SCHEDULE OF FEDERAL AWARD FINDINGS AND
QUESTIONED COSTS
Kent School District No. 415
September 1, 2021 through August 31, 2022
2022-002 The District did not have adequate internal controls for ensuring
compliance with federal procurement requirements.
Assistance Listing Number and Title: 84.027 – Special Education Grants
to States
84.173 – COVID-19 – Special
Education Preschool Grants
84.173 – Special Education
Preschool Grants
Federal Grantor Name: U.S. Department of Education,
Office of Special Education and
Rehabilitation Services
Federal Award/Contract Number: N/A
Pass-through Entity Name: Office of Superintendent of Public
Instruction (OSPI)
Pass-through Award/Contract
Number:
307485, 338471
Known Questioned Cost Amount:
Prior Year Audit Finding:
$0
N/A
Background
The District spent $5,888,268 in Special Education Cluster grant funds during the
2021–22 school year. The objective of the Special Education program is to help
education agencies provide special education and related services to all children
with disabilities.
Federal regulations require recipients of federal awards to establish and follow
internal controls to ensure compliance with program requirements. These controls
include understanding grant requirements and monitoring the effectiveness of
established controls.
When using federal funds to purchase goods or services, governments must apply
the most restrictive of federal requirements, state law, or local policies by obtaining
quotes or following a competitive bid process, depending on the estimated cost of
the purchase. Governments must also keep documentation supporting the
procurement method they used. District policy conforms to the most restrictive laws
for purchases, requiring written quotations from three or more qualified sources for
purchases of goods and services costing between $10,000 and $250,000.
In addition, 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 or cooperative and confirm the awarding
entity followed all procurement laws and regulations applicable to the awarding
entity before it purchases services or goods from the other entity’s contract.
A nonpublic agency (NPA) is an entity authorized by the Office of Superintendent
of Public Instruction under Chapter 28A.300 RCW to contract with a school district
to provide a program of special education services for students whose special
education needs cannot be met by their resident school district. NPAs are nonprocurement
transactions, so districts do not have to demonstrate competition.
Description of Condition
Our audit found the District did not have adequate internal controls for ensuring
compliance with federal procurement requirements. Specifically, the District
procured special education services from a professional service contractor at a total
cost of $837,361 without obtaining sealed bids or announcing a request for
proposals, as federal regulations and District policy require. The District also
piggybacked onto another government’s contract to purchase special education
curriculum totaling $75,717, but did not retain supporting documentation showing
it verified the awarding government followed applicable procurement requirements
before purchasing the services.
We consider these deficiencies in internal controls to be a material weakness that
led to material noncompliance.
Cause of Condition
The District had worked previously with the professional service contractor. Staff
thought the District did not need to competitively procure the services because the
contractor was on the NPA list. However, the contractor was no longer on the NPA
list during the audit period, and District staff did not know this before purchasing
the services. In addition, staff did not know the District needed to obtain
procurement documentation from the awarding agency to verify the process
complied with procurement requirements before purchasing the curriculum.
Effect of Condition and Questioned Costs
Without effective internal controls that ensure it follows procurement and
piggybacking procedures, the District cannot demonstrate it complied with
applicable federal procurement requirements and received the best price for the
curriculum.
Recommendation
We recommend the District establish and follow internal controls to ensure it
complies with procurement requirements for purchases of goods and services.
District’s Response
The district acknowledges that it did not request and retain the competitive bid
documentation in a situation where it “piggy-backed” on another governmental
entity’s purchase of special education curriculum materials. It further
acknowledges that it mistakenly coded expenses for a professional service
contractor to federal rather than state special education funds; this triggered
procurement requirements which were unintended. The compliance issues cited
are solely related to documentation, rather than the actual allowability of the costs.
Auditor’s Remarks
We appreciate the District’s commitment to resolving the issue. We will review the
condition 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, section 318, General procurement
standards, establishes requirements for written procedures.
Title 2 CFR Part 200, Uniform Guidance, Section 319 — Competition, establishes
all procurement transactions are to be conducted in a manner providing full and
open competition.
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.