Finding Text
2025-001 The District’s internal controls were inadequate for ensuring compliance with time-and-effort requirements. Assistance Listing Number and Title: 84.010 – Title I Grants to Local Educational Agencies Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of the Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: AD-8695, AD-9727 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The objective of the Title I program is to improve the teaching and learning of children who are at risk of not meeting academic standards and reside in areas with high concentrations of children from low-income families. During the 2024-25 school year, the District spent $811,069 in federal funds from Title I. 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, 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 OSPI require. Specifically, the time-and-effort certifications maintained for substitute and summer school positions did not meet OSPI requirements as the certifications were missing the program name and program account code. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition Although District staff tracked allowable payroll costs, they misunderstood the requirement to obtain adequate time-and-effort documentation supporting actual time worked in the program for substitutes and summer school employees. Effect of Condition Using a statistical sample, we found five out of 28 employees and substitutes tested whose salaries and benefits totaling $12,555 were not supported by time-and-effort documentation. These unsupported payroll costs were for substitutes and summer school employees. Outside of our sample we identified $35,064 in estimated additional payroll costs for substitutes and summer school employees that may not be supported by adequate time-and-effort documentation. Without adequate time-and-effort documentation, the District cannot demonstrate compliance with the awarding agency’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 provided alternative documentation to support the payroll costs for the five employees that it charged to the program; 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 time-and-effort-documentation. District’s Response The district concurs that the time and effort documentation for supplemental pay provided to three summer school staff members and two classified substitute employees assigned to vacant positions was insufficient to meet applicable time and effort requirements. The district is implementing additional internal controls to prevent similar issues in the future. Moving forward, the district will ensure that all supplemental pay documentation funded with federal funds clearly identifies the applicable cost objective and includes the employee’s signature. In addition, the district will no longer use federal funds to compensate substitute employees serving in vacant positions 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 to Bulletin 039-24, Time and Effort (T&E) Reporting, establishes requirements for documenting time-and-effort, including fixed schedule systems.