SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Mossyrock School District No. 206 September 1, 2024 through August 31, 2025 2025-002 The District did not have adequate internal controls and did not comply with federal procurement and suspension and debarment requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.559 – Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of the Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: N/A Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program, and Summer Food Service Program for Children. These programs provide free and reduced-price meals to students from low-income families. The District received $361,148 to administer these programs during the 2024-25 school year. 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. Procurement 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 procurement policy conforms to the most restrictive laws and requires the District to obtain price or rate quotations for purchases of goods between $10,000 and $75,000. Additionally, the federal Buy American provision requires school districts to purchase domestic commodities and products to the maximum extent practicable. Districts must include a Buy American clause in all product specifications, solicitations, purchase orders and any other procurement documents to ensure contractors are aware of this requirement. Suspension and debarment Federal requirements prohibit grant recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Our audit found the District did not have adequate controls to ensure it complied with procurement requirements. Specifically, the District did not follow its policy when procuring food products. The District paid the vendor $40,013 in federal program funds. Also, the District did not have a process in place to ensure it included the Buy American provision in the product specifications, solicitations, purchase orders and any other procurement documents as required. Suspension and debarment Our audit found the District did not have internal controls to verify the one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. Cause of Condition Although the District’s established procurement policy spoke to procurement and suspension and debarment requirements, employees responsible for these purchases were not familiar with the policy and did not attempt to identify and follow applicable requirements. Further, the District staff was not aware of the Buy American provision requirements. Effect of Condition Procurement The District could not show it complied with its own policy or federal procurement requirements for food products purchased totaling $40,013. Without effective internal controls, the District cannot demonstrate it complied with federal procurement standards and its own policy, allowed for full and open competition, received the best price or selected the lowest responsible bidder, and that federal funds were spent on American products. Suspension and debarment The District did not obtain a written certification from the contractor, did not have a contract in place to insert a clause or check for exclusion records at SAM.gov to verify contractor it paid $40,013 with federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. The District subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning costs. Recommendation Procurement We recommend the District establish internal controls to ensure it complies with its policy and federal regulations for procuring goods and that it maintains documentation to demonstrate it complied with federal procurement requirements. Further, we recommend the District establish internal controls to ensure it includes the Buy American provision in its procurement documentation. Suspension and debarment We recommend the District strengthen its internal controls to verify all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and maintain documentation demonstrating compliance with this requirement. District’s Response The District acknowledges the finding regarding insufficient controls that would ensure compliance with federal procurement and suspension and debarment requirements. To strengthen compliance with federal procurement requirements, the District will add a Buy American clause within procurement documents to ensure contractors are aware of the requirement. In addition to providing training and education to relevant staff, the District will update processes within the business office to ensure the proper check for exclusion records at SAM.gov is completed prior to payment to vendors or contractors meeting the $25,000 or more threshold, and that proper documentation is retained. Additionally, the District will add a clause to all contracts being paid in part or fully with federal funds, that states the contractor is not suspended or debarred. 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. 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. Title 7 CFR Part 210.21(d), Buy American, describes the requirements for school food authorities to include language requiring the purchase of foods that meet the Buy American requirements in all procurement procedures, solicitations, and contracts. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.