Corrective Action Plans

Finding: The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with financial reporting requirements for the Child Care and Development Fund Cluster. Questioned Costs: Assistance Listing # 93.575 93.575 COVID-19 93.596 Amount $0 Status: Corrective action in progress Corrective Action: The Child Care and Development Fund (CCDF) program was previously managed by the Department of Social and Health Services and the Department of Early Learning. Since the program transitioned in 2019, the Department has been making efforts to strengthen internal controls over payments to child care providers and other CCDF grant requirements. The Department implemented grant-level management of all federal funds, including the CCDF grant. The Department allocated the CCDF grant to eligible clients and allowable activities in compliance with 45 CFR 98.67. As part of the audit resolution process, the Department of Health and Human Services (HHS), Administration for Children & Families (ACF), which oversees the CCDF program at the federal level, reviews all the State Auditor’s Office (SAO) findings and issues management decision letters. The Department received a management decision letter dated October 3, 2023, from HHS for finding 2021-033 (2020-038) where ACF did not sustain the disallowance of questioned costs for prior findings and stated: “Although the Department’s internal controls were lacking, the ACF has not identified any funds that were expended on ineligible activities.” The ACF recommended: “…that the Department work with the auditors to determine an appropriate methodology that can be tested to ensure child care payments comply with Federal regulations.” The SAO has taken issue in the past several audits and maintained that the program is not auditable without child-level data. The Department is committed to collaborating with SAO to determine an appropriate methodology that identifies a sampling unit for accurately testing compliance. During the audit period, the Department did not have the staff and resources to develop and maintain the business process redesign, as well as the information technology initiatives necessary to meet the level of assurance as recommended by the SAO. In response to the auditor’s recommendations, the Department submitted a budget request for the 2024 supplemental budget. The enacted budget included funding to implement the Department’s budget request beginning in state fiscal year 2025, specifically: “Funding in this subsection must be expended with internal controls that provide child-level detail for all transactions, beginning July 1, 2024.” The Department is working with a developer to assist with building out the required databases between the Social Service Payment System and the Agency Financial Reporting System to allow transfers between funding sources to include child-level data related to the expenditures. The Department looks forward to working with SAO to resolve the child-level data concerns in the audit of the CCDF grant programs. The conditions noted in this finding were previously reported in findings 2023-062, 2022-044, and 2021-038. Completion Date: Estimated December 2025 Agency Contact: Stefanie Niemela Audit Liaison PO Box 40970 Olympia, WA 98504-0970 (360) 725-4402 stefanie.niemela@dcyf.wa.gov

Finding: The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with period of performance requirements for the Child Care and Development Fund Cluster. Questioned Costs: Assistance Listing # 93.575 93.575 COVID-19 93.596 Amount $0 Status: Corrective action in progress Corrective Action: The Child Care and Development Fund (CCDF) program was previously managed by the Department of Social and Health Services and the Department of Early Learning. Since the program transitioned in 2019, the Department has been making efforts to strengthen internal controls over payments to child care providers and other CCDF grant requirements. The Department implemented grant-level management of all federal funds, including the CCDF grant. The Department allocated the CCDF grant to eligible clients and allowable activities in compliance with 45 CFR 98.67. As part of the audit resolution process, the Department of Health and Human Services (HHS), Administration for Children & Families (ACF), which oversees the CCDF program at the federal level, reviews all the State Auditor’s Office (SAO) findings and issues management decision letters. The Department received a management decision letter dated October 3, 2023, from HHS for finding 2021-033 (2020-038) where ACF did not sustain the disallowance of questioned costs for prior findings and stated: “Although the Department’s internal controls were lacking, the ACF has not identified any funds that were expended on ineligible activities.” The ACF recommended: “…that the Department work with the auditors to determine an appropriate methodology that can be tested to ensure child care payments comply with Federal regulations.” The SAO has taken issue in the past several audits and maintained that the program is not auditable without child-level data. The Department is committed to collaborating with SAO to determine an appropriate methodology that identifies a sampling unit for accurately testing compliance. During the audit period, the Department did not have the staff and resources to develop and maintain the business process redesign, as well as the information technology initiatives necessary to meet the level of assurance as recommended by the SAO. In response to the auditor’s recommendations, the Department submitted a budget request for the 2024 supplemental budget. The enacted budget included funding to implement the Department’s budget request beginning in state fiscal year 2025, specifically: “Funding in this subsection must be expended with internal controls that provide child-level detail for all transactions, beginning July 1, 2024.” The Department is working with a developer to assist with building out the required databases between the Social Service Payment System and the Agency Financial Reporting System to allow transfers between funding sources to include child-level data related to the expenditures. The Department looks forward to working with SAO to resolve the child-level data concerns in the audit of the CCDF grant programs. The conditions noted in this finding were previously reported in findings 2023-061, 2022-043, 2021-037, and 2020-041. Completion Date: Estimated December 2025 Agency Contact: Stefanie Niemela Audit Liaison PO Box 40970 Olympia, WA 98504-0970 (360) 725-4402 stefanie.niemela@dcyf.wa.gov

