Audit 357586

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Orting School District No. 344 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with federal eligibility and paid lunch equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Grantor Name: U.S Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. The District received $678,493 in federal funding to administer these programs during the 2023- 2024 school year, including $98,651 in Supply Chain Assistance awards. 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. Eligibility Direct certification is the process districts use to certify categorically eligible children for free meals without further application. Washington state has an electronic system that matches data from the Department of Social and Health Services with Comprehensive Education Data and Research System data to produce a “Direct Certification List.” Districts must download the direct certification list at least monthly to ensure they serve free meals to eligible students. Paid Lunch Equity 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 the Office of Superintendent of Public Instruction (OSPI)’s Fund Balance Reporting tool. If the calculation shows the District has a deficiency of revenues over expenditures, this means it has 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 it has met the requirement. Description of Condition Eligibility The District did not have adequate internal controls to perform direct certification downloads monthly and has no monitoring to ensure staff complete the required process. Paid Lunch Equity The District did not have adequate internal controls to ensure it completed the PLE tool accurately. Specifically, the District did not correctly follow the tool instructions to ensure the PLE tool was completed using weighted average pricing. The District incorrectly used totals for all meal types instead of only student lunches for part of the tool. We consider these deficiencies in internal controls to be significant deficiencies. Cause of Condition Eligibility District staff were aware of the requirements to determine the eligibility status for students each month, but they did not complete the direct certification downloads monthly as required. The Director of Nutrition Services is responsible for completing the verification; however, they did not perform two of the monthly downloads. Paid Lunch Equity District staff were aware of the requirement to raise lunch prices and attempted to raise prices to meet paid lunch equity. However, they did not understand the District’s price changes did not meet the pricing requirement. Therefore, they did not understand the need to document the contribution of nonfederal funds to the food services account to meet the paid lunch equity requirements of the program. Effect of Condition Eligibility The District did not have documentation to support that it performed the direct certification downloads for two of the six months tested. Without documentation demonstrating it performed the direct certification downloads, the District is at risk of not providing free meals to eligible students and providing free meals to ineligible students. Although the District did not perform direct certification downloads as required, our testing found it provided free meals to eligible students. Paid Lunch Equity The District completed the PLE tool for the 2023-2024 school year and increased the weighted average meal price by $0.02. However, the increases were not sufficient to raise the weighted average price to meet federal requirements. 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 $43,271 ($19,669 with $0.10 cap) in nonfederal funding to meet equity requirements. The District did not increase the weighted average lunch price to the capped required amount 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 $405,035 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 Eligibility We recommend the District establish internal controls to ensure staff perform direct certification downloads monthly, retain documentation for downloads performed and provide adequate oversight of the process to comply with direct certification requirements. Paid Lunch Equity 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 Eligibility: The District will document the internal controls that are in place for the monthly direct certification downloads and will print the certification download along with saving it electronically so that the files are easy to provide for future audits. Paid Lunch Equity: The District will document the internal controls that are in place for the completion of the PLE tool and ensure that the form is completed appropriately to show the continued use of nonfederal funds that are used yearly to fund the food service account fully. The District will also make sure to ‘print’ the GL 828 tab of the Fund Balance Reporting tool that is done yearly no later than November and sign it immediately after completion of the year end process to provide for the proof that the district has and continues to contribute sufficient nonfederal funds to the food service account. 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. RCW 28A.235.280(3) Free school meals—Systems to identify students, at least monthly, schools and school districts shall directly certify students for free school meals if the students qualify because of enrollment in assistance programs, including but not limited to the supplemental nutrition assistance program, the temporary assistance for needy families, and medicaid. RCW 28A.300.255 Meal charge policies, The office of the superintendent of public instruction shall collect, analyze, and promote to school districts and applicable community-based organizations best practices in local meal charge policies that are required by the United States department of agriculture in memorandum SP 46- 2016. Title 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Orting School District No. 344 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with federal eligibility and paid lunch equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Grantor Name: U.S Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. The District received $678,493 in federal funding to administer these programs during the 2023- 2024 school year, including $98,651 in Supply Chain Assistance awards. 