Finding Text
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 Background The District participates in the National School Lunch, Breakfast, and Summer programs. For the 2021?2022 school year, the District received a total of $879,299 for these programs. These programs provide funding for free and reduced-price meals for students of low-income families; however, during the 2021?2022 school year, the District used the funding to provide free meals to all students, which was allowed under a waiver from the U.S. Department of Agriculture. 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. 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. We consider this internal control deficiency to be a material weakness that led to material noncompliance. The issue was not reported as a finding in the prior audit. 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. Effect of Condition The District spent $352,093 in program funds 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. Without effective internal controls that ensure it follows procurement or piggybacking procedures, the District cannot demonstrate it complied with applicable federal procurement requirements and received the best price for the food products. However, since the purchases were allowable under the federal program, we are not questioning costs. 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. 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.