2025-002 The District did not have adequate internal controls and did not comply with time-and-effort requirements. Assistance Listing Number and Title: 21.027 COVID-19 – Coronavirus State and Local Fisal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Snohomish County Pass-through Award/Contract Number: BH-23-AR-08-050, EL-22-AR-050 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2024-002 Background During fiscal year 2025, the District spent $513,574 in federal funds from the Coronavirus State and Local Fiscal Recovery Funds program to provide student support advocates, social emotional learning support and early learning services. The objective of the program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected and make necessary investments in water, sewer or broadband infrastructure. 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. The District is responsible for ensuring it supports all payroll costs it charges to the program with adequate time-and-effort documentation, as required by federal regulations and the awarding agency. Depending on the number and types of activities employees perform, time-and-effort documentation can be a semiannual certification or a monthly personnel activity report (PAR), such as a detailed time sheet. Time-and-effort documentation must also be signed and dated after employees complete the work. Description of Condition The District’s internal controls were ineffective for ensuring it supported all salaries and benefits it charged to the program with appropriate time-and-effort documentation, as federal regulations and the Office of the Superintendent of Public Instruction (OSPI) require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition District staff did not dedicate the necessary time and resources to ensure time charged to the program was supported with time-and-effort documentation. District staff misunderstood OSPI’s time-and-effort requirements and either did not complete time-and-effort documentation for some employees or prepared and had employees sign PARs semiannually rather than monthly, as required. The District relied on one staff member to identify employees requiring time-and-effort certifications without a secondary review to ensure their determinations were complete and complied with grant requirements. Effect of Condition The District did not obtain time and effort documentation for three employees for the first semester whose payroll costs charged to the program totaled $108,346. In addition, four monthly PARs we tested, with payroll costs charged to the program totaling $27,696, were prepared and signed at the end of the semester (June 2025) rather than monthly after the work was performed as required. Without adequate and timely time-and-effort documentation, the District cannot demonstrate compliance with OSPI’s documentation requirements to support costs charged to federal programs. Further, the District cannot assure federal grantors that payroll costs it charged to the program were accurate and valid. During the audit, the District supported these payroll costs by providing alternative documentation to show the three employees worked on the program. In addition, although four PARs were not prepared and signed monthly as required, the District obtained those certifications by the end of June 2025. Therefore, we are not questioning these costs. Recommendation We recommend the District design, implement and follow internal controls to ensure it complies with federal and OSPI requirements for obtaining time-and-effort documentation timely. District’s Response The District agrees with the finding and recognizes the need to strengthen internal controls and update procedures related to time-and-effort documentation to align with current federal and OSPI guidance, including OSPI Bulletin 039-24 and related federal grant requirements. To address this finding, the District will conduct a comprehensive review of all federal grant-funded positions and applicable time-and-effort requirements. This review will include evaluating available documentation methods authorized by OSPI, including semi-annual certifications, monthly personnel activity reports (PARs), and fixed schedule systems where appropriate. The District will also revise written procedures, establish clearer internal review protocols, and implement additional oversight to ensure required certifications and documentation are completed timely and maintained appropriately. 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 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. Office of Superintendent of Public Instruction Bulletin 039-24, Time and Effort (T&E) Reporting establishes requirements for documenting time-and-effort, including fixed schedule systems.