Finding: The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with matching, level of effort and earmarking requirements for the Child Care and Development Fund Cluster. Questioned Costs: Assistance Listing # 93.575 93.575 COVID-19 93.596 Amount $0 Status: Corrective action in progress Corrective Action: The Child Care and Development Fund (CCDF) program was previously managed by the Department of Social and Health Services and the Department of Early Learning. Since the program transitioned in 2019, the Department has been making efforts to strengthen internal controls over payments to child care providers and other CCDF grant requirements. The Department implemented grant-level management of all federal funds, including the CCDF grant. The Department allocated the CCDF grant to eligible clients and allowable activities in compliance with 45 CFR 98.67. As part of the audit resolution process, the Department of Health and Human Services (HHS), Administration for Children & Families (ACF), which oversees the CCDF program at the federal level, reviews all the State Auditor’s Office (SAO) findings and issues management decision letters. The Department received a management decision letter dated October 3, 2023, from HHS for finding 2021-033 (2020-038) where ACF did not sustain the disallowance of questioned costs for prior findings and stated: “Although the Department’s internal controls were lacking, the ACF has not identified any funds that were expended on ineligible activities.” The ACF recommended: “…that the Department work with the auditors to determine an appropriate methodology that can be tested to ensure child care payments comply with Federal regulations.” The SAO has taken issue in the past several audits and maintained that the program is not auditable without child-level data. The Department is committed to collaborating with SAO to determine an appropriate methodology that identifies a sampling unit for accurately testing compliance. During the audit period, the Department did not have the staff and resources to develop and maintain the business process redesign, as well as the information technology initiatives necessary to meet the level of assurance as recommended by the SAO. In response to the auditor’s recommendations, the Department submitted a budget request for the 2024 supplemental budget. The enacted budget included funding to implement the Department’s budget request beginning in state fiscal year 2025, specifically: “Funding in this subsection must be expended with internal controls that provide child-level detail for all transactions, beginning July 1, 2024.” The Department is working with a developer to assist with building out the required databases between the Social Service Payment System and the Agency Financial Reporting System to allow transfers between funding sources to include child-level data related to the expenditures. The Department looks forward to working with SAO to resolve the child-level data concerns in the audit of the CCDF grant programs. The conditions noted in this finding were previously reported in findings 2023-060, 2022-042, 2021-036, and 2020-040. Completion Date: Estimated December 2025 Agency Contact: Stefanie Niemela Audit Liaison PO Box 40970 Olympia, WA 98504-0970 (360) 725-4402 stefanie.niemela@dcyf.wa.gov

Finding: The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with requirements to ensure payments to child care providers for the Child Care and Development Fund Cluster programs were allowable and properly supported. Questioned Costs: Assistance Listing # 93.575 93.575 COVID-19 93.596 Amount $415,579,473 Status: Corrective action in progress Corrective Action: The Child Care and Development Fund (CCDF) program was previously managed by the Department of Social and Health Services and the Department of Early Learning. Since the program transitioned in 2019, the Department has been making efforts to strengthen internal controls over payments to child care providers and other CCDF grant requirements. The Department implemented grant-level management of all federal funds, including the CCDF grant. The Department allocated the CCDF grant to eligible clients and allowable activities in compliance with 45 CFR 98.67. As part of the audit resolution process, the Department of Health and Human Services (HHS), Administration for Children & Families (ACF), which oversees the CCDF program at the federal level, reviews all the State Auditor’s Office (SAO) findings and issues management decision letters. The Department received a management decision letter dated October 3, 2023, from HHS for finding 2021-033 (2020-038) where ACF did not sustain the disallowance of questioned costs for prior findings and stated: “Although the Department’s internal controls were lacking, the ACF has not identified any funds that were expended on ineligible activities.” The ACF recommended: “…that the Department work with the auditors to determine an appropriate methodology that can be tested to ensure child care payments comply with Federal regulations.” The SAO has taken issue in the past several audits and maintained that the program is not auditable without child-level data. The Department is committed to collaborating with SAO to determine an appropriate methodology that identifies a sampling unit for accurately testing compliance. During the audit period, the Department did not have the staff and resources to develop and maintain the business process redesign, as well as the information technology initiatives necessary to meet the level of assurance as recommended by the SAO. In response to the auditor’s recommendations, the Department submitted a budget request for the 2024 supplemental budget. The enacted budget included funding to implement the Department’s budget request beginning in state fiscal year 2025, specifically: “Funding in this subsection must be expended with internal controls that provide child-level detail for all transactions, beginning July 1, 2024.” The Department is working with a developer to assist with building out the required databases between the Social Service Payment System and the Agency Financial Reporting System to allow transfers between funding sources to include child-level data related to the expenditures. The Department looks forward to working with SAO to resolve the child-level data concerns in the audit of the CCDF grant programs. The conditions noted in this finding were previously reported in findings 2023-058, 2022-041, 2021-033, 2020-038, 2019-035, 2018-034, 2017-024, 2016-021, 2015-023, 2014-023, 2013-016, 12-28, 11-23, 10-31, 9-12, and 8-13. Completion Date: Estimated December 2025 Agency Contact: Stefanie Niemela Audit Liaison PO Box 40970 Olympia, WA 98504-0970 (360) 725-4402 stefanie.niemela@dcyf.wa.gov

