Audit 357117

Seattle School District No. 1 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with Paid Lunch Equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Agency Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 619804, 6198, 619811, 6998 Known Questioned Cost Amount: $0 Description of Condition The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. For the 2023-2024 school year, the District received $11,717,706 for these programs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The USDA requires school districts participating in the National School Lunch Program to provide sufficient funds to the nonprofit school food service account for meals served to students who are ineligible for free or reduced-price meals (paid lunches). If the average paid lunch price is less than the difference between the free and paid lunch federal reimbursement rates (known as “equity”), districts must increase the prices for paid lunches or provide additional nonfederal funding to cover the cost of providing full-price lunches, or a combination of both. Each year, the USDA issues the Paid Lunch Equity (PLE) tool, which districts must complete to assist with calculations and decisions to meet this requirement. If the PLE tool calculation indicates paid lunch prices must be increased but the District decides not to increase prices, it must demonstrate it contributed the amount of nonfederal funds required as calculated in the PLE tool. Districts can demonstrate they have contributed nonfederal funds by completing the “GL 828 Restricted” tab calculation of OSPI’s Fund Balance Reporting tool. If the calculation shows the district has a deficiency of revenues over expenditures, this means they have contributed nonfederal funds to its food service account. If the deficit is large enough to cover the nonfederal contribution required by the PLE tool, the District is instructed to print, sign and date a copy of the GL 828 Restricted calculation as evidence they have met the requirement. We found the District lacked sufficient internal controls for ensuring it fully completed all required fields of the PLE tool. The District also lacked controls for demonstrating it increased paid lunch prices or contributed nonfederal funds, as federal regulations and OSPI require. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition District staff were not aware the PLE tool’s instructions required specific fields to be completed and that OSPI had specific guidance on how to complete the tool for the 2023-2024 school year. District staff believed no action was required because the PLE tool was not fully completed. Effect of Condition The District only completed one of the required tabs of the PLE tool for the 2023-2024 school year. The tool included instructions that indicated the District did not meet equity and would have needed to either raise its lunch prices by $0.23 (capped at $0.10 for the school year) or provide $3,128,043 in nonfederal funding to meet equity requirements. The District did not increase its lunch prices and initially could not demonstrate that it provided nonfederal funds to meet equity requirements. However, during the audit the District completed the GL 828 Restricted tab of the Fund Balance Reporting tool that showed it had a deficiency of $3,745,346 for the 2023-2024 school year. This demonstrated that the District contributed more funds into the revenue account than the amount expected from the PLE tool, and the District complied with the paid lunch equity requirement. Recommendation We recommend the District establish internal controls to ensure staff understand how to complete the PLE tool and provide adequate oversight to ensure it is accurately completed to comply with equity requirements. Additionally, if the District decides to contribute nonfederal funds, it should establish controls to complete, sign and date the GL 828 Restricted tab of the Fund Balance Reporting tool to demonstrate it contributed sufficient nonfederal funds to the food service account. District’s Response In response to this finding, the Culinary Services department under the guidance of the Operations team in SPS has made the following adjustments and changes to business practices: 1. The PLE tool has been formally integrated into the annual budgeting process to ensure routine compliance with this guidance and accurate financial planning. 2. If a price increase is deemed necessary, it will undergo a thorough review and approval through the SPS board governance process. This will include a landscape review of meal prices in other districts in the Puget Sound region as well as similarly scaled districts nationally. This structured approach guarantees alignment with strategic objectives while maintaining transparency and accountability. 3. As of May 2025, the Culinary Services department under the direction of the Operations department will be taking action on a price increase for school lunches beginning for the 2025-26 school year with annual reviews scheduled for subsequent years. Auditor’s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

