In the most recent audits of government entities in Kitsap County, the state auditor’s office came up with a number of findings.
Many had to deal with not following required procedures regarding federal COVID funds. In each case, the districts said they were unaware of the requirements.
The North Kitsap School District received the harshest response.
The finding for the school district was in regard to Education Stabilization Funds. The audit says in 2022 the district spent $281,272 in American Rescue Plan monies. “Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements,” the audit says.
It goes on to say, “The district’s internal controls were ineffective for ensuring it supported all salaries and benefits charged to the ESF program with appropriate time-and-effort documentation…The district could not provide time-and-effort documentation for eight employees who worked part-time in the ESF program. The employees were food service workers paid with funds through both ESF and another federal program.”
The audit says district officials did not know about the requirement. As a result of the error, it did not obtain time-and-effort documentation for eight employees whose payroll and benefits costs totaling $113,505 were charged to the ESF program. However, the district supported the payroll costs by providing alternative documentation, so the audit is not questioning the costs.
However, auditors recommend the district design internal controls to ensure employees complete documentation to support payroll costs charged to federal programs. The district responded that it would do that.
The Emergency Connectivity Fund Program provides funding to meet the needs of students and school staff who would otherwise lack access to connected devices and broadband connections sufficient to engage in remote learning. In 2022, the North Kitsap School District spent $603,124 in ECF funds to purchase laptops and Wi-Fi hotspots for students.
Federal regulations require recipients to establish internal controls that ensure compliance with program requirements. The controls include understanding grant requirements and monitoring the effectiveness of established controls. ECF recipients must only seek reimbursement for the eligible devices and services provided to students and staff with unmet needs. Recipients are prohibited from receiving reimbursement for eligible equipment and services purchased for use solely at the school or held for future use (i.e., warehousing).
The audit found the district’s internal controls were ineffective in ensuring it requested reimbursement only for eligible equipment. The district purchased laptops based on its assessment of unmet needs, and it requested reimbursement totaling $587,119. District employees were familiar with its requirements, including that funds could not be used to purchase laptops solely for use at school or held for future use.
The NKSD intentionally purchased fewer laptops with ECF Program funds than the number of students with unmet needs and purchased additional laptops with non-federal funds that were intended to be used in classrooms or stored as backups to meet additional needs as they arose.
However, once purchased, the district pooled the laptops from both funding sources together and did not provide each laptop purchased with ECF funds to a student with unmet need before distributing the other laptops. In the district’s response, it said it misunderstood the requirements. As a result of the error, 236 ECF-funded laptops, which totaled $87,696, were not distributed to students with unmet needs. “As a result, we are questioning these costs.”
“We recommend the district work with the granting agency to determine audit resolution. We further recommend the district establish and follow internal controls to ensure staff fully understand the requirements for ECF awards,” the audit says.
The Central Kitsap School District receives federal Impact Aid funding from the U.S. Department of Education and the Department of Defense. Funds from different agencies are required to be reported under two Assistance Listing Numbers (ALN). But the district accounts for the funding received from both agencies in the same revenue account in its accounting system.
Additionally, district staff did not have adequate internal controls to ensure all COVID funding included the proper designator. “We consider these deficiencies in internal controls over accounting and financial reporting to be a significant deficiency,” the audit says.
The district reported over $1.2 million in DOD Impact Aid funding under the incorrect ALN. Inaccurate reporting of federal expenditures affected selection of major programs for audit. That required state auditors to conduct additional work to ensure compliance. Additionally, the district did not include the COVID designator in front of four federally funded programs containing COVID funding. That can lead to audit delays beyond the federal reporting deadline, cause additional costs and jeopardize future federal funding.
Auditors recommend the district strengthen its internal controls, and the district agreed with the finding and made corrections.
Port of Illahee
The state auditor’s reports say based on its risk assessment for the three previous years, the areas examined were those representing the highest risk of fraud, loss, abuse or noncompliance.
They examined: Open public meetings – compliance with minutes, meetings and executive session requirements; Procurement – public works, purchases, cooperative purchases, joint purchasing agreements, purchasing exemptions and professional services; Compliance with public work projects – prevailing wages; Annual report filing – timeliness, completeness and accuracy; Tenant leases – compliance with contract terms; Accounts payable – general disbursements and credit card activity; and Financial condition – reviewing for indications of financial distress.
The port is undergoing a multi-year dock and waterfront renovation project with total costs expected to exceed $2 million. The port contracted architectural and engineering services without engaging in the required competitive, qualifications-based selection process, and it issued related payments of about $198,000 during the audit period.
The port also engaged in public works projects with capital expenditures totaling $239,000 between 2020 and 2021; however, it disbursed funds without requiring vendors to complete the required prevailing wage intents for the projects. The port relies on another government’s small works roster but does not have an interlocal agreement established, as required by state law.
Port management and staff said they were not aware of the state laws.
The audit says procurement laws are intended to promote openness in government and prevent fraud, collusion and favoritism when awarding public contracts.
“Because the port did not comply with procurement requirements for architectural and engineering services, it cannot be sure all interested firms had the opportunity to apply and that the most qualified firm performed the services.” Since the port does not have certification that all vendors meet requirements, it exposes itself to risk if disputes are filed.
Auditors recommend the port: Establishes internal controls over procurement; Ensures all required vendors have filed prevailing wage documentation before making payments; and Establishes an interlocal agreement to rely on the Port of Silverdale’s small works roster.