2025-001 The District did not have adequate internal controls and did not comply with federal eligibility 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 the Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 257WAWA3N1199 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2024-001 Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and the National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. During the school year 2024-25, the District spent $1,372,623 in federal funds from the Child Nutrition Cluster. 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. 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. For students not on the Direct Certification List, the District must determine eligibility using an annual application submitted by the household of the student. The Child Nutrition Cluster also has a Provision 2 program, which is a four-year claiming option that reduces the burden of processing applications for schools with high numbers of participating low-income children to serve free meals to all students. Only the first year (base year) are schools required to make eligibility determinations. For the school year 2024-25 the District began operating Provision 2 for four out of six of its schools, and as school year 2024-25 was the base year, it needed to document eligibility. Description of Condition Our audit found the District did not have adequate internal controls to perform and monitor eligibility determinations through both the direct certification and annual application processes. 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 the requirements to determine the eligibility status for students each month. Due to turnover in the program’s key staff, they did not retain documentation showing they completed direct certification downloads monthly as required nor did they retain supporting documentation showing that students served met eligibility requirements via the annual application process. Effect of Condition Using a nonstatistical sample, we found the District did not retain documentation of the direct certification downloads for three of the five months we tested. Without documentation showing it performed the direct certification downloads, the District cannot demonstrate compliance with the requirement and risks not providing free meals to eligible students and providing free meals to ineligible students. In addition, using a statistical sample, our testing found that for 11 out of 29 students tested (38%), the District did not have an approved application, direct certification list or categorical determination form to support the eligibility of these students. Without documentation demonstrating students served are eligible, the District risks noncompliance with the base year Provision 2 requirements that requires it to demonstrate the eligibility determination for students served under the program. Although the District did not retain documentation to support the eligibility of the 11 students served as required, meals served would still be free for these students under Provision 2 regulations; therefore, we are not questioning costs. Recommendation We recommend the District establish internal controls to ensure staff perform direct certification downloads monthly, retain documentation for downloads performed, retain annual applications for non-direct certification students and provide adequate oversight of the process to comply with eligibility requirements. District’s Response The District reviewed the existing internal controls for compliance with federal eligibility requirements and have added additional management oversight of existing processes to improve completeness. In addition, the district will implement process improvements to increase transparency of record retention. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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 245, Section 245.6 – Application, eligibility and certification of children for free and reduced-price meals and free milk. 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.