Audit 356304

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Northeast Washington Educational Service District No. 101 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal suspension, debarment and reporting requirements. Assistance Listing Number and Title: 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1H79SM087476-01, 1H79SM084475-01 Pass-through Entity Name: Health Care Authority Pass-through Award/Contract Number: K6959-02, K6959-01 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $1,322,901 under four awards in the Substance Abuse and Mental Health Services Projects of Regional and National Significance program. Of this amount, the District passed through $343,394 to three subrecipients under direct award 1H79SM087476-01. 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. Suspension and Debarment Federal requirements prohibit recipients from contracting with or making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the subrecipient, adding a clause or condition into the contract that states the subrecipient is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Description of Condition Suspension and Debarment Although the District has a process to verify the suspension and debarment status for subrecipients, our audit found the District did not follow this process and did not verify one of three subrecipients was not suspended or debarred before making subawards to them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Reporting The District’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the District made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and Debarment Due to a contract processing error, the suspension and debarment clause was removed from the final subrecipient contract and staff did not notice the error before both parties signed the contract. Reporting District staff were unaware of the federal FFATA reporting requirements for the program. Effect of Condition Suspension and Debarment The District did not obtain a written certification from the subrecipient, insert a clause into the subaward or check for exclusion records at SAM.gov to verify one subrecipient it paid $48,621 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to subrecipients that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the subrecipient was not suspended or debarred. Therefore, we are not questioning costs. Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Recommendation Suspension and Debarment We recommend the District strengthen its internal controls to verify all subrecipients it pays all or in part with federal funds are not suspended or debarred from participating in federal programs. Reporting We recommend the District establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. District’s Response The district acknowledges the importance of internal controls and ensuring compliance with federal suspension and debarment requirements. Going forward we will be adding an additional step to our contract review process specifically for contracts that originate outside of the agency to ensure that suspension & debarment language is included in the contract or the agency has documented verification that the vendors are not suspended or debarred. Previously FFATA reporting was not specifically designated to one individual within the agency and going forward one business office staff member will be identified and responsible for the reporting. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Northeast Washington Educational Service District No. 101 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal suspension, debarment and reporting requirements. Assistance Listing Number and Title: 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1H79SM087476-01, 1H79SM084475-01 Pass-through Entity Name: Health Care Authority Pass-through Award/Contract Number: K6959-02, K6959-01 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $1,322,901 under four awards in the Substance Abuse and Mental Health Services Projects of Regional and National Significance program. Of this amount, the District passed through $343,394 to three subrecipients under direct award 1H79SM087476-01. 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. Suspension and Debarment Federal requirements prohibit recipients from contracting with or making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the subrecipient, adding a clause or condition into the contract that states the subrecipient is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Description of Condition Suspension and Debarment Although the District has a process to verify the suspension and debarment status for subrecipients, our audit found the District did not follow this process and did not verify one of three subrecipients was not suspended or debarred before making subawards to them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Reporting The District’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the District made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and Debarment Due to a contract processing error, the suspension and debarment clause was removed from the final subrecipient contract and staff did not notice the error before both parties signed the contract. Reporting District staff were unaware of the federal FFATA reporting requirements for the program. Effect of Condition Suspension and Debarment The District did not obtain a written certification from the subrecipient, insert a clause into the subaward or check for exclusion records at SAM.gov to verify one subrecipient it paid $48,621 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to subrecipients that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the subrecipient was not suspended or debarred. Therefore, we are not questioning costs. Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Recommendation Suspension and Debarment We recommend the District strengthen its internal controls to verify all subrecipients it pays all or in part with federal funds are not suspended or debarred from participating in federal programs. Reporting We recommend the District establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. District’s Response The district acknowledges the importance of internal controls and ensuring compliance with federal suspension and debarment requirements. Going forward we will be adding an additional step to our contract review process specifically for contracts that originate outside of the agency to ensure that suspension & debarment language is included in the contract or the agency has documented verification that the vendors are not suspended or debarred. Previously FFATA reporting was not specifically designated to one individual within the agency and going forward one business office staff member will be identified and responsible for the reporting. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Northeast Washington Educational Service District No. 101 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal suspension, debarment and reporting requirements. Assistance Listing Number and Title: 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1H79SM087476-01, 1H79SM084475-01 Pass-through Entity Name: Health Care Authority Pass-through Award/Contract Number: K6959-02, K6959-01 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $1,322,901 under four awards in the Substance Abuse and Mental Health Services Projects of Regional and National Significance program. Of this amount, the District passed through $343,394 to three subrecipients under direct award 1H79SM087476-01. 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. Suspension and Debarment Federal requirements prohibit recipients from contracting with or making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the subrecipient, adding a clause or condition into the contract that states the subrecipient is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Description of Condition Suspension and Debarment Although the District has a process to verify the suspension and debarment status for subrecipients, our audit found the District did not follow this process and did not verify one of three subrecipients was not suspended or debarred before making subawards to them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Reporting The District’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the District made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and Debarment Due to a contract processing error, the suspension and debarment clause was removed from the final subrecipient contract and staff did not notice the error before both parties signed the contract. Reporting District staff were unaware of the federal FFATA reporting requirements for the program. Effect of Condition Suspension and Debarment The District did not obtain a written certification from the subrecipient, insert a clause into the subaward or check for exclusion records at SAM.gov to verify one subrecipient it paid $48,621 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to subrecipients that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the subrecipient was not suspended or debarred. Therefore, we are not questioning costs. Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Recommendation Suspension and Debarment We recommend the District strengthen its internal controls to verify all subrecipients it pays all or in part with federal funds are not suspended or debarred from participating in federal programs. Reporting We recommend the District establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. District’s Response The district acknowledges the importance of internal controls and ensuring compliance with federal suspension and debarment requirements. Going forward we will be adding an additional step to our contract review process specifically for contracts that originate outside of the agency to ensure that suspension & debarment language is included in the contract or the agency has documented verification that the vendors are not suspended or debarred. Previously FFATA reporting was not specifically designated to one individual within the agency and going forward one business office staff member will be identified and responsible for the reporting. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Northeast Washington Educational Service District No. 101 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal suspension, debarment and reporting requirements. Assistance Listing Number and Title: 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1H79SM087476-01, 1H79SM084475-01 Pass-through Entity Name: Health Care Authority Pass-through Award/Contract Number: K6959-02, K6959-01 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $1,322,901 under four awards in the Substance Abuse and Mental Health Services Projects of Regional and National Significance program. Of this amount, the District passed through $343,394 to three subrecipients under direct award 1H79SM087476-01. 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. Suspension and Debarment Federal requirements prohibit recipients from contracting with or making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the subrecipient, adding a clause or condition into the contract that states the subrecipient is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Description of Condition Suspension and Debarment Although the District has a process to verify the suspension and debarment status for subrecipients, our audit found the District did not follow this process and did not verify one of three subrecipients was not suspended or debarred before making subawards to them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Reporting The District’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the District made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and Debarment Due to a contract processing error, the suspension and debarment clause was removed from the final subrecipient contract and staff did not notice the error before both parties signed the contract. Reporting District staff were unaware of the federal FFATA reporting requirements for the program. Effect of Condition Suspension and Debarment The District did not obtain a written certification from the subrecipient, insert a clause into the subaward or check for exclusion records at SAM.gov to verify one subrecipient it paid $48,621 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to subrecipients that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the subrecipient was not suspended or debarred. Therefore, we are not questioning costs. Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Recommendation Suspension and Debarment We recommend the District strengthen its internal controls to verify all subrecipients it pays all or in part with federal funds are not suspended or debarred from participating in federal programs. Reporting We recommend the District establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. District’s Response The district acknowledges the importance of internal controls and ensuring compliance with federal suspension and debarment requirements. Going forward we will be adding an additional step to our contract review process specifically for contracts that originate outside of the agency to ensure that suspension & debarment language is included in the contract or the agency has documented verification that the vendors are not suspended or debarred. Previously FFATA reporting was not specifically designated to one individual within the agency and going forward one business office staff member will be identified and responsible for the reporting. