SCHEDULE OF FEDERAL AWARD FINDINGS AND
QUESTIONED COSTS
Castle Rock School District No. 401
September 1, 2022 through August 31, 2023
2023-001 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
Federal Grantor Name: U.S. Department of Agriculture
Federal Award/Contract Number: N/A
Pass-through Entity Name: Office of Superintendent of Public Instruction
Pass-through Award/Contract Number:
N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: Yes, Finding 2022-001
Background
The District participates in the National School Lunch, School Breakfast and Summer Food Service programs. For the 2022–23 school year, the District received a total of $739,367 for these programs. These programs provide funding for free and reduced-price meals for students of low-income families.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls.
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, in order 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. The District previously piggybacked onto another school district for food purchases; however, the interlocal agreement allowing this arrangement expired at the end of the 2019–2020 school year and was not renewed. The District continued to purchase food based on these expired contracts until March 2023 when the District entered into interlocal agreements with a neighboring school district and a purchasing cooperative, piggybacking onto their food service contracts. However, the District did not confirm that the procurement methods the awarding agencies followed met its own statutory procurement requirements before purchasing. Additionally, the District did not have a process in place to ensure it only purchased products that were awarded through the awarding entities’ contracts.
We consider this internal control deficiency to be a material weakness that led to material noncompliance.
Cause of Condition
The District experienced turnover in the director of fiscal services position, which is responsible for overseeing compliance with federal grant requirements. Officials said they did not know that the District’s interlocal agreements had expired at the end of the 2019–2020 school year. To address the prior audit finding, District staff expedited the approval of new interlocal agreements for piggybacking without researching applicable procurement requirements.
Effect of Condition
The District spent $266,063 in program funds from September 2022 to March 2023 based on an expired interlocal agreement. Since the District did not renew this interlocal agreement with the lead agency that allowed for piggybacking, state law would have required the District to competitively procure the food purchases for this period.
The District piggybacked on two contracts beginning in March 2023 and spent $147,255 of federal funds to purchase food. Without effective internal controls, the District cannot demonstrate it complied with piggybacking requirements and allowed for full and open competition.
Recommendation
We recommend the District strengthen internal controls to ensure it complies with applicable procurement requirements for purchases of goods and services.
District’s Response
Once the district was notified of the noncompliance regarding Child Nutrition federal procurement requirements, an interlocal agreement was immediately put in place with Longview School District for our small purchases of $150,000 or below. The agreement was approved by the Castle Rock School Board at the March 8, 2023 board meeting and approved by the Longview School District School Board on March 17, 2023. For our purchases above $150,000, the district requested to be a member of the Puget Sound Joint Purchasing Cooperative on March 6, 2023 and the membership was approved by the PSJPC Board on March 12, 2023. PSJPC provided the district with an interlocal agreement and the agreement was approved by the Castle Rock School Board at the March 22, 2023 board meeting. This agreement with PSJPC is a continuing membership and the district currently pays $150.00 to be apart of the cooperative. On August 30, 2024 Castle Rock renewed their interlocal agreements with Longview School District, however, Castle Rock did not request all of the documentation from Longview to ensure they were compliant with the required procurement laws. Castle Rock has since requested all applicable procurement documentation from Longview School District and has ensured they were compliant with procurement laws for the 2022-2023 and 2023-2024 school years. Moving forward, Castle Rock School District will request required documentation and ensure Longview School District is in compliance before entering into the interlocal agreements for the 2024-2025 school year.
Auditor’s Remarks
We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities.
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.