Finding 396423 (2023-001)

2023-001    The District’s internal controls were inadequate for ensuring compliance with time and effort requirements. Assistance Listing Number and Title: 84.027, Special Education Grants to States 84.173, Special Education Preschool Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 307823/367215   Known Questioned Cost Amount: N/A Prior Year Audit Finding: N/A     Background During fiscal year 2023, the District spent $865,457 of its Special Education Program funds. This program ensures students with disabilities receive free and appropriate public education with specially designed instruction that addresses their unique needs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. Those 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 type of activities employees perform, time and effort documentation can be a semiannual certification or a monthly personnel activity report, such as a detailed timesheet. Time and effort documentation must also be signed and dated after the work is completed. 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. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Turnover in the District’s key positions responsible for managing the program  resulted in an oversight in ensuring compliance with time and effort requirements. Effect of Condition The District did not obtain time and effort documentation for all employees whose payroll and benefits costs it charged to the program, totaling $696,887.  Without adequate time and effort documentation, the District cannot demonstrate compliance with the awarding agency’s documentation requirements that 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 obtained and provided the signed time and effort records to support the payroll costs it charged to the program; therefore, we are not questioning these costs. Recommendation We recommend the District establish and follow internal controls to ensure it complies with federal and OSPI requirements for obtaining signed time and effort documentation timely. District’s Response The district was in transition with staff overseeing time and effort for the year inquestion. Staff salaries were reviewed at the end of the year by the Business Office with communication from the buildings to verify staff were paid from the appropriate programs. The building staff that were requested to sign the Semi Annual certification forms for time and effort documentation after the close of the fiscal year and date them for the time period that they were specific to. In the future, the district will request staff sign the Semi Annual certification forms and date them for the day they are being signed. 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 Addendum to Bulletin 048-17, establishes requirements for documenting time and effort.