Finding: The Office of Superintendent of Public Instruction improperly charged $5,139 to the Special Education program. Questioned Costs: Assistance Listing # 84.027 84.027 COVID-19 84.173 84.173 COVID-19 Amount $5,139 Status: Corrective action complete Corrective Action: The Office of Superintendent of Public Instruction concurs with this finding. The Office has strengthened internal controls to address accounting adjustments made during liquidation periods to ensure that expenditures occurring outside of a grant’s period of performance are not shifted to the grant. Procedures are updated to: • Monitor expenditures through reconciliation of monthly reports to ensure the spending level stays within the allowable threshold and grant maximum. • Require all journal vouchers correcting expenditures during the grant liquidation period be verified by budget staff to ensure they are charged to the appropriate grant period of performance. • Complete expenditure corrections within the grant liquidation period. • Liquidate obligations on the last business day of January (or 120 days after the budget period ends). The Office will communicate the corrective action plan with internal stakeholders to ensure compliance with updated procedures. The Office will consult with the federal grantor to discuss whether the questioned costs identified in the audit should be repaid. Completion Date: November 2024 Agency Contact: Tania May Assistant Superintendent, Special Education PO Box 47200 Olympia, WA 98504-7200 (360) 725-6075 Tania.may@k12.wa.us

Finding: The Department of Commerce did not have adequate internal controls over and did not comply with period of performance requirements for the Low-Income Home Energy Assistance program. Questioned Costs: Assistance Listing # 93.568 93.568 COVID-19 Amount $4,409,760 Status: Corrective action in progress Corrective Action: The Department will review and strengthen its policies and internal controls to ensure compliance with the Low-Income Home Energy Assistance Program (LIHEAP) period of performance requirements. This includes: • Implementing additional checks to verify that all expenditures are incurred within the award’s period of performance. • Providing additional training to staff on the period of performance requirements to prevent future misinterpretations. As part of the corrective action, the program has implemented the following changes: • For the 2024 and 2025 program years for LIHEAP awards, all subrecipient contracts were issued with a two-year period of performance to avoid new expenses being added to the closeout year. • Ensured that all new subrecipient contracts align with the Department’s updated internal approach. Based on the recommendation in the audit finding, the Department will consult with the grantor regarding the questioned costs identified in the audit. Completion Date: Estimated October 2025 Agency Contact: Gena Allen, CFE Internal Control Officer PO Box 42525 Olympia, WA 98504-2525 (360) 480-5149 Gena.Allen@Commerce.wa.gov

Finding: The Office of Superintendent of Public Instruction did not have adequate internal controls over and did not comply with federal activities allowed and subrecipient monitoring requirements for the Education Stabilization Fund program. Questioned Costs: Assistance Listing # 84.425R 84.425V Amount $47,322,280 Status: Corrective action complete Corrective Action: The Office distributed the remaining unobligated funds from the program to Local Education Agencies (LEAs) through the apportionment process to meet the legislative intent. Due to the nature of how the payments were calculated, the Office’s grants system could not be used for the distribution. When a grant is awarded through our grants system, an email notification is sent to the organization that contains the federal elements required in 2 CFR 200.332. Although the Office concurs that we did not provide a formal subaward document that included all of the elements since the funds were not distributed through our grants system, the LEA’s received other formal communication through a Gov Delivery email and the School District Accounting Manual that included most of these federal elements. Going forward, if the Office uses the apportionment process to distribute funds to LEAs, all the required federal elements in 2 CFR 200.332 will be included in a separate subaward. The Office’s communication to LEAs also included the allowable use of these funds. Therefore, the Office does not concur that the funds should be questioned as not being allowable or properly supported. Completion Date: February 2025 Agency Contact: TJ Kelly Chief Financial Officer P.O. Box 47200 Olympia, WA 98504-7200 (360) 725-6301 Thomas.Kelly@k12.wa.us

Finding: The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with financial reporting requirements for the Child Care and Development Fund Cluster. Questioned Costs: Assistance Listing # 93.575 93.575 COVID-19 93.596 Status: Corrective action in progress Corrective Action: The Child Care and Development Fund (CCDF) program was previously managed by the Department of Social and Health Services and the Department of Early Learning. Since the program transitioned in 2019, the Department has been making efforts to strengthen internal controls over payments to child care providers and other CCDF grant requirements. The Department implemented grant-level management of all federal funds, including the CCDF grant. The Department allocated the CCDF grant to eligible clients and allowable activities in compliance with 45 CFR 98.67. As part of the audit resolution process, the Department of Health and Human Services (HHS), Administration for Children & Families (ACF), which oversees the CCDF program at the federal level, reviews all State Auditor’s Office (SAO) findings and issues management decision letters. The Department received a management decision letter dated October 3, 2023, from HHS for finding 2021-033 (2020-038) which states: “The ACF noted that the auditor raised concern about the Department’s accounting procedures and efforts made to trace expenditures at the transaction-level. As the basis for the finding, the auditor used CFRs (200.53, 200.303, 200.403, 200.410) that do not apply to CCDF. Federal regulations allow Lead Agencies to expend and account for CCDF funds in accordance with their own procedures.” In addition, ACF did not sustain the disallowance of questioned costs and stated: “Although the Department’s internal controls were lacking, the ACF has not identified any funds that were expended on ineligible activities.” The ACF recommended: “…that the Department work with the auditors to determine an appropriate methodology that can be tested to ensure child care payments comply with Federal regulations.” The Department met with ACF and SAO on November 8, 2023, to discuss the ACF decision at which time ACF upheld the above statements that the activities allowed finding was not substantiated. The Department is committed to collaborating with SAO to determine an appropriate methodology that identifies a sampling unit that can be used to accurately test compliance. The SAO maintained that the program is not auditable without child-level data. The Department does not currently have the staff and resources to develop and maintain the business process redesign, as well as the information technology initiatives necessary to meet the level of assurance recommended by SAO. In response to the auditor’s recommendations, the Department submitted a budget request for the 2024 supplemental budget. Funding was provided to develop and maintain the business process that would allow adjustments to include child-level data beginning July 2024. The conditions noted in this finding were previously reported in findings 2022-044 and 2021-038. Completion Date: Estimated December 2025 Agency Contact: Stefanie Niemela Audit Liaison PO Box 40970 Olympia, WA 98504-0970 (360) 725-4402 stefanie.niemela@dcyf.wa.gov

