The District did not have adequate internal controls and did not comply with federal suspension and debarment requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.582 – Fresh Fruit and Vegetable 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: 257WAWA3N1199 257WAWA1L1603 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program and the Fresh Fruit and Vegetable Program. These programs provide free and reduced-price meals to students from low-income families. The District received $482,880 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. Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Although the District has a process to verify the suspension and debarment status for contractors it pays more than $25,000, our audit found the District did not follow this process and did not verify two of the three contractors we tested were not suspended or debarred before purchasing from them. The District selected these contractors from a purchasing cooperative and did not establish a process to retain documentation of the cooperative’s verification of the contractors’ suspension and debarment status. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition District staff were aware of the federal suspension and debarment verification requirements and said they reviewed the cooperative’s suspension and debarment certifications for the contractors. However, staff did not realize they needed to retain this supporting documentation showing the contractors were not suspended or debarred before purchasing from them. Effect of Condition The District did not obtain a written certification from the contractors, insert a clause into the contracts or check for exclusion records at SAM.gov to verify contractors it paid $380,890 with federal funds were not suspended or debarred before contracting. Further, the District did not retain documentation showing the purchasing cooperative verified the contractors’ suspension and debarment status before purchasing. Without adequate internal controls, the District increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the District strengthen its internal controls to verify all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and maintain documentation demonstrating compliance with this requirement. District’s Response The District acknowledges the finding and appreciates the opportunity to strengthen our documentation practices related to suspension and debarment verification. We would like to clarify that the District did perform suspension and debarment checks through SAM.gov for the vendors in question on an annual basis. While these procedures were consistently completed, the District did not retain independent documentation of those checks. The District relied on SAM.gov as the authoritative federal system of record, including its historical tracking and notification features, rather than maintaining locally stored or printed copies. At the time, staff were not aware that compliance requirements required retention of documentation evidencing these checks. As a result, this finding reflects a documentation deficiency rather than the absence of the control itself. As confirmed during the audit, all vendors tested were in good standing and not suspended or debarred. Therefore, the District was not at risk of contracting with an ineligible vendor, and no questioned costs were identified. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action 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 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.