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. Eligibility Direct certification is the process districts use to certify categorically eligible children for free meals without further application. Washington state has an electronic system that matches data from the Department of Social and Health Services with Comprehensive Education Data and Research System data to produce a “Direct Certification List.” Districts must download the direct certification list at least monthly to ensure they serve free meals to eligible students. Paid Lunch Equity 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 the Office of Superintendent of Public Instruction (OSPI)’s Fund Balance Reporting tool. If the calculation shows the District has a deficiency of revenues over expenditures, this means it has 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 it has met the requirement. Description of Condition Eligibility The District did not have adequate internal controls to perform direct certification downloads monthly and has no monitoring to ensure staff complete the required process. Paid Lunch Equity The District did not have adequate internal controls to ensure it completed the PLE tool accurately. Specifically, the District did not correctly follow the tool instructions to ensure the PLE tool was completed using weighted average pricing. The District incorrectly used totals for all meal types instead of only student lunches for part of the tool. We consider these deficiencies in internal controls to be significant deficiencies. Cause of Condition Eligibility District staff were aware of the requirements to determine the eligibility status for students each month, but they did not complete the direct certification downloads monthly as required. The Director of Nutrition Services is responsible for completing the verification; however, they did not perform two of the monthly downloads. Paid Lunch Equity District staff were aware of the requirement to raise lunch prices and attempted to raise prices to meet paid lunch equity. However, they did not understand the District’s price changes did not meet the pricing requirement. Therefore, they did not understand the need to document the contribution of nonfederal funds to the food services account to meet the paid lunch equity requirements of the program. Effect of Condition Eligibility The District did not have documentation to support that it performed the direct certification downloads for two of the six months tested. Without documentation demonstrating it performed the direct certification downloads, the District is at risk of not providing free meals to eligible students and providing free meals to ineligible students. Although the District did not perform direct certification downloads as required, our testing found it provided free meals to eligible students. Paid Lunch Equity The District completed the PLE tool for the 2023-2024 school year and increased the weighted average meal price by $0.02. However, the increases were not sufficient to raise the weighted average price to meet federal requirements. 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 $43,271 ($19,669 with $0.10 cap) in nonfederal funding to meet equity requirements. The District did not increase the weighted average lunch price to the capped required amount 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 $405,035 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 Eligibility We recommend the District establish internal controls to ensure staff perform direct certification downloads monthly, retain documentation for downloads performed and provide adequate oversight of the process to comply with direct certification requirements. Paid Lunch Equity 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 Eligibility: The District will document the internal controls that are in place for the monthly direct certification downloads and will print the certification download along with saving it electronically so that the files are easy to provide for future audits. Paid Lunch Equity: The District will document the internal controls that are in place for the completion of the PLE tool and ensure that the form is completed appropriately to show the continued use of nonfederal funds that are used yearly to fund the food service account fully. The District will also make sure to ‘print’ the GL 828 tab of the Fund Balance Reporting tool that is done yearly no later than November and sign it immediately after completion of the year end process to provide for the proof that the district has and continues to contribute sufficient nonfederal funds to the food service account. 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. RCW 28A.235.280(3) Free school meals—Systems to identify students, at least monthly, schools and school districts shall directly certify students for free school meals if the students qualify because of enrollment in assistance programs, including but not limited to the supplemental nutrition assistance program, the temporary assistance for needy families, and medicaid. RCW 28A.300.255 Meal charge policies, The office of the superintendent of public instruction shall collect, analyze, and promote to school districts and applicable community-based organizations best practices in local meal charge policies that are required by the United States department of agriculture in memorandum SP 46- 2016. Title 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Orting School District No. 344 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with federal eligibility and paid lunch equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Grantor Name: U.S Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. The District received $678,493 in federal funding to administer these programs during the 2023- 2024 school year, including $98,651 in Supply Chain Assistance awards. 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. Eligibility Direct certification is the process districts use to certify categorically eligible children for free meals without further application. Washington state has an electronic system that matches data from the Department of Social and Health Services with Comprehensive Education Data and Research System data to produce a “Direct Certification List.” Districts must download the direct certification list at least monthly to ensure they serve free meals to eligible students. Paid Lunch Equity 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 the Office of Superintendent of Public Instruction (OSPI)’s Fund Balance Reporting tool. If the calculation shows the District has a deficiency of revenues over expenditures, this means it has 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 it has met the requirement. Description of Condition Eligibility The District did not have adequate internal controls to perform direct certification downloads monthly and has no monitoring to ensure staff complete the required process. Paid Lunch Equity The District did not have adequate internal controls to ensure it completed the PLE tool accurately. Specifically, the District did not correctly