Finding: The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with period of performance requirements for the Child Care and Development Fund Cluster. Questioned Costs: Assistance Listing # 93.575 93.575 COVID-19 93.596 Status: Corrective action in progress Corrective Action: The Child Care and Development Fund (CCDF) program was previously managed by the Department of Social and Health Services and the Department of Early Learning. Since the program transitioned in 2019, the Department has been making efforts to strengthen internal controls over payments to child care providers and other CCDF grant requirements. The Department implemented grant-level management of all federal funds, including the CCDF grant. The Department allocated the CCDF grant to eligible clients and allowable activities in compliance with 45 CFR 98.67. As part of the audit resolution process, the Department of Health and Human Services (HHS), Administration for Children & Families (ACF), which oversees the CCDF program at the federal level, reviews all State Auditor’s Office (SAO) findings and issues management decision letters. The Department received a management decision letter dated October 3, 2023, from HHS for finding 2021-033 (2020-038) which states: “The ACF noted that the auditor raised concern about the Department’s accounting procedures and efforts made to trace expenditures at the transaction-level. As the basis for the finding, the auditor used CFRs (200.53, 200.303, 200.403, 200.410) that do not apply to CCDF. Federal regulations allow Lead Agencies to expend and account for CCDF funds in accordance with their own procedures.” In addition, ACF did not sustain the disallowance of questioned costs and stated: “Although the Department’s internal controls were lacking, the ACF has not identified any funds that were expended on ineligible activities.” The ACF recommended: “…that the Department work with the auditors to determine an appropriate methodology that can be tested to ensure child care payments comply with Federal regulations.” The Department met with ACF and SAO on November 8, 2023, to discuss the ACF decision at which time ACF upheld the above statements that the activities allowed finding was not substantiated. The Department is committed to collaborating with SAO to determine an appropriate methodology that identifies a sampling unit that can be used to accurately test compliance. The SAO maintained that the program is not auditable without child-level data. The Department does not currently have the staff and resources to develop and maintain the business process redesign, as well as the information technology initiatives necessary to meet the level of assurance recommended by SAO. In response to the auditor’s recommendations, the Department: • Implemented written procedures for period of performance requirements effective December 6, 2023. • Submitted a budget request for the 2024 supplemental budget. Funding was provided to develop and maintain the business process that would allow adjustments to include child-level data beginning July 2024. The conditions noted in this finding were previously reported in findings 2022-043, 2021-037 and 2020-041. Completion Date: Estimated December 2025 Agency Contact: Stefanie Niemela Audit Liaison PO Box 40970 Olympia, WA 98504-0970 (360) 725-4402 stefanie.niemela@dcyf.wa.gov

Finding: The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with matching, level of effort, and earmarking requirements for the Child Care and Development Fund Cluster. Questioned Costs: Assistance Listing # 93.575 93.575 COVID-19 93.596 Amount $0 Status: Corrective action in progress Corrective Action: The Child Care and Development Fund (CCDF) program was previously managed by the Department of Social and Health Services and the Department of Early Learning. Since the program transitioned in 2019, the Department has been making efforts to strengthen internal controls over payments to child care providers and other CCDF grant requirements. The Department implemented grant-level management of all federal funds, including the CCDF grant. The Department allocated the CCDF grant to eligible clients and allowable activities in compliance with 45 CFR 98.67. As part of the audit resolution process, the Department of Health and Human Services (HHS), Administration for Children & Families (ACF), which oversees the CCDF program at the federal level, reviews all State Auditor’s Office (SAO) findings and issues management decision letters. The Department received a management decision letter dated October 3, 2023, from HHS for finding 2021-033 (2020-038) which states: “The ACF noted that the auditor raised concern about the Department’s accounting procedures and efforts made to trace expenditures at the transaction-level. As the basis for the finding, the auditor used CFRs (200.53, 200.303, 200.403, 200.410) that do not apply to CCDF. Federal regulations allow Lead Agencies to expend and account for CCDF funds in accordance with their own procedures.” In addition, ACF did not sustain the disallowance of questioned costs and stated: “Although the Department’s internal controls were lacking, the ACF has not identified any funds that were expended on ineligible activities.” The ACF recommended: “…that the Department work with the auditors to determine an appropriate methodology that can be tested to ensure child care payments comply with Federal regulations.” The Department met with ACF and SAO on November 8, 2023, to discuss the ACF decision at which time ACF upheld the above statements that the activities allowed finding was not substantiated. The Department is committed to collaborating with SAO to determine an appropriate methodology that identifies a sampling unit that can be used to accurately test compliance. The SAO maintained that the program is not auditable without child-level data. The Department does not currently have the staff and resources to develop and maintain the business process redesign, as well as the information technology initiatives necessary to meet the level of assurance recommended by SAO. In response to the auditor’s recommendations, the Department submitted a budget request for the 2024 supplemental budget. Funding was provided to develop and maintain the business process that would allow adjustments to include child-level data beginning July 2024. The conditions noted in this finding were previously reported in findings 2022-042, 2021-036 and 2020-040. Completion Date: Estimated December 2025 Agency Contact: Stefanie Niemela Audit Liaison PO Box 40970 Olympia, WA 98504-0970 (360) 725-4402 stefanie.niemela@dcyf.wa.gov

