costs to the Supply Chain Assistance award of the Child Nutrition Cluster. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,938 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–23 school year, the District received $1,571,422 in federal funding, including $287,371 in Supply Chain Assistance awards, to administer these programs. Federal regulations require school districts to comply with allowable uses of the funds. Specifically, for the Supply Chain Assistance awards, district must use funds exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. While the District had a process to track all food items it claimed under the Supply Chain Assistance award, our audit found the District charged unallowable and unsupported food items to the award. Cause of Condition The Supply Chain Assistance award was new for the Child Nutrition Cluster in the 2022–23 school year. The District did not perform sufficient monitoring and relied on one staff member to ensure allowable costs were applied to the program. Staff were unfamiliar with the restrictive requirements for the award and claimed all food-related expenditures as allowable. Effect of Condition and Questioned Costs We determined the District received reimbursement for 17 unallowed food purchases of processed food products totaling $25,938. We are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. Failure to comply with federal requirements may jeopardize the District’s eligibility for future federal assistance. Recommendation We recommend the District monitor to ensure staff understand program requirements and only charge allowable costs to federal programs in compliance with federal allowable cost requirements. District’s Response The district concurs with the auditors regarding claiming processed items under the Supply Chain Assistance award. Although the district was aware of the restrictions on this award and sought input from others regarding the allowability of the claimed items, there were several processed food products that slipped into the final claim. The disallowed items cost a total of $25,938. The district had an additional list of fruits and vegetables for 2022-23 totaling $75,059.71 that were not included in the original claim, an amount far exceeding the disallowed total. For 2023-24, the district has made multiple checks for processed vs unprocessed foods claimed in the Supply Chain Assistance award. This includes multiple staff reviewing the claimed items and cross-checking against the 2022-23 claim. All items deemed processed have been removed from the2023-24 claim. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, establishes requirements for allowable use of Supply Chain Assistance funds.

2023-001 The District charged unallowable costs to the Supply Chain Assistance award of the Child Nutrition Cluster. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,938 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–23 school year, the District received $1,571,422 in federal funding, including $287,371 in Supply Chain Assistance awards, to administer these programs. Federal regulations require school districts to comply with allowable uses of the funds. Specifically, for the Supply Chain Assistance awards, district must use funds exclusively to purchase domestic, unprocessed or minimally processed food products for the school meal programs. Description of Condition The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. While the District had a process to track all food items it claimed under the Supply Chain Assistance award, our audit found the District charged unallowable and unsupported food items to the award. Cause of Condition The Supply Chain Assistance award was new for the Child Nutrition Cluster in the 2022–23 school year. The District did not perform sufficient monitoring and relied on one staff member to ensure allowable costs were applied to the program. Staff were unfamiliar with the restrictive requirements for the award and claimed all food-related expenditures as allowable. Effect of Condition and Questioned Costs We determined the District received reimbursement for 17 unallowed food purchases of processed food products totaling $25,938. We are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. Failure to comply with federal requirements may jeopardize the District’s eligibility for future federal assistance. Recommendation We recommend the District monitor to ensure staff understand program requirements and only charge allowable costs to federal programs in compliance with federal allowable cost requirements. District’s Response The district concurs with the auditors regarding claiming processed items under the Supply Chain Assistance award. Although the district was aware of the restrictions on this award and sought input from others regarding the allowability of the claimed items, there were several processed food products that slipped into the final claim. The disallowed items cost a total of $25,938. The district had an additional list of fruits and vegetables for 2022-23 totaling $75,059.71 that were not included in the original claim, an amount far exceeding the disallowed total. For 2023-24, the district has made multiple checks for processed vs unprocessed foods claimed in the Supply Chain Assistance award. This includes multiple staff reviewing the claimed items and cross-checking against the 2022-23 claim. All items deemed processed have been removed from the2023-24 claim. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction (OSPI) Bulletin 029-22, Child Nutrition Services, establishes requirements for allowable use of Supply Chain Assistance funds.