follow the tool instructions to ensure the PLE tool was completed using weighted average pricing. The District incorrectly used totals for all meal types instead of only student lunches for part of the tool. We consider these deficiencies in internal controls to be significant deficiencies. Cause of Condition Eligibility District staff were aware of the requirements to determine the eligibility status for students each month, but they did not complete the direct certification downloads monthly as required. The Director of Nutrition Services is responsible for completing the verification; however, they did not perform two of the monthly downloads. Paid Lunch Equity District staff were aware of the requirement to raise lunch prices and attempted to raise prices to meet paid lunch equity. However, they did not understand the District’s price changes did not meet the pricing requirement. Therefore, they did not understand the need to document the contribution of nonfederal funds to the food services account to meet the paid lunch equity requirements of the program. Effect of Condition Eligibility The District did not have documentation to support that it performed the direct certification downloads for two of the six months tested. Without documentation demonstrating it performed the direct certification downloads, the District is at risk of not providing free meals to eligible students and providing free meals to ineligible students. Although the District did not perform direct certification downloads as required, our testing found it provided free meals to eligible students. Paid Lunch Equity The District completed the PLE tool for the 2023-2024 school year and increased the weighted average meal price by $0.02. However, the increases were not sufficient to raise the weighted average price to meet federal requirements. 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 $43,271 ($19,669 with $0.10 cap) in nonfederal funding to meet equity requirements. The District did not increase the weighted average lunch price to the capped required amount 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 $405,035 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 Eligibility We recommend the District establish internal controls to ensure staff perform direct certification downloads monthly, retain documentation for downloads performed and provide adequate oversight of the process to comply with direct certification requirements. Paid Lunch Equity 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 Eligibility: The District will document the internal controls that are in place for the monthly direct certification downloads and will print the certification download along with saving it electronically so that the files are easy to provide for future audits. Paid Lunch Equity: The District will document the internal controls that are in place for the completion of the PLE tool and ensure that the form is completed appropriately to show the continued use of nonfederal funds that are used yearly to fund the food service account fully. The District will also make sure to ‘print’ the GL 828 tab of the Fund Balance Reporting tool that is done yearly no later than November and sign it immediately after completion of the year end process to provide for the proof that the district has and continues to contribute sufficient nonfederal funds to the food service account. 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. RCW 28A.235.280(3) Free school meals—Systems to identify students, at least monthly, schools and school districts shall directly certify students for free school meals if the students qualify because of enrollment in assistance programs, including but not limited to the supplemental nutrition assistance program, the temporary assistance for needy families, and medicaid. RCW 28A.300.255 Meal charge policies, The office of the superintendent of public instruction shall collect, analyze, and promote to school districts and applicable community-based organizations best practices in local meal charge policies that are required by the United States department of agriculture in memorandum SP 46- 2016. Title 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Orting School District No. 344 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with federal eligibility and paid lunch equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Grantor Name: U.S Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. The District received $678,493 in federal funding to administer these programs during the 2023- 2024 school year, including $98,651 in Supply Chain Assistance awards. 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. Eligibility Direct certification is the process districts use to certify categorically eligible children for free meals without further application. Washington state has an electronic system that matches data from the Department of Social and Health Services with Comprehensive Education Data and Research System data to produce a “Direct Certification List.” Districts must download the direct certification list at least monthly to ensure they serve free meals to eligible students. Paid Lunch Equity 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 the Office of Superintendent of Public Instruction (OSPI)’s Fund Balance Reporting tool. If the calculation shows the District has a deficiency of revenues over expenditures, this means it has 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 it has met the requirement. Description of Condition Eligibility The District did not have adequate internal controls to perform direct certification downloads monthly and has no monitoring to ensure staff complete the required process. Paid Lunch Equity The District did not have adequate internal controls to ensure it completed the PLE tool accurately. Specifically, the District did not correctly follow the tool instructions to ensure the PLE tool was completed using weighted average pricing. The District incorrectly used totals for all meal types instead of only student lunches for part of the tool. We consider these deficiencies in internal controls to be significant deficiencies. Cause of Condition Eligibility District staff were aware of the requirements to determine the eligibility status for students each month, but they did not complete the direct certification downloads monthly as required. The Director of Nutrition Services is responsible for completing the verification; however, they did not perform two of the monthly downloads. Paid Lunch Equity District staff were aware of the requirement to raise lunch prices and attempted to raise prices to meet paid lunch equity. However, they did not understand the District’s price changes did not meet the pricing requirement. Therefore, they did not understand the need to document the contribution of nonfederal funds to the food services account to meet the paid lunch equity requirements of the program. Effect of Condition Eligibility The District did not have documentation to support that it performed the direct certification downloads for two of the six months tested. Without documentation demonstrating it performed the direct certification downloads, the District is at risk of not providing free meals to eligible students and providing free meals to ineligible students. Although the District did not perform direct certification downloads as required, our testing found it provided free meals to eligible students. Paid Lunch Equity The District completed the PLE tool for the 2023-2024 school year and increased the weighted average meal price by $0.02. However, the increases were not sufficient to raise the weighted average price to meet federal requirements. 