The District did not have adequate internal controls and did not comply with federal procurement requirements. Assistance Listing Number and Title: 84.027 Special Education Grants to States 84.173 Special Education Preschool Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of the Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: GT-04184, GT-HNI25- 00129 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2025, the District spent $326,284 in federal funds from the Special Education program cluster. This program ensures students with disabilities receive free and appropriate public education with specially designed instruction that addresses their unique needs. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. The District must maintain documentation showing the procurement process it performed. The District’s policy conforms to the most restrictive laws and requires it to obtain price or rate quotations for personal services costing between $10,000 and $250,000. Description of Condition Our audit found the District’s internal controls were ineffective for ensuring compliance with federal procurement requirements. Specifically, the District did not follow its policy when procuring personal services for school psychology, speech-language pathology and occupational therapy. The District paid two contractors a total of $167,145 in federal program funds. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition District staff were aware of procurement requirements but did not retain documentation of price or rate quotations to demonstrate compliance with procurement requirements. Effect of Condition Without effective internal controls or documentation, the District cannot demonstrate it complied with federal procurement standards and its own policy, allowed for full and open competition or received the best price. Recommendation We recommend the District strengthen internal controls to ensure it complies with its policy and federal regulations for procuring personal services and it maintains documentation to demonstrate it complied with federal procurement requirements. District’s Response The District acknowledges the finding and appreciates the opportunity to strengthen our documentation practices related to procurement. We would like to clarify that the District did perform the procurement requirements outlined in District policy 6220 and provided a written rationale for the process but did not retain the documentation to demonstrate compliance with the procurement requirements. As a result, this finding reflects a documentation deficiency rather than the absence of the control itself. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring goods and services, including noncompetitive procurement.