Finding: The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with requirements to ensure payments to child care providers for the Child Care and Development Fund Cluster programs were allowable and properly supported. Questioned Costs: Assistance Listing # 93.575 93.575 COVID-19 93.596 Amount 356,042,172 Status: Corrective action in progress Corrective Action: The Child Care and Development Fund (CCDF) program was previously managed by the Department of Social and Health Services and the Department of Early Learning. Since the program transitioned in 2019, the Department has been making efforts to strengthen internal controls over payments to child care providers and other CCDF grant requirements. The Department implemented grant-level management of all federal funds, including the CCDF grant. The Department allocated the CCDF grant to eligible clients and allowable activities in compliance with 45 CFR 98.67. As part of the audit resolution process, the Department of Health and Human Services (HHS), Administration for Children & Families (ACF), which oversees the CCDF program at the federal level, reviews all State Auditor’s Office (SAO) findings and issues management decision letters. The Department received a management decision letter dated October 3, 2023, from HHS for finding 2021-033 (2020-038) which states: “The ACF noted that the auditor raised concern about the Department’s accounting procedures and efforts made to trace expenditures at the transaction-level. As the basis for the finding, the auditor used CFRs (200.53, 200.303, 200.403, 200.410) that do not apply to CCDF. Federal regulations allow Lead Agencies to expend and account for CCDF funds in accordance with their own procedures.” In addition, ACF did not sustain the disallowance of questioned costs and stated: “Although the Department’s internal controls were lacking, the ACF has not identified any funds that were expended on ineligible activities.” The ACF recommended: “…that the Department work with the auditors to determine an appropriate methodology that can be tested to ensure child care payments comply with Federal regulations.” The Department met with ACF and SAO on November 8, 2023, to discuss the ACF decision at which time ACF upheld the above statements that the activities allowed finding was not substantiated. The Department is committed to collaborating with SAO to determine an appropriate methodology that identifies a sampling unit that can be used to accurately test compliance. The SAO maintained that the program is not auditable without child-level data. The Department does not currently have the staff and resources to develop and maintain the business process redesign, as well as the information technology initiatives necessary to meet the level of assurance recommended by SAO. In response to the auditor’s recommendations, the Department submitted a budget request for the 2024 supplemental budget. Funding was provided to develop and maintain the business process that would allow adjustments to include child-level data beginning July 2024. The conditions noted in this finding were previously reported in findings 2022-041, 2021-033, 2020-038, 2019-035, 2018-034, 2017-024, 2016-021, 2015-023, 2014-023, 2013-016, 12-28, 11-23, 10-31, 9-12 and 8-13. Completion Date: Estimated December 2025 Agency Contact: Stefanie Niemela Audit Liaison PO Box 40970 Olympia, WA 98504-0970 (360) 725-4402 stefanie.niemela@dcyf.wa.gov

Finding: The Office of Superintendent of Public Instruction improperly charged $42,265 to the Special Education Cluster. Questioned Costs: Assistance Listing # 84.027 84.027 COVID-19 84.173 84.173 COVID-19 Amount $42,265 Status: Corrective action complete Corrective Action: As stated in the finding, the Office has adequate internal controls to comply with period of performance requirements. To address the allowable periods for journal vouchers (corrections), the Office will ensure the correction cycle will align with federally established liquidation periods. In response to the finding, the Office has updated procedures to strengthen internal controls, as follows: • Monitor monthly expenditures to ensure the Office stays within the allowable pre-determined threshold and grant award limit. • Complete expenditure corrections within the grant liquidation period. • Liquidate obligations charged to the grant on the last business day of January (or 120 days after the budget period ends). • Request prior approval of late liquidations from the federal grantor as needed. The Office will communicate the corrective action plan with internal stakeholders to ensure compliance with updated process/procedures. The Office will consult with the federal grantor to discuss whether the questioned costs identified in the audit should be repaid. Completion Date: January 2024 Agency Contact: Amy Kollar Director of Agency Financial Services PO Box 47200 Olympia, WA 98504-7200 (360) 725-6283 Amy.kollar@k12.wa.us

Finding: The Office of Superintendent of Public Instruction did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the Special Education program. Questioned Costs: Assistance Listing # 84.027 84.027 COVID-19 84.173 84.173 COVID-19 Amount $378,206 Status: Corrective action complete Corrective Action: When the Special Education program underwent a fiscal leadership transition in 2021, the incoming director identified necessary changes in agency procedures for closing out fiscal year (FY) 2021. The director and budget analyst have been maintaining weekly check-ins since May 2022 to discuss the implementation of proper internal controls. Beginning in FY 2023, the Office has fully implemented processes to ensure spending plans do not exceed the maximum allowable amounts earmarked for administration and other state-level activities. The updated procedures require the director of Operations and the budget analyst to perform the following: • Review criteria for spending plans at the beginning of the fiscal year. • Review the Grant Award Notice and Grants to States Summary Table and Preschool Grants to States Summary Table. • Review spending plans and update the maximum allowable amounts earmarked for administration and other state-level activities in the spending plan throughout the fiscal year. • Meet weekly to review spending plans and update plans as requests are received. • Review monthly expenditure reports during weekly meetings. These updated procedures have contributed to increased communication and partnership between the director of Operations and the budget analyst. These internal controls provide assurance that the Office will meet earmarking requirements and compliance with federal rules. The Office will consult with the federal grantor to discuss whether the questioned costs identified in the audit should be repaid. The conditions noted in this finding were previously reported in finding 2022-025. Completion Date: March 2024 Agency Contact: Tania May Assistant Superintendent, Special Education PO Box 47200 Olympia, WA 98504-7200 (360) 725-6075 Tania.may@k12.wa.us

