Background During fiscal year 2025, the District spent $1,598,841 in federal funds from the School Safely National Activities program. The program’s objective is to improve students' safety and well-being during and after the school day. The District used program funding to retain 4.5 counseling positions at risk of being cut and added three new positions to support the Assistant Director. 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. Time and effort The District is responsible for ensuring it supports all payroll costs it charges to the program with adequate time-and-effort documentation, as required by federal regulations and the awarding agency. Depending on the number and types of activities employees perform, time-and-effort documentation can be a semiannual certification or monthly personnel activity report, such as a detailed time sheet. Time-and-effort documentation must also be signed and dated after employees complete the work. 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 bid process, depending on the estimated cost of the procurement activity. The District must maintain documentation showing the procurement process it performed. District policy requires the District to solicit sealed bids for procurement of services more than $250,000. Description of Condition Time and effort The District’s internal controls were ineffective for ensuring it supported all salaries and benefits it charged to the program with appropriate time-and-effort documentation, as federal regulations and OSPI require. Specifically, the District did not obtain time-and-effort documentation to support payroll costs moved to the program through the payroll reallocation it performed at fiscal year-end. 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 mental health consulting services more than $250,000. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. Cause of Condition Time and effort District staff believed there was adequate supporting documentation for payroll costs it moved to the program, which included an email from the grantor approving reallocation of costs for time spent working on the program. The District did not have time-and-effort records to demonstrate the payroll costs allocated to the program at year-end were specifically for program-related work. Procurement District staff did not believe the mental health service contracts were subject to competitive procurement requirements. Effect of Condition Time and effort The District did not obtain time-and-effort documentation for three employees whose payroll costs totaling $284,101 it reallocated and charged to the program. Without adequate time-and-effort documentation, the District cannot demonstrate compliance with the awarding agency’s documentation requirements to support costs charged to federal programs. Further, the District cannot assure federal grantors that payroll costs it charged to the program were accurate and valid. During the audit, the District obtained and provided signed time-and-effort records to support the payroll costs it charged to the program. Additionally, the District received grantor communication that these payroll costs would be allowable to charge to the grant. Therefore, we are not questioning these costs. Procurement We found the District did not comply with procurement requirements for all five contracts we tested that were subject to procurement. The District paid these contractors a total of $766,000 in federal program funds. Without effective internal controls, the District cannot demonstrate it complied with federal procurement standards and its own policy and allowed for full and open competition. Recommendation Time and effort We recommend the District strengthen and follow internal controls to ensure it complies with federal and OSPI requirements for obtaining time-and-effort documentation timely. Procurement We recommend the District strengthen internal controls to ensure it complies with its policy and federal regulations for procuring services and that it maintains documentation to demonstrate such. District’s Response Time and effort: Thank you for the opportunity to respond to Audit Finding 2025-002 related to time-and-effort documentation and procurement requirements under the School Safety National Activities Program (Assistance Listing 84.184). Tacoma School District recognizes the importance of maintaining strong internal controls to ensure all costs charged to federal programs comply with applicable requirements. Although the district was able to provide alternative documentation supporting the work activities of the three affected employees, and no questioned costs were identified, we agree that enhancements to our compliance procedures are appropriate and necessary. The U.S. Department of Education award was originally established as a five-year continuation grant; however, the grant was discontinued two years prior to the anticipated end of the performance period. Due to these unforeseen circumstances, the district was required to reevaluate program needs within a shortened timeline and revise the spending plan to appropriately utilize remaining grant funds over a three-year period rather than the originally planned five-year period. As part of this process, the district consulted with the federal grantor and received approval to modify the program plan by reallocating salary costs for employees who were already performing work activities fully aligned with the federal grant objectives, but whose salaries had previously been supported by other district funding sources. The district maintains an established process for completing time-and-effort certifications based on employee position allocations. Following approval from the Department of Education program supervisor, the district proceeded with payroll adjustments consistent with allowable grant activities and within available grant funding levels. During subsequent review, it was identified that sufficient time-and-effort documentation had not been obtained contemporaneously with the payroll adjustments. This represented an isolated incident that occurred during year-end processing and was outside the district’s standard operating procedures. Corrective actions were implemented immediately upon identification of the control weakness and prior to the conclusion of the audit. Time-and-effort certifications were subsequently obtained for the affected employees. In addition, the district has enhanced its payroll adjustment procedures involving federal funds by incorporating an additional checklist item within the approval routing process to ensure required time-and-effort certifications are obtained and documented before payroll adjustments are finalized. In addition, the district accepts and agrees with the State Auditor’s Office that compliance with Federal procurement requirements is essential. The district recognizes the importance of maintaining procurement files that clearly and transparently document the rationale, analysis, and decision-making process supporting procurement actions, particularly when utilizing a noncompetitive procurement method under Federal regulations. In this regard, the district would like to clarify that the contracts referenced were procured under emergency circumstances using a non-competitive procurement process. The procurement documentation provided did not identify these vendors as sole source contractors; rather, the non-competitive procurement approach was utilized due to the urgent need to ensure continuity and availability of mental health services during emergency situation. The district did provide documentation supporting the procurement action identified within the audit finding; however, the district acknowledges the documentation retained within the procurement file was not adequate in clearly addressing and articulating the rationale for waiving competition in a coherent and logical manner that fully demonstrated the district’s process and justification. At the time of procurement, the district believed the documentation maintained was sufficient to support the procurement method utilized. The district selected the noncompetitive procurement method pursuant to 2 CFR 200.320(a)(3), which permits noncompetitive procurement when “the public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation.” The district’s determination was based upon the urgent student mental health conditions identified within the Washington State Governor’s Proclamation 21-05 regarding the Children’s Mental Health Crisis. The district determined that the immediate need to provide critical mental health services and student supports would not permit the delay associated with conducting a traditional competitive solicitation process during the emergency conditions identified by the State. The Governor’s proclamation can be found here: Governor’s Proclamation 21-05 – Children’s Mental Health Crisis The district recognizes the need to strengthen internal controls and procurement documentation practices to ensure procurement files clearly relay the rationale and supporting analysis in a precise, transparent, and easily understandable manner for any future reviewer. The following corrective actions will be taken: • Provide targeted staff training related to Federal procurement requirements, including noncompetitive procurement standards under 2 CFR 200.320. • Provide additional training focused on internal controls, procurement documentation requirements, and drafting clear procurement justifications. • Update the district’s sole source/noncompetitive procurement documentation form to specifically incorporate and address the five allowable rationale methods identified under 2 CFR 200.320. • Implement additional internal review procedures to ensure procurement files contain sufficient written justification and support documentation prior to approval and execution. The district is committed to continuous improvement of its procurement practices and ensuring compliance with Federal, state, and District procurement requirements moving forward. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. The Governor’s Proclamation was terminated in October 2022 and, therefore, not effective during the audit period. We reaffirm our finding and will review the status of the District’s corrective action 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 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction Bulletin 039-24, Time and Effort (T&E) Reporting establishes requirements for documenting time-and-effort, including fixed schedule systems. 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.