The Moses Lake School Board briefly discussed the findings that the Office of the Washington State Auditor, or SAO, published on Monday. The financial and federal audit reviewed statements from September 2023 to August 2024 to assess compliance and whether MLSD is spending taxpayer dollars accordingly.
The state didn’t raise issues with MLSD’s general financial statements, meaning the budget, revenue, and expenses appeared balanced, but about $4.4 million in federal grants lacked supporting evidence.
SAO also identified $6.8 million in unsupported costs from 2022 to 2023 related to federal grants, as MLSD failed to provide the necessary documentation. The most recent audit marked that issue as fully corrected, meaning the district followed up with evidence, which it must do again before the next one.
“One of the things we did to get by in our true emergency was to compensate for the budget shortfall in general apportionment by utilizing some of those special purpose funds,” Superintendent Carol Lewis said on Thursday. “We have to do everything we can to stop doing that as soon as possible.”
Last year, taxpayers rejected back-to-back levy proposals, which led to a review that unveiled a shortfall of roughly $20 million. Hundreds of employees lost their jobs, and an average decrease in enrollment of roughly 2% annually, confirmed by MLSD Business Manager Ruby Perez, only exacerbated the crisis.
Hoping to reverse the trend this year, Perez said MLSD only budgeted for a “conservative” 1% decline.
Voters recently passed a new levy, which MLSD will start collecting next year. The district balanced the budget ahead of this fall, but Lewis said maintaining federal grant compliance is still at the top of mind.
“I have been very clear with everybody, public and the board, that this was kind of a one-time thing,” Lewis clarified. “We’re not in deep trouble about that, but we will be if we don’t make some changes.”
She said MLSD needs to figure out another plan, since it can’t keep spending special-purpose funds on general education expenses like paying teachers. That must come from the general fund or elsewhere, with the grants reserved for specific employees or other expenses that the money is intended to fund.
Lewis said MLSD identified deficiencies related to poor internal control that led to material weaknesses and material noncompliance. SAO will verify whether MLSD took corrective actions during its federal and financial audit next spring, but it’s also in the process of a much-anticipated accountability audit.
Taxpayers called on the board to undergo a forensic audit before the latest levy vote, but the officials tabled the idea, citing the upcoming accountability audit. A forensic audit investigates potential fraud and misconduct, while an accountability audit looks at compliance with state laws and local policies.
The recent audit of federal grant compliance found missing time-and-effort documentation for special education grants, Title I grants and COVID-19 funding. SAO Communications Manager Adam Wilson said that without all that, the state can’t determine whether MLSD charged those costs appropriately.
“We do not know whether the district will have to repay any funds,” Wilson told The Center Square. “The district will work with the state Office of Superintendent of Public Instruction to determine if they have any other documentation to support those costs as they go through a process known as ‘audit resolution’ with the federal government. We will follow up on the issues we found in our next audit.”
He said time-and-effort findings are common, but “should be addressed promptly when they arise.”
If MLSD has to repay nearly $4.4 million, it likely will come from taxpayer dollars in the general fund.
Lewis said OSPI will place MLSD on an improvement plan for the lack of oversight and internal controls around special-purpose funds. OSPI has also informed MLSD that it must have staff overseeing this work and reporting the appropriate documentation to ensure everyone knows how the money is spent.
“If we don’t do this right, then we don’t get the millions of dollars that go along with this,” Lewis said.
The Center Square contacted Lewis for further clarification, but didn’t receive anything before publishing.