2023-002 The District’s internal controls were inadequate for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 21.027 – COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: City of Snohomish, Snohomish County Pass-through Award/Contract Number: BH-22-AR-03-242, EL-22-AR-26-034 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2023, the District spent $292,149 in federal funds from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program to provide mental health counseling, community resource navigation and early learning services. The objective of the program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected and make necessary investments in water, sewer or broadband infrastructure. 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 program controls. When using federal funds to purchase services, governments must apply the most restrictive of federal requirements, state laws or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. District policy conforms to the most restrictive laws and requires that it must obtain price or rate quotations from a reasonable number (for example, more than one) of qualified sources for personal services costing between $10,000 and $250,000. Description of Condition The District contracted with an external staffing agency to obtain three mental health counselors’ services. The District entered into three separate contracts with the staffing agency for these services. The District paid the staffing agency, which then paid the counselors for their work. The District’s internal controls were not effective for ensuring it complied with federal procurement requirements. Specifically, the District did not follow its policy for procuring and awarding the contracts to the staffing agency. The District paid the external staffing agency $184,680 for mental health counselor services and charged these costs to the federal program. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition District staff misunderstood federal procurement requirements and believed that these services were for unique staffing situations and therefore exempt from competitive procurement. As a result, the District did not obtain more than one quote for staffing agency services as required. Effect of Condition Without soliciting more than one quote as required, the District cannot demonstrate that it complied with its policy and federal regulations and received the best price for the staffing agency services or selected the most qualified contractor. Recommendation We recommend the District strengthen internal controls to ensure staff responsible for procuring services understand and follow federal procurement requirements and the District’s own procurement policies and procedures. District’s Response The District agrees that it should have followed policy 6220, which requires the District to obtain price or rate quotations from a reasonable number of qualified sources for personal services costing between $10,000 and $250,000. The District will follow it’s policy for services purchased with Federal Funds in the future. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures and requirements for maintaining records sufficient to detail the history of procurement. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities.

2023-002 The District’s internal controls were inadequate for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 21.027 – COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: City of Snohomish, Snohomish County Pass-through Award/Contract Number: BH-22-AR-03-242, EL-22-AR-26-034 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2023, the District spent $292,149 in federal funds from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program to provide mental health counseling, community resource navigation and early learning services. The objective of the program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected and make necessary investments in water, sewer or broadband infrastructure. 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 program controls. When using federal funds to purchase services, governments must apply the most restrictive of federal requirements, state laws or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. District policy conforms to the most restrictive laws and requires that it must obtain price or rate quotations from a reasonable number (for example, more than one) of qualified sources for personal services costing between $10,000 and $250,000. Description of Condition The District contracted with an external staffing agency to obtain three mental health counselors’ services. The District entered into three separate contracts with the staffing agency for these services. The District paid the staffing agency, which then paid the counselors for their work. The District’s internal controls were not effective for ensuring it complied with federal procurement requirements. Specifically, the District did not follow its policy for procuring and awarding the contracts to the staffing agency. The District paid the external staffing agency $184,680 for mental health counselor services and charged these costs to the federal program. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition District staff misunderstood federal procurement requirements and believed that these services were for unique staffing situations and therefore exempt from competitive procurement. As a result, the District did not obtain more than one quote for staffing agency services as required. Effect of Condition Without soliciting more than one quote as required, the District cannot demonstrate that it complied with its policy and federal regulations and received the best price for the staffing agency services or selected the most qualified contractor. Recommendation We recommend the District strengthen internal controls to ensure staff responsible for procuring services understand and follow federal procurement requirements and the District’s own procurement policies and procedures. District’s Response The District agrees that it should have followed policy 6220, which requires the District to obtain price or rate quotations from a reasonable number of qualified sources for personal services costing between $10,000 and $250,000. The District will follow it’s policy for services purchased with Federal Funds in the future. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures and requirements for maintaining records sufficient to detail the history of procurement. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities.