Colville School District No. 115 September 1, 2024 through August 31, 2025 2025-001 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 10.559 – Summer Food Service Program for Children Federal Agency 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: N/A 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 the Summer Food Service Program for Children. These programs provide free and reduced-price meals to students from low-income families. The District received $810,386 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 or 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 one of the three contractors we tested was not suspended or debarred before purchasing from them. The District selected this contractor from a purchasing cooperative and did not establish a process to retain documentation of the cooperative’s verification of the contractor’s 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 certification for the contractor. However, the District experienced turnover in the position responsible for ensuring this verification occurred and was unable to locate the support that staff performed the search before purchasing from the contractor. Effect of Condition The District did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify the contractor it paid $33,860 with federal funds was not suspended or debarred before contracting. 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 contractor was 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 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 its internal controls. We are disappointed that we were unable to locate documentation supporting the suspension and debarment verification for this vendor. District staff indicate that the verification was performed at the time of procurement; however, due to turnover in the Nutrition Services Director position, the documentation was not retained in a manner that allowed it to be produced for audit. While we have confirmed that the vendor was in fact not suspended or debarred, we recognize the importance of maintaining clear and accessible documentation to demonstrate compliance. To strengthen internal controls and prevent recurrence, the District will implement additional procedures requiring that all suspension and debarment verifications for Nutrition Services vendors meeting the $25,000 threshold be documented and submitted to the Business Office for centralized recordkeeping. In addition, the Business Office will conduct an annual review each September 1 to confirm that all required verifications have been completed and properly retained. These steps will provide an added layer of oversight and ensure continuity of compliance despite staff transitions. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue 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.