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 $43,271 ($19,669 with $0.10 cap) in nonfederal funding to meet equity requirements. The District did not increase the weighted average lunch price to the capped required amount 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 $405,035 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 Eligibility We recommend the District establish internal controls to ensure staff perform direct certification downloads monthly, retain documentation for downloads performed and provide adequate oversight of the process to comply with direct certification requirements. Paid Lunch Equity 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 Eligibility: The District will document the internal controls that are in place for the monthly direct certification downloads and will print the certification download along with saving it electronically so that the files are easy to provide for future audits. Paid Lunch Equity: The District will document the internal controls that are in place for the completion of the PLE tool and ensure that the form is completed appropriately to show the continued use of nonfederal funds that are used yearly to fund the food service account fully. The District will also make sure to ‘print’ the GL 828 tab of the Fund Balance Reporting tool that is done yearly no later than November and sign it immediately after completion of the year end process to provide for the proof that the district has and continues to contribute sufficient nonfederal funds to the food service account. 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. RCW 28A.235.280(3) Free school meals—Systems to identify students, at least monthly, schools and school districts shall directly certify students for free school meals if the students qualify because of enrollment in assistance programs, including but not limited to the supplemental nutrition assistance program, the temporary assistance for needy families, and medicaid. RCW 28A.300.255 Meal charge policies, The office of the superintendent of public instruction shall collect, analyze, and promote to school districts and applicable community-based organizations best practices in local meal charge policies that are required by the United States department of agriculture in memorandum SP 46- 2016. Title 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Orting School District No. 344 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with federal eligibility and paid lunch equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Grantor Name: U.S Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. The District received $678,493 in federal funding to administer these programs during the 2023- 2024 school year, including $98,651 in Supply Chain Assistance awards. 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. Eligibility Direct certification is the process districts use to certify categorically eligible children for free meals without further application. Washington state has an electronic system that matches data from the Department of Social and Health Services with Comprehensive Education Data and Research System data to produce a “Direct Certification List.” Districts must download the direct certification list at least monthly to ensure they serve free meals to eligible students. Paid Lunch Equity 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 the Office of Superintendent of Public Instruction (OSPI)’s Fund Balance Reporting tool. If the calculation shows the District has a deficiency of revenues over expenditures, this means it has 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 it has met the requirement. Description of Condition Eligibility The District did not have adequate internal controls to perform direct certification downloads monthly and has no monitoring to ensure staff complete the required process. Paid Lunch Equity The District did not have adequate internal controls to ensure it completed the PLE tool accurately. Specifically, the District did not correctly follow the tool instructions to ensure the PLE tool was completed using weighted average pricing. The District incorrectly used totals for all meal types instead of only student lunches for part of the tool. We consider these deficiencies in internal controls to be significant deficiencies. Cause of Condition Eligibility District staff were aware of the requirements to determine the eligibility status for students each month, but they did not complete the direct certification downloads monthly as required. The Director of Nutrition Services is responsible for completing the verification; however, they did not perform two of the monthly downloads. Paid Lunch Equity District staff were aware of the requirement to raise lunch prices and attempted to raise prices to meet paid lunch equity. However, they did not understand the District’s price changes did not meet the pricing requirement. Therefore, they did not understand the need to document the contribution of nonfederal funds to the food services account to meet the paid lunch equity requirements of the program. Effect of Condition Eligibility The District did not have documentation to support that it performed the direct certification downloads for two of the six months tested. Without documentation demonstrating it performed the direct certification downloads, the District is at risk of not providing free meals to eligible students and providing free meals to ineligible students. Although the District did not perform direct certification downloads as required, our testing found it provided free meals to eligible students. Paid Lunch Equity The District completed the PLE tool for the 2023-2024 school year and increased the weighted average meal price by $0.02. However, the increases were not sufficient to raise the weighted average price to meet federal requirements. 