The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, and restricted purpose requirements. Assistance Listing Number and Title: 32.009, COVID-19 ? Emergency Connectivity Fund Program Federal Grantor Name: Federal Communications Commission Federal Award/Contract Number: Pass-through Entity Name: 145203 N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $824,281 Background The Emergency Connectivity Fund (ECF) 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. This is referred to as ?unmet need.? In fiscal year 2022, the District spent $824,281 in ECF Program funds to purchase laptops for students and school staff. 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. Allowable activities and costs ECF Program recipients must only seek reimbursement for the eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking and receiving reimbursement for eligible equipment purchased for use solely at the school or held for future use (i.e., warehousing). Restricted purpose ? unmet need When submitting applications to the Federal Communications Commission (FCC), schools only had to provide an estimate of their students? and staff?s unmet need. However, when requesting reimbursement, the District could only request program funds for eligible equipment and services provided to students and school staff with actual unmet need. Description of Condition Allowable activities and costs/restricted purpose ? unmet need The District estimated unmet need for eligible equipment when it applied for ECF Program funds. However, our audit found the District?s internal controls were ineffective for ensuring it requested reimbursement only for eligible equipment provided to students and school staff with a documented unmet need. Specifically, the District purchased laptops, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $824,281. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student or employee with unmet need. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Allowable activities and costs/restricted purpose ? unmet need District staff thought the determination of unmet need provided during the application process was sufficient to comply with this requirement. Therefore, they did not perform additional procedures during the reimbursement process to ensure the District only requested reimbursement for specific students and staff with a documented unmet need. Further, the District used a consultant for administering the program, and it relied on the consultant to ensure documentation to support the reimbursements was complete with all required elements. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose ? unmet need Because the District did not have documentation supporting whether it provided eligible equipment to students and school staff with actual unmet need, it cannot demonstrate compliance with the program?s requirements. Given the nature of the program and circumstances, it is likely that at least some of the equipment the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students? and staff?s actual unmet need means that all costs are unsupported. Since we do not have a reasonable basis for estimating how much of the District?s expenditures are allowable, we are questioning all unsupported costs. Federal regulations require the State Auditor?s Office to report known questioned costs that are greater than $25,000 for each type of compliance requirement. We question costs when we find the District does not have adequate documentation to support expenditures. Recommendation 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. Specifically, the District should request reimbursement only for eligible equipment and services provided to students and staff with unmet need, and maintain documentation demonstrating compliance. District?s Response The Anacortes School District would first like to acknowledge the high level of professionalism, good communication, and overall quality of the audit performed this year. The letter dated May 26, 2023 from Chris Reykdal, Superintendent of Public Instruction, to State Auditor, Pat McCarthy, acknowledges the fact that the State Auditor?s Office is compelled to audit based on the Federal Compliance Bulletin issued ?. . . despite very poor guidance from the federal authorities about the documentation that would be expected from local school districts.? The District understands that our local auditor?s followed the Federal Compliance Bulletin and even sought clarification at the State level in ensuring the quality and accuracy of issues related to this audit finding which demonstrated the high level of integrity our local auditors possess. The Anacortes School District did separate surveys of students and staff to identify unmet needs in our district for electronic devices (Chromebooks) and used this data to apply for the ECF funds. We were awarded the funds based on our application and followed through with the purchase on that basis and claimed reimbursement. The District acknowledges that it did not re-establish documentation for the unmet needs for those students and staff receiving the devices at the time funds were received. The District?s understanding was that the determination of unmet need was to be done by the District and that the District would have flexibility on determining the unmet needs of the students and staff. The District feels that the FCC did not make it clear what, if any, documentation was required regarding re-establishing the unmet need at the time funds were received. This belief was shared by many other school districts as noted in a ?Special to the Times? article in the Seattle Times written by The Washington State Auditor, Pat McCarthy in regards to the FCC stating ?I sent the agency a formal letter detailing the gaps between guidance to schools and instructions to auditors.? It also stated ?When taken together with the unusual number of audit findings, this context suggests school districts believed they were adequately documenting their work. However, it also suggests that the FCC?s communication with school districts was not clear regarding what documentation it would ultimately require.? The District does understand that documentation is important therefore would like to note that in addition to the initial survey results identifying the unmet need the District did have the following documentation for each device: Date purchased, purchase order number, cost of the specific device, serial number, district asset tag, date the device was checked out to a student, when applicable the date the device was returned to the district, and the dates for all software updates and hardware repairs for the device. This documentation includes the fact that the device is still in the hands of the students today and is specific about which student has what device. To summarize, the Anacortes School District believed we were meeting the regulatory requirements throughout this process. It seems like the instructions provided to the auditors were more stringent and less flexible than originally presented to the districts by the FCC. Auditor?s Remarks The State Auditor?s Office is sympathetic to the significant challenges the District faced during the COVID-19 pandemic, and deeply respects its commitment to student learning despite these challenges. SAO knows that in many cases, governments across Washington received significant pandemic-era federal funds without also receiving clear guidance on how to use them. Then, and now, SAO continues to advocate for clear, timely guidance from federal agencies to make sure Washington governments are not put in a difficult position at audit time. However, when auditing federal programs of any kind, governments must provide documentation to substantiate that they met the award requirements. As is our practice and audit standards require, we will review the status of this finding during our next audit. We value our partnership with the District in striving for transparency in public service. 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 47 CFR Part 54, Universal Service, Subpart Q, Emergency Connectivity Fund, describes the ECF Program requirements.
