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 10.559 Summer Food Service Program for Children 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, Summer Food Service Program for Children, and Fresh Fruit and Vegetable Program. These programs provide free and reduced-price meals to students from low-income families. For the 2024-25 school year, the District received $11,148,930 to administer these programs. 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’s procurement policy conforms to the most restrictive laws and requires the District to follow a competitive bidding process for purchases of goods costing $75,000 or more. State and federal requirements allow local entities to bypass normal procurement laws through a process commonly referred to as “piggybacking.” This process allows entities to purchase goods and services using contracts awarded by another government or group of governments via an interlocal agreement or cooperative. To comply with piggybacking requirements under state law, the entity must enter into this interlocal agreement before it purchases services or goods from the other entity’s bid contract. If the District uses such an agreement, federal regulations require it to confirm that the procurement methods the awarding agency followed met its own statutory procurement laws and followed regulations applicable to the District when selecting the contractor. Additionally, to make a valid piggybacking transaction, the District must purchase goods or services from the contractor that the original entity awarded the contract to through its own procurement process. Description of Condition The District did not have a process to ensure it complied with procurement requirements when purchasing food products. The District piggybacked onto the Department of Enterprise Services (DES) contract for fresh fruit and vegetable purchases. DES awarded this contract to multiple contractors and assigned each contractor to a specific region of the state. The District is required to select the awarded contractor for its region; however, the District selected a contractor outside of its assigned region. We consider this internal control deficiency to be a significant deficiency. Cause of Condition District staff responsible for procuring nutrition service’s food products did not fully understand the DES contract and did not know that contractors were assigned to specific regions. Effect of Condition The District piggybacked onto one DES contract and did not select the contractor for its region as required. The District paid the contractor $700,671 in federal program funds to purchase fresh fruits and vegetables. Without effective internal controls, the District cannot demonstrate it complied with federal procurement requirements and District policy and received the best price for the food products it purchased. Recommendation We recommend the District strengthen internal controls to ensure it complies with federal procurement requirements and District policy for procuring goods and services. District’s Response Pasco School District concurs with the finding and appreciates the opportunity to strengthen its internal controls. The issue resulted from a lack of specific procedural guidance and staff awareness related to cooperative purchasing requirements under Department of Enterprise Services contracts. The District places a strong emphasis on supporting local businesses, which contributed to procurement decisions in this instance; however, the District recognizes that all federal procurement requirements must take precedence. Upon identification, the District promptly corrected the issue and aligned purchasing practices with contract requirements. Additionally, the vendor involved remains an approved provider under the Office of Superintendent of Public Instruction’s Department of Defense Fresh Produce Program, and the District will continue to utilize that vendor where appropriate under that program. The District has implemented enhanced procedures, training, and oversight controls to ensure full compliance moving forward and remains committed to strong internal controls and responsible stewardship of public resources. 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.