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Northeast Washington Educational Service District No. 101 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal suspension, debarment and reporting requirements. Assistance Listing Number and Title: 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1H79SM087476-01, 1H79SM084475-01 Pass-through Entity Name: Health Care Authority Pass-through Award/Contract Number: K6959-02, K6959-01 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $1,322,901 under four awards in the Substance Abuse and Mental Health Services Projects of Regional and National Significance program. Of this amount, the District passed through $343,394 to three subrecipients under direct award 1H79SM087476-01. 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. Suspension and Debarment Federal requirements prohibit recipients from contracting with or making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the subrecipient, adding a clause or condition into the contract that states the subrecipient is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Description of Condition Suspension and Debarment Although the District has a process to verify the suspension and debarment status for subrecipients, our audit found the District did not follow this process and did not verify one of three subrecipients was not suspended or debarred before making subawards to them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Reporting The District’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the District made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and Debarment Due to a contract processing error, the suspension and debarment clause was removed from the final subrecipient contract and staff did not notice the error before both parties signed the contract. Reporting District staff were unaware of the federal FFATA reporting requirements for the program. Effect of Condition Suspension and Debarment The District did not obtain a written certification from the subrecipient, insert a clause into the subaward or check for exclusion records at SAM.gov to verify one subrecipient it paid $48,621 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to subrecipients that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the subrecipient was not suspended or debarred. Therefore, we are not questioning costs. Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Recommendation Suspension and Debarment We recommend the District strengthen its internal controls to verify all subrecipients it pays all or in part with federal funds are not suspended or debarred from participating in federal programs. Reporting We recommend the District establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. District’s Response The district acknowledges the importance of internal controls and ensuring compliance with federal suspension and debarment requirements. Going forward we will be adding an additional step to our contract review process specifically for contracts that originate outside of the agency to ensure that suspension & debarment language is included in the contract or the agency has documented verification that the vendors are not suspended or debarred. Previously FFATA reporting was not specifically designated to one individual within the agency and going forward one business office staff member will be identified and responsible for the reporting. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Northeast Washington Educational Service District No. 101 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal suspension, debarment and reporting requirements. Assistance Listing Number and Title: 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1H79SM087476-01, 1H79SM084475-01 Pass-through Entity Name: Health Care Authority Pass-through Award/Contract Number: K6959-02, K6959-01 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $1,322,901 under four awards in the Substance Abuse and Mental Health Services Projects of Regional and National Significance program. Of this amount, the District passed through $343,394 to three subrecipients under direct award 1H79SM087476-01. 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. Suspension and Debarment Federal requirements prohibit recipients from contracting with or making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the subrecipient, adding a clause or condition into the contract that states the subrecipient is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Description of Condition Suspension and Debarment Although the District has a process to verify the suspension and debarment status for subrecipients, our audit found the District did not follow this process and did not verify one of three subrecipients was not suspended or debarred before making subawards to them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Reporting The District’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the District made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and Debarment Due to a contract processing error, the suspension and debarment clause was removed from the final subrecipient contract and staff did not notice the error before both parties signed the contract. Reporting District staff were unaware of the federal FFATA reporting requirements for the program. Effect of Condition Suspension and Debarment The District did not obtain a written certification from the subrecipient, insert a clause into the subaward or check for exclusion records at SAM.gov to verify one subrecipient it paid $48,621 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to subrecipients that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the subrecipient was not suspended or debarred. Therefore, we are not questioning costs. Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Recommendation Suspension and Debarment We recommend the District strengthen its internal controls to verify all subrecipients it pays all or in part with federal funds are not suspended or debarred from participating in federal programs. Reporting We recommend the District establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. District’s Response The district acknowledges the importance of internal controls and ensuring compliance with federal suspension and debarment requirements. Going forward we will be adding an additional step to our contract review process specifically for contracts that originate outside of the agency to ensure that suspension & debarment language is included in the contract or the agency has documented verification that the vendors are not suspended or debarred. Previously FFATA reporting was not specifically designated to one individual within the agency and going forward one business office staff member will be identified and responsible for the reporting. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Northeast Washington Educational Service District No. 101 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal suspension, debarment and reporting requirements. Assistance Listing Number and Title: 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1H79SM087476-01, 1H79SM084475-01 Pass-through Entity Name: Health Care Authority Pass-through Award/Contract Number: K6959-02, K6959-01 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $1,322,901 under four awards in the Substance Abuse and Mental Health Services Projects of Regional and National Significance program. Of this amount, the District passed through $343,394 to three subrecipients under direct award 1H79SM087476-01. 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. Suspension and Debarment Federal requirements prohibit recipients from contracting with or making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the subrecipient, adding a clause or condition into the contract that states the subrecipient is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Description of Condition Suspension and Debarment Although the District has a process to verify the suspension and debarment status for subrecipients, our audit found the District did not follow this process and did not verify one of three subrecipients was not suspended or debarred before making subawards to them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Reporting The District’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the District made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and Debarment Due to a contract processing error, the suspension and debarment clause was removed from the final subrecipient contract and staff did not notice the error before both parties signed the contract. Reporting District staff were unaware of the federal FFATA reporting requirements for the program. Effect of Condition Suspension and Debarment The District did not obtain a written certification from the subrecipient, insert a clause into the subaward or check for exclusion records at SAM.gov to verify one subrecipient it paid $48,621 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to subrecipients that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the subrecipient was not suspended or debarred. Therefore, we are not questioning costs. Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Recommendation Suspension and Debarment We recommend the District strengthen its internal controls to verify all subrecipients it pays all or in part with federal funds are not suspended or debarred from participating in federal programs. Reporting We recommend the District establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. District’s Response The district acknowledges the importance of internal controls and ensuring compliance with federal suspension and debarment requirements. Going forward we will be adding an additional step to our contract review process specifically for contracts that originate outside of the agency to ensure that suspension & debarment language is included in the contract or the agency has documented verification that the vendors are not suspended or debarred. Previously FFATA reporting was not specifically designated to one individual within the agency and going forward one business office staff member will be identified and responsible for the reporting. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Northeast Washington Educational Service District No. 101 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal suspension, debarment and reporting requirements. Assistance Listing Number and Title: 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1H79SM087476-01, 1H79SM084475-01 Pass-through Entity Name: Health Care Authority Pass-through Award/Contract Number: K6959-02, K6959-01 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $1,322,901 under four awards in the Substance Abuse and Mental Health Services Projects of Regional and National Significance program. Of this amount, the District passed through $343,394 to three subrecipients under direct award 1H79SM087476-01. 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. Suspension and Debarment Federal requirements prohibit recipients from contracting with or making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the subrecipient, adding a clause or condition into the contract that states the subrecipient is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Description of Condition Suspension and Debarment Although the District has a process to verify the suspension and debarment status for subrecipients, our audit found the District did not follow this process and did not verify one of three subrecipients was not suspended or debarred before making subawards to them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Reporting The District’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the District made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and Debarment Due to a contract processing error, the suspension and debarment clause was removed from the final subrecipient contract and staff did not notice the error before both parties signed the contract. Reporting District staff were unaware of the federal FFATA reporting requirements for the program. Effect of Condition Suspension and Debarment The District did not obtain a written certification from the subrecipient, insert a clause into the subaward or check for exclusion records at SAM.gov to verify one subrecipient it paid $48,621 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to subrecipients that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the subrecipient was not suspended or debarred. Therefore, we are not questioning costs. Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Recommendation Suspension and Debarment We recommend the District strengthen its internal controls to verify all subrecipients it pays all or in part with federal funds are not suspended or debarred from participating in federal programs. Reporting We recommend the District establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. District’s Response The district acknowledges the importance of internal controls and ensuring compliance with federal suspension and debarment requirements. Going forward we will be adding an additional step to our contract review process specifically for contracts that originate outside of the agency to ensure that suspension & debarment language is included in the contract or the agency has documented verification that the vendors are not suspended or debarred. Previously FFATA reporting was not specifically designated to one individual within the agency and going forward one business office staff member will be identified and responsible for the reporting. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Northeast Washington Educational Service District No. 101 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal suspension, debarment and reporting requirements. Assistance Listing Number and Title: 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1H79SM087476-01, 1H79SM084475-01 Pass-through Entity Name: Health Care Authority Pass-through Award/Contract Number: K6959-02, K6959-01 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $1,322,901 under four awards in the Substance Abuse and Mental Health Services Projects of Regional and National Significance program. Of this amount, the District passed through $343,394 to three subrecipients under direct award 1H79SM087476-01. 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. Suspension and Debarment Federal requirements prohibit recipients from contracting with or making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the subrecipient, adding a clause or condition into the contract that states the subrecipient is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Description of Condition Suspension and Debarment Although the District has a process to verify the suspension and debarment status for subrecipients, our audit found the District did not follow this process and did not verify one of three subrecipients was not suspended or debarred before making subawards to them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Reporting The District’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the District made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and Debarment Due to a contract processing error, the suspension and debarment clause was removed from the final subrecipient contract and staff did not notice the error before both parties signed the contract. Reporting District staff were unaware of the federal FFATA reporting requirements for the program. Effect of Condition Suspension and Debarment The District did not obtain a written certification from the subrecipient, insert a clause into the subaward or check for exclusion records at SAM.gov to verify one subrecipient it paid $48,621 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to subrecipients that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the subrecipient was not suspended or debarred. Therefore, we are not questioning costs. Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Recommendation Suspension and Debarment We recommend the District strengthen its internal controls to verify all subrecipients it pays all or in part with federal funds are not suspended or debarred from participating in federal programs. Reporting We recommend the District establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. District’s Response The district acknowledges the importance of internal controls and ensuring compliance with federal suspension and debarment requirements. Going forward we will be adding an additional step to our contract review process specifically for contracts that originate outside of the agency to ensure that suspension & debarment language is included in the contract or the agency has documented verification that the vendors are not suspended or debarred. Previously FFATA reporting was not specifically designated to one individual within the agency and going forward one business office staff member will be identified and responsible for the reporting. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Northeast Washington Educational Service District No. 101 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal suspension, debarment and reporting requirements. Assistance Listing Number and Title: 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: 1H79SM087476-01, 1H79SM084475-01 Pass-through Entity Name: Health Care Authority Pass-through Award/Contract Number: K6959-02, K6959-01 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $1,322,901 under four awards in the Substance Abuse and Mental Health Services Projects of Regional and National Significance program. Of this amount, the District passed through $343,394 to three subrecipients under direct award 1H79SM087476-01. 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. Suspension and Debarment Federal requirements prohibit recipients from contracting with or making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the subrecipient, adding a clause or condition into the contract that states the subrecipient is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Description of Condition Suspension and Debarment Although the District has a process to verify the suspension and debarment status for subrecipients, our audit found the District did not follow this process and did not verify one of three subrecipients was not suspended or debarred before making subawards to them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Reporting The District’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the District made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and Debarment Due to a contract processing error, the suspension and debarment clause was removed from the final subrecipient contract and staff did not notice the error before both parties signed the contract. Reporting District staff were unaware of the federal FFATA reporting requirements for the program. Effect of Condition Suspension and Debarment The District did not obtain a written certification from the subrecipient, insert a clause into the subaward or check for exclusion records at SAM.gov to verify one subrecipient it paid $48,621 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to subrecipients that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the subrecipient was not suspended or debarred. Therefore, we are not questioning costs. Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Recommendation Suspension and Debarment We recommend the District strengthen its internal controls to verify all subrecipients it pays all or in part with federal funds are not suspended or debarred from participating in federal programs. Reporting We recommend the District establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. District’s Response The district acknowledges the importance of internal controls and ensuring compliance with federal suspension and debarment requirements. Going forward we will be adding an additional step to our contract review process specifically for contracts that originate outside of the agency to ensure that suspension & debarment language is included in the contract or the agency has documented verification that the vendors are not suspended or debarred. Previously FFATA reporting was not specifically designated to one individual within the agency and going forward one business office staff member will be identified and responsible for the reporting. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).