Finding: The Department of Children, Youth, and Families did not have adequate internal controls over and did not comply with requirements to ensure payments to child care providers paid with Temporary Assistance for Needy Families funds were allowable and property supported. Questioned Costs: Assistance Listing # 93.558 Amount $107,338,725 Status: Corrective action in progress Corrective Action: The Working Connections Child Care (WCCC) program was previously managed by the Department of Social and Health Services (DSHS) and the Department of Early Learning. Since the program transitioned in 2019, the Department has been making efforts to strengthen internal controls over payments to child care providers and other grant requirements. The Department implemented grant-level management of all federal funds, including the Temporary Assistance for Needy Families grant. This consisted of making significant grant level adjustments between allowable grant sources to properly spend grant dollars within the allowable period of performance and ensure level of effort and matching requirements were met. The Department’s grant adjustments were processed based on eligible clients and allowable activities. The Department does not currently have the staff to develop and maintain the business process redesign, as well as the information technology initiatives necessary to meet the level of assurance recommended by the State Auditor’s Office. In response to the auditor’s recommendations, the Department submitted a budget request for the 2024 supplemental budget. Funding was provided to develop and maintain the business process that would allow adjustments to include child-level data beginning July 2024. The conditions noted in this finding were previously reported in findings 2022-035 and 2021-028. Completion Date: Estimated December 2025 Agency Contact: Stefanie Niemela Audit Liaison PO Box 40970 Olympia, WA 98504-0970 (360) 725-4402 stefanie.niemela@dcyf.wa.gov

Finding: The Department of Social and Health Services did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Questioned Costs: Assistance Listing # 21.027 COVID-19 Amount $312,659,850 Status: Corrective action in progress Corrective Action: The Department partially concurs with the finding. The Department’s Office of Refugee and Immigrant Assistance (ORIA) administered this funding through the Washington COVID-19 Immigrant Relief Fund program and contracted with a subrecipient organization to conduct eligibility determinations to approve and disburse funds to undocumented immigrants. This program is now closed, with all subrecipient contracts ended and the final payments sent in early 2023. The Department is taking action to strengthen internal controls over subrecipient monitoring for ORIA’s contracts. By July 2024, the Department will: • Complete a review of all active contracts utilizing federal funding to ensure subrecipients are accurately identified. • Explore the feasibility of increasing ORIA and Economic Services Administration accounting staff resources to support the workload increase associated with monitoring subrecipients. By October 2024, the Department will convene a work group with contracts and accounting staff to create effective internal controls and written procedures for fiscal and program monitoring of ORIA’s subrecipient contracts. This will include the following: • Verify the subrecipient status for each contract is correctly determined and recorded in the Agency Contracts Database. • Include the required subrecipient language in the contract. • Obtain a copy of the indirect rate certification or cost allocation plan from the subrecipient. • Complete risk assessments. • Create appropriate monitoring plans for each subrecipient. • Conduct fiscal monitoring of each subrecipient to obtain assurance that the use of federal funds complies with federal laws and regulations. • Create corrective action plans when required. By January 2025, the Department will ensure all ORIA program staff responsible for monitoring receive training on the updated procedures. In addition, the Office of the Secretary will request the Department’s Internal Audit and Consultation office conduct an internal audit of ORIA to ensure the program implements strong internal controls, properly accounts for federal funds, and materially complies with federal requirements. The Department does not concur with the questioned costs. The funds were used to assist Washington workers/families who were affected by the COVID-19 pandemic but were unable to access federal stimulus programs and other social support due to their immigration status. Repayment of these funds would only hinder the state’s ability to provide critical services to our clients. If the grantor contacts the Department regarding the questioned costs, the Department will discuss this with the Department of Health & Human Services and will take additional action as appropriate. Completion Date: Estimated January 2025 Agency Contact: Richard Meyer External Audit Compliance Manager PO Box 45804 Olympia, WA 98504-5804 (360) 664-6027 Richard.Meyer@dshs.wa.gov

Finding: The Department of Commerce did not have adequate internal controls over and did not comply with requirements to monitor subrecipients and to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Questioned Costs: Assistance Listing # 21.027 COVID-19 Amount $75,251,225 Status: Corrective action in progress Corrective Action: Completion Date: Agency Contact: The Legislature appropriated Coronavirus State and Local Fiscal Recovery Funds (SLFRF) to the Department’s Energy Division to award assistance to utility service providers to eliminate customer account arrearages. Payments for the program ended in 2022 and the program is no longer funded by the Department. The Department will implement procedures to strengthen internal controls for future programs managed by the Energy Division to ensure payments to subrecipients are adequately supported, allowable, and only reimburse costs incurred during the grant period of performance. As part of the audit resolution process, the Department will: • Work with utilities to obtain official client arrearage reports to verify the amounts paid and the period in which they were incurred. • Verify all households served were eligible per U.S. Treasury guidance. • Reconcile all allowable and unallowable expenditures. • Consult with the grantor to discuss the resolution of any questioned costs identified. Estimated July 2024 Gena Allen, CFE Internal Control Officer PO Box 42525 Olympia, WA 98504-2525 (360) 480-5149 Gena.Allen@Commerce.wa.gov