Seattle School District No. 1 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with Paid Lunch Equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Agency Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 619804, 6198, 619811, 6998 Known Questioned Cost Amount: $0 Description of Condition The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. For the 2023-2024 school year, the District received $11,717,706 for these programs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The USDA requires school districts participating in the National School Lunch Program to provide sufficient funds to the nonprofit school food service account for meals served to students who are ineligible for free or reduced-price meals (paid lunches). If the average paid lunch price is less than the difference between the free and paid lunch federal reimbursement rates (known as “equity”), districts must increase the prices for paid lunches or provide additional nonfederal funding to cover the cost of providing full-price lunches, or a combination of both. Each year, the USDA issues the Paid Lunch Equity (PLE) tool, which districts must complete to assist with calculations and decisions to meet this requirement. If the PLE tool calculation indicates paid lunch prices must be increased but the District decides not to increase prices, it must demonstrate it contributed the amount of nonfederal funds required as calculated in the PLE tool. Districts can demonstrate they have contributed nonfederal funds by completing the “GL 828 Restricted” tab calculation of OSPI’s Fund Balance Reporting tool. If the calculation shows the district has a deficiency of revenues over expenditures, this means they have contributed nonfederal funds to its food service account. If the deficit is large enough to cover the nonfederal contribution required by the PLE tool, the District is instructed to print, sign and date a copy of the GL 828 Restricted calculation as evidence they have met the requirement. We found the District lacked sufficient internal controls for ensuring it fully completed all required fields of the PLE tool. The District also lacked controls for demonstrating it increased paid lunch prices or contributed nonfederal funds, as federal regulations and OSPI require. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition District staff were not aware the PLE tool’s instructions required specific fields to be completed and that OSPI had specific guidance on how to complete the tool for the 2023-2024 school year. District staff believed no action was required because the PLE tool was not fully completed. Effect of Condition The District only completed one of the required tabs of the PLE tool for the 2023-2024 school year. The tool included instructions that indicated the District did not meet equity and would have needed to either raise its lunch prices by $0.23 (capped at $0.10 for the school year) or provide $3,128,043 in nonfederal funding to meet equity requirements. The District did not increase its lunch prices and initially could not demonstrate that it provided nonfederal funds to meet equity requirements. However, during the audit the District completed the GL 828 Restricted tab of the Fund Balance Reporting tool that showed it had a deficiency of $3,745,346 for the 2023-2024 school year. This demonstrated that the District contributed more funds into the revenue account than the amount expected from the PLE tool, and the District complied with the paid lunch equity requirement. Recommendation We recommend the District establish internal controls to ensure staff understand how to complete the PLE tool and provide adequate oversight to ensure it is accurately completed to comply with equity requirements. Additionally, if the District decides to contribute nonfederal funds, it should establish controls to complete, sign and date the GL 828 Restricted tab of the Fund Balance Reporting tool to demonstrate it contributed sufficient nonfederal funds to the food service account. District’s Response In response to this finding, the Culinary Services department under the guidance of the Operations team in SPS has made the following adjustments and changes to business practices: 1. The PLE tool has been formally integrated into the annual budgeting process to ensure routine compliance with this guidance and accurate financial planning. 2. If a price increase is deemed necessary, it will undergo a thorough review and approval through the SPS board governance process. This will include a landscape review of meal prices in other districts in the Puget Sound region as well as similarly scaled districts nationally. This structured approach guarantees alignment with strategic objectives while maintaining transparency and accountability. 3. As of May 2025, the Culinary Services department under the direction of the Operations department will be taking action on a price increase for school lunches beginning for the 2025-26 school year with annual reviews scheduled for subsequent years. Auditor’s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

Seattle School District No. 1 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with Paid Lunch Equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Agency Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 619804, 6198, 619811, 6998 Known Questioned Cost Amount: $0 Description of Condition The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. For the 2023-2024 school year, the District received $11,717,706 for these programs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The USDA requires school districts participating in the National School Lunch Program to provide sufficient funds to the nonprofit school food service account for meals served to students who are ineligible for free or reduced-price meals (paid lunches). If the average paid lunch price is less than the difference between the free and paid lunch federal reimbursement rates (known as “equity”), districts must increase the prices for paid lunches or provide additional nonfederal funding to cover the cost of providing full-price lunches, or a combination of both. Each year, the USDA issues the Paid Lunch Equity (PLE) tool, which districts must complete to assist with calculations and decisions to meet this requirement. If the PLE tool calculation indicates paid lunch prices must be increased but the District decides not to increase prices, it must demonstrate it contributed the amount of nonfederal funds required as calculated in the PLE tool. Districts can demonstrate they have contributed nonfederal funds by completing the “GL 828 Restricted” tab calculation of OSPI’s Fund Balance Reporting tool. If the calculation shows the district has a deficiency of revenues over expenditures, this means they have contributed nonfederal funds to its food service account. If the deficit is large enough to cover the nonfederal contribution required by the PLE tool, the District is instructed to print, sign and date a copy of the GL 828 Restricted calculation as evidence they have met the requirement. We found the District lacked sufficient internal controls for ensuring it fully completed all required fields of the PLE tool. The District also lacked controls for demonstrating it increased paid lunch prices or contributed nonfederal funds, as federal regulations and OSPI require. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition District staff were not aware the PLE tool’s instructions required specific fields to be completed and that OSPI had specific guidance on how to complete the tool for the 2023-2024 school year. District staff believed no action was required because the PLE tool was not fully completed. Effect of Condition The District only completed one of the required tabs of the PLE tool for the 2023-2024 school year. The tool included instructions that indicated the District did not meet equity and would have needed to either raise its lunch prices by $0.23 (capped at $0.10 for the school year) or provide $3,128,043 in nonfederal funding to meet equity requirements. The District did not increase its lunch prices and initially could not demonstrate that it provided nonfederal funds to meet equity requirements. However, during the audit the District completed the GL 828 Restricted tab of the Fund Balance Reporting tool that showed it had a deficiency of $3,745,346 for the 2023-2024 school year. This demonstrated that the District contributed more funds into the revenue account than the amount expected from the PLE tool, and the District complied with the paid lunch equity requirement. Recommendation We recommend the District establish internal controls to ensure staff understand how to complete the PLE tool and provide adequate oversight to ensure it is accurately completed to comply with equity requirements. Additionally, if the District decides to contribute nonfederal funds, it should establish controls to complete, sign and date the GL 828 Restricted tab of the Fund Balance Reporting tool to demonstrate it contributed sufficient nonfederal funds to the food service account. District’s Response In response to this finding, the Culinary Services department under the guidance of the Operations team in SPS has made the following adjustments and changes to business practices: 1. The PLE tool has been formally integrated into the annual budgeting process to ensure routine compliance with this guidance and accurate financial planning. 2. If a price increase is deemed necessary, it will undergo a thorough review and approval through the SPS board governance process. This will include a landscape review of meal prices in other districts in the Puget Sound region as well as similarly scaled districts nationally. This structured approach guarantees alignment with strategic objectives while maintaining transparency and accountability. 3. As of May 2025, the Culinary Services department under the direction of the Operations department will be taking action on a price increase for school lunches beginning for the 2025-26 school year with annual reviews scheduled for subsequent years. Auditor’s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

Seattle School District No. 1 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with Paid Lunch Equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Agency Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 619804, 6198, 619811, 6998 Known Questioned Cost Amount: $0 Description of Condition The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. For the 2023-2024 school year, the District received $11,717,706 for these programs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The USDA requires school districts participating in the National School Lunch Program to provide sufficient funds to the nonprofit school food service account for meals served to students who are ineligible for free or reduced-price meals (paid lunches). If the average paid lunch price is less than the difference between the free and paid lunch federal reimbursement rates (known as “equity”), districts must increase the prices for paid lunches or provide additional nonfederal funding to cover the cost of providing full-price lunches, or a combination of both. Each year, the USDA issues the Paid Lunch Equity (PLE) tool, which districts must complete to assist with calculations and decisions to meet this requirement. If the PLE tool calculation indicates paid lunch prices must be increased but the District decides not to increase prices, it must demonstrate it contributed the amount of nonfederal funds required as calculated in the PLE tool. Districts can demonstrate they have contributed nonfederal funds by completing the “GL 828 Restricted” tab calculation of OSPI’s Fund Balance Reporting tool. If the calculation shows the district has a deficiency of revenues over expenditures, this means they have contributed nonfederal funds to its food service account. If the deficit is large enough to cover the nonfederal contribution required by the PLE tool, the District is instructed to print, sign and date a copy of the GL 828 Restricted calculation as evidence they have met the requirement. We found the District lacked sufficient internal controls for ensuring it fully completed all required fields of the PLE tool. The District also lacked controls for demonstrating it increased paid lunch prices or contributed nonfederal funds, as federal regulations and OSPI require. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition District staff were not aware the PLE tool’s instructions required specific fields to be completed and that OSPI had specific guidance on how to complete the tool for the 2023-2024 school year. District staff believed no action was required because the PLE tool was not fully completed. Effect of Condition The District only completed one of the required tabs of the PLE tool for the 2023-2024 school year. The tool included instructions that indicated the District did not meet equity and would have needed to either raise its lunch prices by $0.23 (capped at $0.10 for the school year) or provide $3,128,043 in nonfederal funding to meet equity requirements. The District did not increase its lunch prices and initially could not demonstrate that it provided nonfederal funds to meet equity requirements. However, during the audit the District completed the GL 828 Restricted tab of the Fund Balance Reporting tool that showed it had a deficiency of $3,745,346 for the 2023-2024 school year. This demonstrated that the District contributed more funds into the revenue account than the amount expected from the PLE tool, and the District complied with the paid lunch equity requirement. Recommendation We recommend the District establish internal controls to ensure staff understand how to complete the PLE tool and provide adequate oversight to ensure it is accurately completed to comply with equity requirements. Additionally, if the District decides to contribute nonfederal funds, it should establish controls to complete, sign and date the GL 828 Restricted tab of the Fund Balance Reporting tool to demonstrate it contributed sufficient nonfederal funds to the food service account. District’s Response In response to this finding, the Culinary Services department under the guidance of the Operations team in SPS has made the following adjustments and changes to business practices: 1. The PLE tool has been formally integrated into the annual budgeting process to ensure routine compliance with this guidance and accurate financial planning. 2. If a price increase is deemed necessary, it will undergo a thorough review and approval through the SPS board governance process. This will include a landscape review of meal prices in other districts in the Puget Sound region as well as similarly scaled districts nationally. This structured approach guarantees alignment with strategic objectives while maintaining transparency and accountability. 3. As of May 2025, the Culinary Services department under the direction of the Operations department will be taking action on a price increase for school lunches beginning for the 2025-26 school year with annual reviews scheduled for subsequent years. Auditor’s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

Seattle School District No. 1 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with Paid Lunch Equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Agency Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 619804, 6198, 619811, 6998 Known Questioned Cost Amount: $0 Description of Condition The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. For the 2023-2024 school year, the District received $11,717,706 for these programs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The USDA requires school districts participating in the National School Lunch Program to provide sufficient funds to the nonprofit school food service account for meals served to students who are ineligible for free or reduced-price meals (paid lunches). If the average paid lunch price is less than the difference between the free and paid lunch federal reimbursement rates (known as “equity”), districts must increase the prices for paid lunches or provide additional nonfederal funding to cover the cost of providing full-price lunches, or a combination of both. Each year, the USDA issues the Paid Lunch Equity (PLE) tool, which districts must complete to assist with calculations and decisions to meet this requirement. If the PLE tool calculation indicates paid lunch prices must be increased but the District decides not to increase prices, it must demonstrate it contributed the amount of nonfederal funds required as calculated in the PLE tool. Districts can demonstrate they have contributed nonfederal funds by completing the “GL 828 Restricted” tab calculation of OSPI’s Fund Balance Reporting tool. If the calculation shows the district has a deficiency of revenues over expenditures, this means they have contributed nonfederal funds to its food service account. If the deficit is large enough to cover the nonfederal contribution required by the PLE tool, the District is instructed to print, sign and date a copy of the GL 828 Restricted calculation as evidence they have met the requirement. We found the District lacked sufficient internal controls for ensuring it fully completed all required fields of the PLE tool. The District also lacked controls for demonstrating it increased paid lunch prices or contributed nonfederal funds, as federal regulations and OSPI require. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition District staff were not aware the PLE tool’s instructions required specific fields to be completed and that OSPI had specific guidance on how to complete the tool for the 2023-2024 school year. District staff believed no action was required because the PLE tool was not fully completed. Effect of Condition The District only completed one of the required tabs of the PLE tool for the 2023-2024 school year. The tool included instructions that indicated the District did not meet equity and would have needed to either raise its lunch prices by $0.23 (capped at $0.10 for the school year) or provide $3,128,043 in nonfederal funding to meet equity requirements. The District did not increase its lunch prices and initially could not demonstrate that it provided nonfederal funds to meet equity requirements. However, during the audit the District completed the GL 828 Restricted tab of the Fund Balance Reporting tool that showed it had a deficiency of $3,745,346 for the 2023-2024 school year. This demonstrated that the District contributed more funds into the revenue account than the amount expected from the PLE tool, and the District complied with the paid lunch equity requirement. Recommendation We recommend the District establish internal controls to ensure staff understand how to complete the PLE tool and provide adequate oversight to ensure it is accurately completed to comply with equity requirements. Additionally, if the District decides to contribute nonfederal funds, it should establish controls to complete, sign and date the GL 828 Restricted tab of the Fund Balance Reporting tool to demonstrate it contributed sufficient nonfederal funds to the food service account. District’s Response In response to this finding, the Culinary Services department under the guidance of the Operations team in SPS has made the following adjustments and changes to business practices: 1. The PLE tool has been formally integrated into the annual budgeting process to ensure routine compliance with this guidance and accurate financial planning. 2. If a price increase is deemed necessary, it will undergo a thorough review and approval through the SPS board governance process. This will include a landscape review of meal prices in other districts in the Puget Sound region as well as similarly scaled districts nationally. This structured approach guarantees alignment with strategic objectives while maintaining transparency and accountability. 3. As of May 2025, the Culinary Services department under the direction of the Operations department will be taking action on a price increase for school lunches beginning for the 2025-26 school year with annual reviews scheduled for subsequent years. Auditor’s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

Seattle School District No. 1 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with Paid Lunch Equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Agency Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 619804, 6198, 619811, 6998 Known Questioned Cost Amount: $0 Description of Condition The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. For the 2023-2024 school year, the District received $11,717,706 for these programs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The USDA requires school districts participating in the National School Lunch Program to provide sufficient funds to the nonprofit school food service account for meals served to students who are ineligible for free or reduced-price meals (paid lunches). If the average paid lunch price is less than the difference between the free and paid lunch federal reimbursement rates (known as “equity”), districts must increase the prices for paid lunches or provide additional nonfederal funding to cover the cost of providing full-price lunches, or a combination of both. Each year, the USDA issues the Paid Lunch Equity (PLE) tool, which districts must complete to assist with calculations and decisions to meet this requirement. If the PLE tool calculation indicates paid lunch prices must be increased but the District decides not to increase prices, it must demonstrate it contributed the amount of nonfederal funds required as calculated in the PLE tool. Districts can demonstrate they have contributed nonfederal funds by completing the “GL 828 Restricted” tab calculation of OSPI’s Fund Balance Reporting tool. If the calculation shows the district has a deficiency of revenues over expenditures, this means they have contributed nonfederal funds to its food service account. If the deficit is large enough to cover the nonfederal contribution required by the PLE tool, the District is instructed to print, sign and date a copy of the GL 828 Restricted calculation as evidence they have met the requirement. We found the District lacked sufficient internal controls for ensuring it fully completed all required fields of the PLE tool. The District also lacked controls for demonstrating it increased paid lunch prices or contributed nonfederal funds, as federal regulations and OSPI require. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition District staff were not aware the PLE tool’s instructions required specific fields to be completed and that OSPI had specific guidance on how to complete the tool for the 2023-2024 school year. District staff believed no action was required because the PLE tool was not fully completed. Effect of Condition The District only completed one of the required tabs of the PLE tool for the 2023-2024 school year. The tool included instructions that indicated the District did not meet equity and would have needed to either raise its lunch prices by $0.23 (capped at $0.10 for the school year) or provide $3,128,043 in nonfederal funding to meet equity requirements. The District did not increase its lunch prices and initially could not demonstrate that it provided nonfederal funds to meet equity requirements. However, during the audit the District completed the GL 828 Restricted tab of the Fund Balance Reporting tool that showed it had a deficiency of $3,745,346 for the 2023-2024 school year. This demonstrated that the District contributed more funds into the revenue account than the amount expected from the PLE tool, and the District complied with the paid lunch equity requirement. Recommendation We recommend the District establish internal controls to ensure staff understand how to complete the PLE tool and provide adequate oversight to ensure it is accurately completed to comply with equity requirements. Additionally, if the District decides to contribute nonfederal funds, it should establish controls to complete, sign and date the GL 828 Restricted tab of the Fund Balance Reporting tool to demonstrate it contributed sufficient nonfederal funds to the food service account. District’s Response In response to this finding, the Culinary Services department under the guidance of the Operations team in SPS has made the following adjustments and changes to business practices: 1. The PLE tool has been formally integrated into the annual budgeting process to ensure routine compliance with this guidance and accurate financial planning. 