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 $43,271 ($19,669 with $0.10 cap) in nonfederal funding to meet equity requirements. The District did not increase the weighted average lunch price to the capped required amount 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 $405,035 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 Eligibility We recommend the District establish internal controls to ensure staff perform direct certification downloads monthly, retain documentation for downloads performed and provide adequate oversight of the process to comply with direct certification requirements. Paid Lunch Equity 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 Eligibility: The District will document the internal controls that are in place for the monthly direct certification downloads and will print the certification download along with saving it electronically so that the files are easy to provide for future audits. Paid Lunch Equity: The District will document the internal controls that are in place for the completion of the PLE tool and ensure that the form is completed appropriately to show the continued use of nonfederal funds that are used yearly to fund the food service account fully. The District will also make sure to ‘print’ the GL 828 tab of the Fund Balance Reporting tool that is done yearly no later than November and sign it immediately after completion of the year end process to provide for the proof that the district has and continues to contribute sufficient nonfederal funds to the food service account. 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. RCW 28A.235.280(3) Free school meals—Systems to identify students, at least monthly, schools and school districts shall directly certify students for free school meals if the students qualify because of enrollment in assistance programs, including but not limited to the supplemental nutrition assistance program, the temporary assistance for needy families, and medicaid. RCW 28A.300.255 Meal charge policies, The office of the superintendent of public instruction shall collect, analyze, and promote to school districts and applicable community-based organizations best practices in local meal charge policies that are required by the United States department of agriculture in memorandum SP 46- 2016. Title 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Orting School District No. 344 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with federal eligibility and paid lunch equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Grantor Name: U.S Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. The District received $678,493 in federal funding to administer these programs during the 2023- 2024 school year, including $98,651 in Supply Chain Assistance awards. 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. Eligibility Direct certification is the process districts use to certify categorically eligible children for free meals without further application. Washington state has an electronic system that matches data from the Department of Social and Health Services with Comprehensive Education Data and Research System data to produce a “Direct Certification List.” Districts must download the direct certification list at least monthly to ensure they serve free meals to eligible students. Paid Lunch Equity 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 the Office of Superintendent of Public Instruction (OSPI)’s Fund Balance Reporting tool. If the calculation shows the District has a deficiency of revenues over expenditures, this means it has 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 it has met the requirement. Description of Condition Eligibility The District did not have adequate internal controls to perform direct certification downloads monthly and has no monitoring to ensure staff complete the required process. Paid Lunch Equity The District did not have adequate internal controls to ensure it completed the PLE tool accurately. Specifically, the District did not correctly follow the tool instructions to ensure the PLE tool was completed using weighted average pricing. The District incorrectly used totals for all meal types instead of only student lunches for part of the tool. We consider these deficiencies in internal controls to be significant deficiencies. Cause of Condition Eligibility District staff were aware of the requirements to determine the eligibility status for students each month, but they did not complete the direct certification downloads monthly as required. The Director of Nutrition Services is responsible for completing the verification; however, they did not perform two of the monthly downloads. Paid Lunch Equity District staff were aware of the requirement to raise lunch prices and attempted to raise prices to meet paid lunch equity. However, they did not understand the District’s price changes did not meet the pricing requirement. Therefore, they did not understand the need to document the contribution of nonfederal funds to the food services account to meet the paid lunch equity requirements of the program. Effect of Condition Eligibility The District did not have documentation to support that it performed the direct certification downloads for two of the six months tested. Without documentation demonstrating it performed the direct certification downloads, the District is at risk of not providing free meals to eligible students and providing free meals to ineligible students. Although the District did not perform direct certification downloads as required, our testing found it provided free meals to eligible students. Paid Lunch Equity The District completed the PLE tool for the 2023-2024 school year and increased the weighted average meal price by $0.02. However, the increases were not sufficient to raise the weighted average price to meet federal requirements. 