Finding: The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Questioned Costs: Assistance Listing # 21.027 COVID-19 Amount $95,560 Status: Corrective action complete Corrective Action: The Department’s Eviction Rental Assistance program which was funded with the Coronavirus State and Local Fiscal Recovery Funds ended in June 2023. During the audit period, the Department implemented procedures to strengthen internal controls to ensure expenditures were allowable, properly supported, and in compliance with the subrecipient fiscal monitoring requirements. The Department’s Homelessness Assistance Unit implemented the following corrective actions: · Updated unit reimbursement procedures to include a requirement for supporting documentation that details transaction level expenditure information for direct expenses that reconciles to payment requests. · Provided training to staff on reviewing transaction level supporting documentation to ensure expenditures reconcile with reimbursement requests and are within the period of performance. · Added a review note to each reimbursement request to document the grant coordinator’s review of documentation and reconciliation to payment requests. · Worked with the Department’s internal control officer for review and feedback of the updated procedures. The Department is currently working to standardize a reimbursement documentation process that is in compliance with federal requirements. The Department will discuss any repayment of questioned costs through the normal audit resolution process with the Department of Treasury. The conditions noted in this finding were previously reported in finding 2022-019. Completion Date: April 2024 Agency Contact: Gena Allen, CFE Internal Control Officer PO Box 42525 Olympia, WA 98504-2525 (360) 480-5149 Gena.Allen@Commerce.wa.gov

Finding: The Department of Commerce did not have adequate internal controls over and did not comply with requirements to ensure payments to subrecipients of the Emergency Rental Assistance program were allowable and properly supported. Questioned Costs: Assistance Listing # 21.023 COVID-19 Amount $4,123,486 Status: Corrective action complete Corrective Action: The funding for the Emergency Rental Assistance program ended on June 30, 2023. The Department is no longer funding this program. To address the control deficiencies reported in the prior year’s finding, the Department improved internal control processes, resulting in improved compliance. The Department strives to meet all federal requirements and any repayment of questioned costs will be determined through the normal audit resolution process with the U.S. Treasury. The conditions noted in this finding were previously reported in finding 2022-016. Completion Date: July 2023 Agency Contact: Gena Allen, CFE Internal Control Officer PO Box 42525 Olympia, WA 98504-2525 (360) 480-5149 Gena.Allen@Commerce.wa.gov

Finding: The Washington State Department of Transportation did not have adequate internal controls over and did not comply with cash management requirements for the Formula Grants for Rural Areas program. Questioned Costs: Assistance Listing # 20.509 Amount $41,555 Status: Corrective action complete Corrective Action: The audit identified a payment that was entered into the Electronic Clearing House Operation (ECHO) system with incorrect project information. The Department has since implemented additional controls to help ensure the draws of program funds are timely and accurate and are drawn for the correct program. To address the audit recommendations, the Department: • Assigned Project Support and Receivable (PS&R) staff to submit Public Transportation ECHO draws. Two additional staff have been identified as backup in this process to ensure draws are processed timely. • Rescheduled the entry of draw information into the ECHO system to the morning to allow for timely corrections as needed. • Updated the ECHO system to allow automatic confirmation email for payments entered into the system. Additionally, • The PS&R Manager will automatically receive draw confirmation emails and conduct a review and check as the draws are being submitted. • Additional checks and balances will be performed by the person entering information into the ECHO system. • The Public Transportation division has a validation process in place for staff to check the amounts with the project. The Department will continue to review procedures regularly and update as required to ensure compliance. The questioned costs identified in the audit have been reimbursed to the incorrectly charged federal program. Completion Date: October 2023 Agency Contact: Jesse Daniels External Audit Liaison PO Box 47320 Olympia, WA 98504-7320 (360) 705-7035 danielje@wsdot.wa.gov

Finding: The Employment Security Department made improper payments to ineligible beneficiaries of the Unemployment Insurance program. Questioned Costs: Assistance Listing # 17.225 17.225 COVID-19 Amount $603 Status: Corrective action not taken Corrective Action: The Department does not concur with the finding. The State Auditor’s Office (SAO) made the assertion that the Department incorrectly interpreted guidance in the Unemployment Insurance Program Letter (UIPL) No. 16-20 requiring claimants to provide proof of employment to receive Pandemic Unemployment Assistance (PUA) payments. However, the section cited by SAO was paragraph b(ii) which only lays out the requirements for establishing the respond-by dates for providing documentation for review. The deadline for responses is different depending on whether the PUA claim was filed before January 31, 2021, or on/after that date. This paragraph does not establish the requirements for payment or non-payment of PUA weeks. In our finding response, the Department cited section C.2 of the UIPL, which states: If, in that timeframe, the individual fails to provide documentation or fails to show good cause to have the deadline extended, an overpayment must be established for all of the weeks paid beginning with the week ending January 2, 2021. This is because the individual cannot be deemed ineligible for a week of unemployment ending before the date of enactment solely for failure to submit documentation. Therefore, the three cases identified by SAO should not be exceptions under this guidance. Further, the Department received guidance from the U.S. Department of Labor on January 11, 2021, which confirmed the proper methodology used by the Department. Completion Date: Not Applicable Agency Contact: Jay Summers External Audit Manager PO Box 9046 Olympia, WA 98507-9046 (360) 529-6718 Joshua.Summers@esd.wa.gov