2. If a price increase is deemed necessary, it will undergo a thorough review and approval through the SPS board governance process. This will include a landscape review of meal prices in other districts in the Puget Sound region as well as similarly scaled districts nationally. This structured approach guarantees alignment with strategic objectives while maintaining transparency and accountability. 3. As of May 2025, the Culinary Services department under the direction of the Operations department will be taking action on a price increase for school lunches beginning for the 2025-26 school year with annual reviews scheduled for subsequent years. Auditor’s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

Seattle School District No. 1 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with Paid Lunch Equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Agency Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 619804, 6198, 619811, 6998 Known Questioned Cost Amount: $0 Description of Condition The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. For the 2023-2024 school year, the District received $11,717,706 for these programs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The USDA requires school districts participating in the National School Lunch Program to provide sufficient funds to the nonprofit school food service account for meals served to students who are ineligible for free or reduced-price meals (paid lunches). If the average paid lunch price is less than the difference between the free and paid lunch federal reimbursement rates (known as “equity”), districts must increase the prices for paid lunches or provide additional nonfederal funding to cover the cost of providing full-price lunches, or a combination of both. Each year, the USDA issues the Paid Lunch Equity (PLE) tool, which districts must complete to assist with calculations and decisions to meet this requirement. If the PLE tool calculation indicates paid lunch prices must be increased but the District decides not to increase prices, it must demonstrate it contributed the amount of nonfederal funds required as calculated in the PLE tool. Districts can demonstrate they have contributed nonfederal funds by completing the “GL 828 Restricted” tab calculation of OSPI’s Fund Balance Reporting tool. If the calculation shows the district has a deficiency of revenues over expenditures, this means they have contributed nonfederal funds to its food service account. If the deficit is large enough to cover the nonfederal contribution required by the PLE tool, the District is instructed to print, sign and date a copy of the GL 828 Restricted calculation as evidence they have met the requirement. We found the District lacked sufficient internal controls for ensuring it fully completed all required fields of the PLE tool. The District also lacked controls for demonstrating it increased paid lunch prices or contributed nonfederal funds, as federal regulations and OSPI require. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition District staff were not aware the PLE tool’s instructions required specific fields to be completed and that OSPI had specific guidance on how to complete the tool for the 2023-2024 school year. District staff believed no action was required because the PLE tool was not fully completed. Effect of Condition The District only completed one of the required tabs of the PLE tool for the 2023-2024 school year. The tool included instructions that indicated the District did not meet equity and would have needed to either raise its lunch prices by $0.23 (capped at $0.10 for the school year) or provide $3,128,043 in nonfederal funding to meet equity requirements. The District did not increase its lunch prices and initially could not demonstrate that it provided nonfederal funds to meet equity requirements. However, during the audit the District completed the GL 828 Restricted tab of the Fund Balance Reporting tool that showed it had a deficiency of $3,745,346 for the 2023-2024 school year. This demonstrated that the District contributed more funds into the revenue account than the amount expected from the PLE tool, and the District complied with the paid lunch equity requirement. Recommendation We recommend the District establish internal controls to ensure staff understand how to complete the PLE tool and provide adequate oversight to ensure it is accurately completed to comply with equity requirements. Additionally, if the District decides to contribute nonfederal funds, it should establish controls to complete, sign and date the GL 828 Restricted tab of the Fund Balance Reporting tool to demonstrate it contributed sufficient nonfederal funds to the food service account. District’s Response In response to this finding, the Culinary Services department under the guidance of the Operations team in SPS has made the following adjustments and changes to business practices: 1. The PLE tool has been formally integrated into the annual budgeting process to ensure routine compliance with this guidance and accurate financial planning. 2. If a price increase is deemed necessary, it will undergo a thorough review and approval through the SPS board governance process. This will include a landscape review of meal prices in other districts in the Puget Sound region as well as similarly scaled districts nationally. This structured approach guarantees alignment with strategic objectives while maintaining transparency and accountability. 3. As of May 2025, the Culinary Services department under the direction of the Operations department will be taking action on a price increase for school lunches beginning for the 2025-26 school year with annual reviews scheduled for subsequent years. Auditor’s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

