Areas SAO will examine in upcoming schools and ESD audits

School districts have asked the State Auditor's Office for as much clarity as we can provide on what we plan to audit each fiscal year. Like districts, SAO relies on the Office of the Superintendent for Public Instruction for clear rules and guidance to provide the criteria for the audits.

For fiscal year 2020 audits, OSPI set the expectation that districts have a documented plan for differentiating between expenditures of state and local revenue. Those plans must include a methodology for coding expenditures in compliance with RCW 28A.150.276. SAO will verify the methodology was consistently applied.

At this stage, for fiscal year 2021 audits, we recommend districts work with OSPI to obtain clear guidance on expenditures to support compliance with these requirements.

Background on new requirements

In March 2018 the Legislature passed E2SSB 6362, which adopted new requirements related to the tracking of local revenues and expenditures. The Office of the Superintendent of Public Instruction (OSPI) is required to adopt rules requiring the separate accounting of state and local revenues to expenditures. These rules are intended to add clarity to RCW 28A.150.276, which sets requirements for how school districts can spend local revenues.

On April 24, 2018, OSPI and SAO issued a joint letter to school district superintendents and businesses officers in Washington, which included the effective dates of the accounting and audit requirements contained in E2SSB 6362. State law defines enrichment in EHB 2242, Section 501. OSPI expects districts to have a documented plan for differentiating between expenditures of state and local revenue. This plan must adhere to the provisions established in EHB 2242 and be applied consistently across expenditure categories. In December 2020, OSPI sent a memorandum to school district business officers requiring the plan be available for review by SAO.