SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Orting School District No. 344 September 1, 2024 through August 31, 2025 2025-001 The District did not have adequate internal controls for ensuring compliance 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: N/A 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 National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. The District received $622,935 in federal funding 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. 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.” Direct Certification with Medicaid Data (DCM) allows states to directly certify students for free and reduced-price meals using Medicaid data. The only Medicaid categories directly certified are those Medicaid programs with income eligibility similar to the Income Eligibility Guidelines used by the USDA for the school meal programs. Districts must download the direct certification and direct certification with Medicaid data at least monthly to ensure they serve free meals to eligible students. Description of Condition The District did not have adequate internal controls to ensure direct certification with Medicaid downloads were completed monthly as required by Chapters 28A.235 and 28A.300 RCW. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The Director of Nutrition Services is responsible for completing the verification and is aware of the requirement for downloads to be performed monthly; however, additional responsibilities due to short staffing impacted the ability to retain evidence of the direct certification with Medicaid downloads. Further, there is no secondary review process in place to ensure the completion of the direct certification downloads. Effect of Condition The District did not have documentation to support that it performed the direct certification for Medicaid downloads for three of the seven months we tested. Without documentation demonstrating it performed the direct certification downloads, the District is at risk of not providing free or reduced-price meals to eligible students and providing free or reduced-price meals to ineligible students. Although the District did not perform direct certification for Medicaid downloads as required, our testing found it provided free and reduced-price meals to eligible students. Recommendation We recommend the District establish internal controls to ensure staff perform direct certification downloads monthly, retain documentation for downloads performed and provide adequate oversight of the process to comply with direct certification requirements. District’s Response Eligibility: The District will document the internal controls that are in place for the monthly direct certification downloads and will print the certification download along with saving it electronically so that the files are easy to provide for future audits. Auditor’s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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. 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.