Wellpinit School District No. 49 September 1, 2024 through August 31, 2025 2025-001 The District did not have adequate internal controls and did not comply with requirements to supplement, not supplant, non-federal funds. Assistance Listing Number and Title: 84.010 Title I Grants to Local Educational Agencies Federal Grantor Name: U.S. Department of Education, Office of Elementary and Secondary Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: AD-6842 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background In fiscal year 2025, the District spent a total of $318,182 in federal funds in Title I, Part A, Grants to Local Educational Agencies awards. The objective of the Title I, Part A program is to improve the teaching and learning of children who are at risk of not meeting challenging state academic standards and who reside in areas with high concentrations of children from low-income families. Federal regulations require recipients to establish, document and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. District must use Title I, Part A funds in addition to (supplement) and not to replace (supplant) state and local funds. The District must have a written methodology or methodologies that it uses to allocate state and local funds to each Title I school unless the District or schools within the District meet exemption requirements. The methodology must ensure the school receives all the state and local funds it would otherwise receive if it were not receiving Title I funds. The methodology may not consider a school's Title I status. This requirement applies to both school-wide program and targeted assistance schools. Description of Condition The District has two high schools, one middle school, and one elementary school and although it was partially exempt, the District was required to create a methodology for the high school grade span. Our audit found the District’s internal controls were ineffective for ensuring it created a written methodology to distribute funding and staffing to the high schools without considering Title I, Part A funds, as federal regulations and OSPI require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Since the District was partially exempt from this requirement, District management thought they were supposed to consider the OSPI guidance when using federal funds but did not know they were required to establish a written methodology for the high schools. Effect of Condition The District did not establish a written methodology to distribute funding and staffing to schools without considering Title I, Part A funds. Without adequate internal controls to ensure it establishes a written methodology, the District cannot demonstrate it complied with federal requirements. After we completed the audit of the program, the District provided additional documentation, including a written methodology, but did not have evidence showing it used and followed this methodology during the audit period, as federal regulations and OSPI require. Recommendation We recommend the District design internal controls to ensure compliance with federal supplement not supplant requirements. This should include establishing a written methodology for the high school grade span and maintaining documentation to demonstrate it followed the methodology. District’s Response Wellpinit School District acknowledges the audit finding regarding the absence of a written methodology for allocating state and local funding and staffing to the high school grade span in compliance with Title I, Part A supplement not supplant requirements. At the time of the audit, the District operated under a partial exemption and believed it was appropriately following guidance from the Office of Superintendent of Public Instruction (OSPI). However, the District did not fully understand that a written methodology was still required for the non-exempt high school grade span. While allocation decisions were made using consistent practices, they were not formally documented in a manner that demonstrates compliance with federal requirements. To address this finding, the District is implementing the following corrective actions: 1. Development and Adoption of a Written Methodology The District is developing a formal, written methodology for allocating state and local funds and staffing to its high school grade span. The methodology will: • Allocate resources based on objective, neutral criteria such as student enrollment, program offerings, and staffing ratios • Ensure each high school receives the state and local resources it would otherwise receive if it were not receiving Title I, Part A funds • Clearly document that Title I status is not considered in the allocation process This methodology will be formally adopted and applied beginning with the next annual budget development cycle. 2. Strengthening Internal Controls The District is establishing internal control procedures to ensure compliance with supplement not supplant requirements, including: • Annual documentation of allocation formulas and staffing decisions • Review and approval of allocations by the Business Manager prior to budget adoption • Maintenance of supporting documentation demonstrating consistent application of the methodology 3. Training and Capacity Building District leadership and business office staff will participate in training on Title I, Part A fiscal requirements, including supplement not supplant provisions and documentation standards, utilizing guidance provided by OSPI and federal program resources. 4. Ongoing Monitoring and Oversight The Business Manager will be responsible for monitoring implementation and ensuring compliance by: • Conducting annual reviews of allocation practices • Verifying that documentation is complete and audit-ready • Updating the methodology as needed to reflect changes in enrollment, programming, or regulatory guidance 5. Implementation Timeline The written methodology and internal control procedures will be finalized prior to the development of the upcoming fiscal year budget and fully implemented for that cycle. Documentation supporting compliance will be retained annually. Auditor’s Remarks We appreciate the District’s commitment to resolving 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. 20 U.S Code 6321(b)(1) Elementary and Secondary Education Act (ESEA) section 1118(b)(1) requires that Title I funds be used to supplement, not supplant, state and local funds for education. 20 U.S Code 6321(b)(2) ESEA section 1118(b)(2) establishes how recipients demonstrate compliance with the supplement, not supplant, requirement. OSPI Supplement Not Supplant Guidance for Title I, Part A provides detailed guidance for documenting a methodology.