The District did not have adequate internal controls for ensuring compliance with time-and-effort requirements. Assistance Listing Number and Title: 84.010 – Title I Grants to Local Educational Agencies 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: 84.010-5913-FP209 84.010-5925-FP452 Known Questioned Cost Amount: N/A Prior Year Audit Finding: N/A Background The objective of the Title I program is to improve the teaching and learning of children who are at risk of not meeting academic standards and reside in areas with high concentrations of children from low-income families. During fiscal year 2025, the District spent $480,058 in federal funds from Title I. 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. 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 a 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. If the District initially allocates payroll expenditures to federal programs based on budgeted or estimated time or amounts, then it must compare actual costs based on time-and-effort records to the estimates used. This reconciliation must occur timely and be documented. Description of Condition 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. We consider this internal control deficiency to be a significant deficiency. Cause of Condition District staff responsible for collecting time-and-effort documentation relied on staff assignments and budget allocations established at the beginning of the year to identify employees requiring time-and-effort documentation. During the fiscal year there was a misunderstanding regarding the requirements of semiannual versus monthly time-and-effort requirements. This resulted in one employee being switched from a semiannual time-and-effort certification to a monthly certification. Due to lack of communication with this employee’s change, the District did not collect signed time-and-effort documents required for two months. Additionally, a second employee did not provide their monthly time-and-effort documentation for two months despite District staff’s multiple attempts to collect them. Because of the unique situation, District staff overlooked removing the employee’s payroll charges from the program. Effect of Condition The District did not obtain time-and-effort documentation for a total of four months for two employees whose payroll costs totaling $28,149 it charged to the program. During the audit, the District obtained and provided the signed time-and-effort records to support $13,653 for one of the employees whose payroll costs it charged to the program. The District could not provide signed time-and-effort or alternative documentation to show the second employee worked on the program, resulting in unsupported costs totaling $14,496. 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. Recommendation We recommend the District develop and follow internal controls to ensure it complies with federal and OSPI requirements for obtaining signed time-and-effort documentation timely. District’s Response The District appreciates the work of the audit team and the professional manner in which the finding was discussed throughout the audit process. We agree with the finding related to four instances in which required time-and-effort documentation was not obtained and maintained in accordance with federal and Office of Superintendent of Public Instruction requirements. We also acknowledge that the finding must be reported as a significant internal control deficiency for the Title I program audited. While the District concurs with the finding, we believe additional context is important when evaluating the significance of this issue within the District's overall system of internal controls. The Title I program expenditures audited represent approximately 1% of the District’s total revenues, and the unsupported payroll costs identified in the finding ($14,496) represent approximately 0.02% of the District’s total federal revenues. In addition, the District administers a robust time-and-effort process, including monthly reports for approximately 90 employees and semiannual certifications for approximately 20 employees each year. The exceptions identified by the audit involved four missing reports associated with two employees and resulted from employee classification and communication issues rather than a systemic breakdown in the District’s internal control environment. The District takes compliance with federal requirements seriously and recognizes that even isolated exceptions require corrective action. The District has developed a corrective action plan that strengthens the current monitoring controls through enhancements to existing processes in the following areas: • Monthly time-and-effort tracking checklist • Monthly management review and sign-off • Periodic review of employee classifications • Escalation procedures for missing documentation The corrective action plan also includes the development of a formalized annual training program for employees and supervisors. The process enhancements have been developed and will be implemented in the current fiscal year. Annual training of employees will occur at the start of each school year, beginning September 2026. These enhancements are designed to ensure the timely collection and review of required documentation and to prevent similar issues in the future. These actions reflect the District’s commitment to continuous improvement and maintaining a strong system of internal controls. The District appreciates the auditors’ recommendations and will continue to improve its processes to ensure ongoing compliance with federal requirements while maintaining effective stewardship of public resources. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to resolve this finding. We will review the corrective action taken 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, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of the Superintendent of Public Instruction Bulletin 039-24, Time and Effort (T&E) Reporting establishes requirements for documenting time-and-effort.