Seattle School District No. 1 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with Paid Lunch Equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Agency Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 619804, 6198, 619811, 6998 Known Questioned Cost Amount: $0 Description of Condition The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. For the 2023-2024 school year, the District received $11,717,706 for these programs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The USDA requires school districts participating in the National School Lunch Program to provide sufficient funds to the nonprofit school food service account for meals served to students who are ineligible for free or reduced-price meals (paid lunches). If the average paid lunch price is less than the difference between the free and paid lunch federal reimbursement rates (known as “equity”), districts must increase the prices for paid lunches or provide additional nonfederal funding to cover the cost of providing full-price lunches, or a combination of both. Each year, the USDA issues the Paid Lunch Equity (PLE) tool, which districts must complete to assist with calculations and decisions to meet this requirement. If the PLE tool calculation indicates paid lunch prices must be increased but the District decides not to increase prices, it must demonstrate it contributed the amount of nonfederal funds required as calculated in the PLE tool. Districts can demonstrate they have contributed nonfederal funds by completing the “GL 828 Restricted” tab calculation of OSPI’s Fund Balance Reporting tool. If the calculation shows the district has a deficiency of revenues over expenditures, this means they have contributed nonfederal funds to its food service account. If the deficit is large enough to cover the nonfederal contribution required by the PLE tool, the District is instructed to print, sign and date a copy of the GL 828 Restricted calculation as evidence they have met the requirement. We found the District lacked sufficient internal controls for ensuring it fully completed all required fields of the PLE tool. The District also lacked controls for demonstrating it increased paid lunch prices or contributed nonfederal funds, as federal regulations and OSPI require. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition District staff were not aware the PLE tool’s instructions required specific fields to be completed and that OSPI had specific guidance on how to complete the tool for the 2023-2024 school year. District staff believed no action was required because the PLE tool was not fully completed. Effect of Condition The District only completed one of the required tabs of the PLE tool for the 2023-2024 school year. The tool included instructions that indicated the District did not meet equity and would have needed to either raise its lunch prices by $0.23 (capped at $0.10 for the school year) or provide $3,128,043 in nonfederal funding to meet equity requirements. The District did not increase its lunch prices and initially could not demonstrate that it provided nonfederal funds to meet equity requirements. However, during the audit the District completed the GL 828 Restricted tab of the Fund Balance Reporting tool that showed it had a deficiency of $3,745,346 for the 2023-2024 school year. This demonstrated that the District contributed more funds into the revenue account than the amount expected from the PLE tool, and the District complied with the paid lunch equity requirement. Recommendation We recommend the District establish internal controls to ensure staff understand how to complete the PLE tool and provide adequate oversight to ensure it is accurately completed to comply with equity requirements. Additionally, if the District decides to contribute nonfederal funds, it should establish controls to complete, sign and date the GL 828 Restricted tab of the Fund Balance Reporting tool to demonstrate it contributed sufficient nonfederal funds to the food service account. District’s Response In response to this finding, the Culinary Services department under the guidance of the Operations team in SPS has made the following adjustments and changes to business practices: 1. The PLE tool has been formally integrated into the annual budgeting process to ensure routine compliance with this guidance and accurate financial planning. 2. If a price increase is deemed necessary, it will undergo a thorough review and approval through the SPS board governance process. This will include a landscape review of meal prices in other districts in the Puget Sound region as well as similarly scaled districts nationally. This structured approach guarantees alignment with strategic objectives while maintaining transparency and accountability. 3. As of May 2025, the Culinary Services department under the direction of the Operations department will be taking action on a price increase for school lunches beginning for the 2025-26 school year with annual reviews scheduled for subsequent years. Auditor’s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.