Identifying Number: 2022-001 Finding: The following discrepancies and inconsistencies were identified: administrative procedures and requirements of the grantor were not followed; there were no proper review or approval of required reporting prior to submission. Contact person responsible for corrective action: Kevyn Harmon, Senior Director of Finance & Administration Corrective Action: All personnel involved with the ESSER III ? MFT Programs undergo training on the all the processes and requirements to administer the programs, and management will perform proper review of all claims for reimbursement. In additional, an annual update on the procedures and the requirements to ensure propriety and accuracy. Proposed Completion Date: EPIC Academy will complete implementation of the above procedures by November 30, 2022.

Identifying Number: 2022-002 Finding: The following discrepancies and inconsistencies were identified: administrative procedures and requirements of the grantor were not followed; there were no proper review or approval of required reporting prior to submission. Contact person responsible for corrective action: Kevyn Harmon, Senior Director of Finance & Administration Corrective Action: All personnel involved with the Title programs undergo training on the all the processes and requirements to administer the programs, and management will perform proper review of all claims for reimbursement. In additional, an annual update on the procedures and the requirements to ensure propriety and accuracy. Proposed Completion Date: EPIC Academy will complete implementation of the above procedures by November 30, 2022.

Finding: The Health Care Authority did not have adequate internal controls over and did not comply with requirements to report recoveries of fraudulent overpayments on the CMS-64 report. Questioned Costs: Assistance Listing # 93.775 93.777 93.777 COVID-19 93.778 93.778 Amount $977,612 Status: Corrective action in progress Corrective Action: The Authority partially concurs with the finding. The Authority has established a process to ensure information concerning the status of Medicaid Fraud Control Unit (MFCU) cases is communicated timely to the Authority from the Attorney General?s Office. The Authority has documented the process to ensure recoveries of fraudulent overpayments are reported on the CMS-64 report appropriately and any federal share is returned timely to the Centers for Medicaid & Medicare Services (CMS). The Authority agrees that $1,032 needs to be repaid to CMS and will initiate return of those funds. The Authority does not concur that the remaining $976,580 needs to be returned to CMS. The state pursued assets through its available means and the court. The provider in question has been out of business since 2017 and a final court ruling was made in June 2022. In April 2023, the Attorney General?s Office certified the defaulted corporation had no identifiable assets. In accordance with 42 CFR 433.318(d), the provider is out of business and the Authority is not required to return the overpayment to CMS. The Authority will provide the court documentation and Attorney General?s certification to CMS Audit Resolution. The conditions noted in this finding were previously reported in findings 2021-052 and 2020-050. Completion Date: Estimated September 2023 Agency Contact: Kari Summerour, CPA External Audit Compliance Manager PO Box 45502 Olympia, WA 98504-5502 (360) 725-9586 Kari.Summerour@hca.wa.gov

Finding: Washington State University did not ensure that returns of Title IV funds were accurate for the Student Financial Assistance programs. Questioned Costs: Assistance Listing # 84.007 84.033 84.038 84.063 84.268 84.379 Amount $2,582 Status: Corrective action complete Corrective Action: The University has improved processes for the return of Title IV funds. The University: ? Included a standard calculation in workbooks to quickly identify whether amounts to be returned for withdrawn students will exceed the amounts disbursed. ? Implemented a quality check to review these exceptions, and to investigate and correct as necessary. The University has returned all questioned costs to the sponsors. Completion Date: May 2023 Agency Contact: Heather Lopez Chief Audit Executive PO Box 641221 Pullman, WA 99164-1221 (509) 335-2001 hlopez@wsu.edu

Finding: The Department of Commerce did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Questioned Costs: Assistance Listing # 21.027 COVID-19 Amount $28,886,606 Status: Corrective action in progress Corrective Action: The Department implemented procedures to strengthen internal controls to ensure program expenditures are allowable, properly supported, and in compliance with the subrecipient fiscal monitoring requirements. The Homelessness Assistance Unit managing director completed the following corrective actions in July 2022: ? Updated unit reimbursement procedures to include a requirement for specific supporting documentation to accompany payment requests from all subrecipients. ? Provided training to staff on reviewing supporting documentation to ensure expenditures reconcile with reimbursement requests and to verify expenditures are within the period of performance. ? Reviewed 2 CFR 200.332 and updated procedures to include additional requirements for pass-through entities. ? Worked with the Department?s internal control officer for review and feedback of the updated procedures. The managing director will perform a review of the reimbursement process during the next fiscal year which begins July 1, 2023, to ensure procedures are followed. The Department increased the number of client files reviewed during program monitoring. The client file review included verifying household assistance expenses were allowable and incurred within the period of performance. Since the Department received the Coronavirus State and Local Fiscal Recovery Funds through legislative appropriation, resolution of the questioned costs with the grantor will be managed by the Office of Financial Management. Completion Date: Estimated September 2023 Agency Contact: Gena Allen Internal Control Officer PO Box 42525 Olympia, WA 98504 (360) 480-5149 Gena.Allen@Commerce.wa.gov