Finding Text
2025-001 The District did not have adequate internal controls for ensuring compliance with federal procurement 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: United States 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: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program, National School Lunch Program, and Fresh Fruit and Vegetable Program. These programs provide free and reduced-price meals to students from low-income families. The District received $913,876 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. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. The District must maintain documentation showing the procurement process it performed. Federal regulations and District policy require the District to obtain price or rate quotations for purchases of goods between $10,000 and $75,000. Description of Condition Our audit found the District did not have adequate controls to ensure it complied with procurement requirements. Specifically, the District did not follow its policy when procuring dairy products. The District paid the vendor $66,419 in federal program funds. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District previously piggybacked onto another government’s contract for purchasing dairy products from the vendor. However, after the contract ended, District staff continued to use this vendor without obtaining the required price or rate quotations. Effect of Condition We found the District did not comply with procurement requirements for one of two contracts we tested that were subject to procurement. The District paid the vendor $66,419 in federal program funds. Without effective internal controls, the District cannot demonstrate it complied with federal procurement standards and its own policy, allowed for full and open competition, and received the best price. Recommendation We recommend the District establish internal controls to ensure it complies with its policy and federal regulations for procuring goods and that it maintains documentation to demonstrate it complied with federal procurement requirements. District’s Response The District agrees with the auditor’s finding. The District did not have adequate controls to ensure we followed our policy to comply with the procurement requirements required by the Child Nutrition Cluster. The District is committed to maintaining strong internal controls and ensuring all future expenditures of federal funds fully comply with procurement mandates. The District is conducting a comprehensive review of our procurement policies with all relevant staff to ensure we follow our policies regarding federal compliance requirements. The District will ensure that the start of each fiscal year that The District will follow a competitive procurement process based on the estimated spend for the vendor. 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. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures and maintaining records sufficient to detail the history of procurement. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring goods and services. 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.