The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, and restricted purpose requirements. Assistance Listing Number and Title: 32.009, COVID-19 ? Emergency Connectivity Fund Program Federal Grantor Name: Federal Communications Commission Federal Award/Contract Number: Pass-through Entity Name: 145203 N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $824,281 Background The Emergency Connectivity Fund (ECF) 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. This is referred to as ?unmet need.? In fiscal year 2022, the District spent $824,281 in ECF Program funds to purchase laptops for students and school staff. 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. Allowable activities and costs ECF Program recipients must only seek reimbursement for the eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking and receiving reimbursement for eligible equipment purchased for use solely at the school or held for future use (i.e., warehousing). Restricted purpose ? unmet need When submitting applications to the Federal Communications Commission (FCC), schools only had to provide an estimate of their students? and staff?s unmet need. However, when requesting reimbursement, the District could only request program funds for eligible equipment and services provided to students and school staff with actual unmet need. Description of Condition Allowable activities and costs/restricted purpose ? unmet need The District estimated unmet need for eligible equipment when it applied for ECF Program funds. However, our audit found the District?s internal controls were ineffective for ensuring it requested reimbursement only for eligible equipment provided to students and school staff with a documented unmet need. Specifically, the District purchased laptops, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $824,281. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student or employee with unmet need. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Allowable activities and costs/restricted purpose ? unmet need District staff thought the determination of unmet need provided during the application process was sufficient to comply with this requirement. Therefore, they did not perform additional procedures during the reimbursement process to ensure the District only requested reimbursement for specific students and staff with a documented unmet need. Further, the District used a consultant for administering the program, and it relied on the consultant to ensure documentation to support the reimbursements was complete with all required elements. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose ? unmet need Because the District did not have documentation supporting whether it provided eligible equipment to students and school staff with actual unmet need, it cannot demonstrate compliance with the program?s requirements. Given the nature of the program and circumstances, it is likely that at least some of the equipment the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students? and staff?s actual unmet need means that all costs are unsupported. Since we do not have a reasonable basis for estimating how much of the District?s expenditures are allowable, we are questioning all unsupported costs. Federal regulations require the State Auditor?s Office to report known questioned costs that are greater than $25,000 for each type of compliance requirement. We question costs when we find the District does not have adequate documentation to support expenditures. Recommendation 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. Specifically, the District should request reimbursement only for eligible equipment and services provided to students and staff with unmet need, and maintain documentation demonstrating compliance. District?s Response The Anacortes School District would first like to acknowledge the high level of professionalism, good communication, and overall quality of the audit performed this year. The letter dated May 26, 2023 from Chris Reykdal, Superintendent of Public Instruction, to State Auditor, Pat McCarthy, acknowledges the fact that the State Auditor?s Office is compelled to audit based on the Federal Compliance Bulletin issued ?. . . despite very poor guidance from the federal authorities about the documentation that would be expected from local school districts.? The District understands that our local auditor?s followed the Federal Compliance Bulletin and even sought clarification at the State level in ensuring the quality and accuracy of issues related to this audit finding which demonstrated the high level of integrity our local auditors possess. The Anacortes School District did separate surveys of students and staff to identify unmet needs in our district for electronic devices (Chromebooks) and used this data to apply for the ECF funds. We were awarded the funds based on our application and followed through with the purchase on that basis and claimed reimbursement. The District acknowledges that it did not re-establish documentation for the unmet needs for those students and staff receiving the devices at the time funds were received. The District?s understanding was that the determination of unmet need was to be done by the District and that the District would have flexibility on determining the unmet needs of the students and staff. The District feels that the FCC did not make it clear what, if any, documentation was required regarding re-establishing the unmet need at the time funds were received. This belief was shared by many other school districts as noted in a ?Special to the Times? article in the Seattle Times written by The Washington State Auditor, Pat McCarthy in regards to the FCC stating ?I sent the agency a formal letter detailing the gaps between guidance to schools and instructions to auditors.? It also stated ?When taken together with the unusual number of audit findings, this context suggests school districts believed they were adequately documenting their work. However, it also suggests that the FCC?s communication with school districts was not clear regarding what documentation it would ultimately require.? The District does understand that documentation is important therefore would like to note that in addition to the initial survey results identifying the unmet need the District did have the following documentation for each device: Date purchased, purchase order number, cost of the specific device, serial number, district asset tag, date the device was checked out to a student, when applicable the date the device was returned to the district, and the dates for all software updates and hardware repairs for the device. This documentation includes the fact that the device is still in the hands of the students today and is specific about which student has what device. To summarize, the Anacortes School District believed we were meeting the regulatory requirements throughout this process. It seems like the instructions provided to the auditors were more stringent and less flexible than originally presented to the districts by the FCC. Auditor?s Remarks The State Auditor?s Office is sympathetic to the significant challenges the District faced during the COVID-19 pandemic, and deeply respects its commitment to student learning despite these challenges. SAO knows that in many cases, governments across Washington received significant pandemic-era federal funds without also receiving clear guidance on how to use them. Then, and now, SAO continues to advocate for clear, timely guidance from federal agencies to make sure Washington governments are not put in a difficult position at audit time. However, when auditing federal programs of any kind, governments must provide documentation to substantiate that they met the award requirements. As is our practice and audit standards require, we will review the status of this finding during our next audit. We value our partnership with the District in striving for transparency in public service. 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 47 CFR Part 54, Universal Service, Subpart Q, Emergency Connectivity Fund, describes the ECF Program requirements.