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 $43,271 ($19,669 with $0.10 cap) in nonfederal funding to meet equity requirements. The District did not increase the weighted average lunch price to the capped required amount 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 $405,035 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 Eligibility We recommend the District establish internal controls to ensure staff perform direct certification downloads monthly, retain documentation for downloads performed and provide adequate oversight of the process to comply with direct certification requirements. Paid Lunch Equity 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 Eligibility: The District will document the internal controls that are in place for the monthly direct certification downloads and will print the certification download along with saving it electronically so that the files are easy to provide for future audits. Paid Lunch Equity: The District will document the internal controls that are in place for the completion of the PLE tool and ensure that the form is completed appropriately to show the continued use of nonfederal funds that are used yearly to fund the food service account fully. The District will also make sure to ‘print’ the GL 828 tab of the Fund Balance Reporting tool that is done yearly no later than November and sign it immediately after completion of the year end process to provide for the proof that the district has and continues to contribute sufficient nonfederal funds to the food service account. 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. RCW 28A.235.280(3) Free school meals—Systems to identify students, at least monthly, schools and school districts shall directly certify students for free school meals if the students qualify because of enrollment in assistance programs, including but not limited to the supplemental nutrition assistance program, the temporary assistance for needy families, and medicaid. RCW 28A.300.255 Meal charge policies, The office of the superintendent of public instruction shall collect, analyze, and promote to school districts and applicable community-based organizations best practices in local meal charge policies that are required by the United States department of agriculture in memorandum SP 46- 2016. Title 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Orting School District No. 344 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with federal eligibility and paid lunch equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Grantor Name: U.S Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. The District received $678,493 in federal funding to administer these programs during the 2023- 2024 school year, including $98,651 in Supply Chain Assistance awards. 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. Eligibility Direct certification is the process districts use to certify categorically eligible children for free meals without further application. Washington state has an electronic system that matches data from the Department of Social and Health Services with Comprehensive Education Data and Research System data to produce a “Direct Certification List.” Districts must download the direct certification list at least monthly to ensure they serve free meals to eligible students. Paid Lunch Equity 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 the Office of Superintendent of Public Instruction (OSPI)’s Fund Balance Reporting tool. If the calculation shows the District has a deficiency of revenues over expenditures, this means it has 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 it has met the requirement. Description of Condition Eligibility The District did not have adequate internal controls to perform direct certification downloads monthly and has no monitoring to ensure staff complete the required process. Paid Lunch Equity The District did not have adequate internal controls to ensure it completed the PLE tool accurately. Specifically, the District did not correctly follow the tool instructions to ensure the PLE tool was completed using weighted average pricing. The District incorrectly used totals for all meal types instead of only student lunches for part of the tool. We consider these deficiencies in internal controls to be significant deficiencies. Cause of Condition Eligibility District staff were aware of the requirements to determine the eligibility status for students each month, but they did not complete the direct certification downloads monthly as required. The Director of Nutrition Services is responsible for completing the verification; however, they did not perform two of the monthly downloads. Paid Lunch Equity District staff were aware of the requirement to raise lunch prices and attempted to raise prices to meet paid lunch equity. However, they did not understand the District’s price changes did not meet the pricing requirement. Therefore, they did not understand the need to document the contribution of nonfederal funds to the food services account to meet the paid lunch equity requirements of the program. Effect of Condition Eligibility The District did not have documentation to support that it performed the direct certification downloads for two of the six months tested. Without documentation demonstrating it performed the direct certification downloads, the District is at risk of not providing free meals to eligible students and providing free meals to ineligible students. Although the District did not perform direct certification downloads as required, our testing found it provided free meals to eligible students. Paid Lunch Equity The District completed the PLE tool for the 2023-2024 school year and increased the weighted average meal price by $0.02. However, the increases were not sufficient to raise the weighted average price to meet federal requirements. 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 $43,271 ($19,669 with $0.10 cap) in nonfederal funding to meet equity requirements. The District did not increase the weighted average lunch price to the capped required amount 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 $405,035 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 Eligibility We recommend the District establish internal controls to ensure staff perform direct certification downloads monthly, retain documentation for downloads performed and provide adequate oversight of the process to comply with direct certification requirements. Paid Lunch Equity 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 Eligibility: The District will document the internal controls that are in place for the monthly direct certification downloads and will print the certification download along with saving it electronically so that the files are easy to provide for future audits. Paid Lunch Equity: The District will document the internal controls that are in place for the completion of the PLE tool and ensure that the form is completed appropriately to show the continued use of nonfederal funds that are used yearly to fund the food service account fully. The District will also make sure to ‘print’ the GL 828 tab of the Fund Balance Reporting tool that is done yearly no later than November and sign it immediately after completion of the year end process to provide for the proof that the district has and continues to contribute sufficient nonfederal funds to the food service account. 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. RCW 28A.235.280(3) Free school meals—Systems to identify students, at least monthly, schools and school districts shall directly certify students for free school meals if the students qualify because of enrollment in assistance programs, including but not limited to the supplemental nutrition assistance program, the temporary assistance for needy families, and medicaid. RCW 28A.300.255 Meal charge policies, The office of the superintendent of public instruction shall collect, analyze, and promote to school districts and applicable community-based organizations best practices in local meal charge policies that are required by the United States department of agriculture in memorandum SP 46- 2016. Title 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Orting School District No. 344 September 1, 2023 through August 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with federal eligibility and paid lunch equity requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Grantor Name: U.S Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. The District received $678,493 in federal funding to administer these programs during the 2023- 2024 school year, including $98,651 in Supply Chain Assistance awards. 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. Eligibility Direct certification is the process districts use to certify categorically eligible children for free meals without further application. Washington state has an electronic system that matches data from the Department of Social and Health Services with Comprehensive Education Data and Research System data to produce a “Direct Certification List.” Districts must download the direct certification list at least monthly to ensure they serve free meals to eligible students. Paid Lunch Equity 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 the Office of Superintendent of Public Instruction (OSPI)’s Fund Balance Reporting tool. If the calculation shows the District has a deficiency of revenues over expenditures, this means it has 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 it has met the requirement. Description of Condition Eligibility The District did not have adequate internal controls to perform direct certification downloads monthly and has no monitoring to ensure staff complete the required process. Paid Lunch Equity The District did not have adequate internal controls to ensure it completed the PLE tool accurately. Specifically, the District did not correctly follow the tool instructions to ensure the PLE tool was completed using weighted average pricing. The District incorrectly used totals for all meal types instead of only student lunches for part of the tool. We consider these deficiencies in internal controls to be significant deficiencies. Cause of Condition Eligibility District staff were aware of the requirements to determine the eligibility status for students each month, but they did not complete the direct certification downloads monthly as required. The Director of Nutrition Services is responsible for completing the verification; however, they did not perform two of the monthly downloads. Paid Lunch Equity District staff were aware of the requirement to raise lunch prices and attempted to raise prices to meet paid lunch equity. However, they did not understand the District’s price changes did not meet the pricing requirement. Therefore, they did not understand the need to document the contribution of nonfederal funds to the food services account to meet the paid lunch equity requirements of the program. Effect of Condition Eligibility The District did not have documentation to support that it performed the direct certification downloads for two of the six months tested. Without documentation demonstrating it performed the direct certification downloads, the District is at risk of not providing free meals to eligible students and providing free meals to ineligible students. Although the District did not perform direct certification downloads as required, our testing found it provided free meals to eligible students. Paid Lunch Equity The District completed the PLE tool for the 2023-2024 school year and increased the weighted average meal price by $0.02. However, the increases were not sufficient to raise the weighted average price to meet federal requirements. 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 $43,271 ($19,669 with $0.10 cap) in nonfederal funding to meet equity requirements. The District did not increase the weighted average lunch price to the capped required amount 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 $405,035 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 Eligibility We recommend the District establish internal controls to ensure staff perform direct certification downloads monthly, retain documentation for downloads performed and provide adequate oversight of the process to comply with direct certification requirements. Paid Lunch Equity 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 Eligibility: The District will document the internal controls that are in place for the monthly direct certification downloads and will print the certification download along with saving it electronically so that the files are easy to provide for future audits. Paid Lunch Equity: The District will document the internal controls that are in place for the completion of the PLE tool and ensure that the form is completed appropriately to show the continued use of nonfederal funds that are used yearly to fund the food service account fully. The District will also make sure to ‘print’ the GL 828 tab of the Fund Balance Reporting tool that is done yearly no later than November and sign it immediately after completion of the year end process to provide for the proof that the district has and continues to contribute sufficient nonfederal funds to the food service account. 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. RCW 28A.235.280(3) Free school meals—Systems to identify students, at least monthly, schools and school districts shall directly certify students for free school meals if the students qualify because of enrollment in assistance programs, including but not limited to the supplemental nutrition assistance program, the temporary assistance for needy families, and medicaid. RCW 28A.300.255 Meal charge policies, The office of the superintendent of public instruction shall collect, analyze, and promote to school districts and applicable community-based organizations best practices in local meal charge policies that are required by the United States department of agriculture in memorandum SP 46- 2016. Title 7 CFR Part 210, National School Lunch Program, section 14, Resource management, Part E, describes the requirements for pricing paid lunches.