Audit 307577

2023-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment 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: ECF202113227, ECF202112569, and ECF202119898 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,510 Prior Year Audit Finding: Yes, Finding 2022-001 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 November 2022, the District requested reimbursement of $2,284,501 in ECF Program funds to pay for laptops and hotspot internet services for students and school staff during the 2021–2022 school year. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Allowable activities and costs ECF Program recipients may only seek reimbursement for eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking reimbursement for eligible equipment and services used solely at the school or held for future use (in other words, warehousing). Equipment The Federal Communications Commission (FCC) requires ECF Program recipients to maintain inventories of the devices and services they have purchased with program funds. The FCC also requires inventory records to include specific elements, such as the type of equipment or service provided, equipment make/model and serial number, name of the students or employees provided the equipment or service, dates they used the equipment or service, and more. Restricted purpose – unmet need When submitting applications to the 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. Restricted purpose – per-location and per-user limitations The FCC imposed per-location and per-user limitations to maximize the use of limited funds. Under the program, eligible schools could only be reimbursed for one connected device and hotspot internet service per student or school employee with unmet need, and no more than one fixed broadband connection per location, such as a student’s or employee’s residence. Description of Condition Allowable activities and costs/restricted purpose – unmet need The District estimated unmet need for eligible equipment and services when it applied for ECF Program funds. However, our audit found the District’s internal controls were ineffective for ensuring it documented the determination of actual unmet need and only requested reimbursement for equipment and services provided to students and school staff. Specifically, the District purchased 4,500 laptops for students and hotspot internet services for students and staff, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $1,622,101. However, the District did not maintain documentation showing it provided each laptop and hotspot internet services paid with program funds to a student or staff with unmet need. In addition, the District’s internal controls were ineffective for ensuring it uses credits or discounts it received from vendors to offset expenditures it claimed for reimbursement. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Equipment The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for 873 hotspot internet services (87 percent) the District purchased with ECF Program funds, it did not include names of the students or employees provided or responsible for the service and the dates they used it. We consider this internal control deficiency to be a significant deficiency. Restricted purpose – per-user limitations Our audit found the District’s internal controls were ineffective for demonstrating it complied with the FCC’s per-user limitations. Specifically, the District did not maintain documentation showing it monitored or had a tracking process in place to ensure it only provided one device per user. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Allowable activities and costs/restricted purpose – unmet need As communicated in the prior audit finding, District staff thought the determination of unmet need provided during the application process was sufficient to comply with this requirement. Since the funding spanned two fiscal years, the District had already distributed laptops and hotspot internet services and requested reimbursement before the prior audit identified this issue. The District did not take any additional action and is waiting for audit resolution from the federal grantor. Equipment District staff said there was an urgent need to distribute hotspot internet services to students so they could participate in remote learning. Due to extenuating circumstances caused by the COVID-19 pandemic, there was a breakdown in established internal controls. As a result, staff did not retain documentation that identified the students it provided with hotspot internet services. Restricted purpose –per-user limitations As communicated in the prior audit finding, District staff did not know they could not provide more than one device and/or connection per student and employee. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose – unmet need We used statistical sampling to select and test 42 laptops and 23 hotspot internet services to determine whether the District had supporting documentation to demonstrate it provided eligible equipment and services to students and staff with actual unmet needs. We noted the District could not demonstrate that it fulfilled the unmet need requirement for 31 student-issued laptops and 20 hotspot internet services. Given the nature of the program and circumstances, it is likely that at least some of the equipment and services the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students’ and staffs’ actual unmet need means that most costs could be unsupported. In total, we identified $13,860 of overpayments for the 31 laptops and 20 hotspot internet services. Based on the projection of our statistical sample, we identified $1,588,189 in total estimated overpayments. Additionally, one of the District’s vendors provided $11,650 in credits and the District did not use the credits to offset expenditures claimed for reimbursement. As such, credits are not eligible for reimbursement. We are questioning the entire amount of $11,650. Federal regulations require the Office of the Washington State Auditor to report known and likely 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. Equipment Without maintaining proper service inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded services. Restricted purpose –per-user limitations Because the District did not maintain documentation, it cannot demonstrate compliance with the FCC’s restrictions. Additionally, we cannot determine whether the District only provided one device or connection per user. Recommendation We recommend the District work with the awarding 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 • Maintain inventories that include all required elements to track the use of services paid with ECF Program funds • Monitor to confirm it provides no more than one device per student in compliance with the ECF Program’s requirements District’s Response As communicated in the District’s response to the prior audit finding, the District does not concur with the SAO’s interpretation of unmet need in the 2021-2022 audit nor does it concur with the same finding for the audit of the 2022-2023 fiscal year. We believe all Chromebook purchases were allowable and devices were only provided to those with an unmet need. We concur with SAO that we did not retain adequate documentation indicating which staff and students received hotspots and appreciate that SAO noted that there was an urgent need to distribute hotspot internet services to students in order that they could participate in remote learning, and that this urgency and extenuating circumstances resulted in this situation. We recognize there was an error associated with vendor credits in the amount of $2,751.10 but did not claim reimbursement for the other credits totaling $8,898.90 as indicated in the audit finding. We will work to improve our process regarding credits on future invoices. The District will continue to work with the FCC to resolve this finding. Auditor’s Remarks We value our partnership with the District in striving for transparency in public service. 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. SAO continues to advocate for clear, timely guidance from federal agencies. 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.

2023-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment 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: ECF202113227, ECF202112569, and ECF202119898 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,510 Prior Year Audit Finding: Yes, Finding 2022-001 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 November 2022, the District requested reimbursement of $2,284,501 in ECF Program funds to pay for laptops and hotspot internet services for students and school staff during the 2021–2022 school year. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Allowable activities and costs ECF Program recipients may only seek reimbursement for eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking reimbursement for eligible equipment and services used solely at the school or held for future use (in other words, warehousing). Equipment The Federal Communications Commission (FCC) requires ECF Program recipients to maintain inventories of the devices and services they have purchased with program funds. The FCC also requires inventory records to include specific elements, such as the type of equipment or service provided, equipment make/model and serial number, name of the students or employees provided the equipment or service, dates they used the equipment or service, and more. Restricted purpose – unmet need When submitting applications to the 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. Restricted purpose – per-location and per-user limitations The FCC imposed per-location and per-user limitations to maximize the use of limited funds. Under the program, eligible schools could only be reimbursed for one connected device and hotspot internet service per student or school employee with unmet need, and no more than one fixed broadband connection per location, such as a student’s or employee’s residence. Description of Condition Allowable activities and costs/restricted purpose – unmet need The District estimated unmet need for eligible equipment and services when it applied for ECF Program funds. However, our audit found the District’s internal controls were ineffective for ensuring it documented the determination of actual unmet need and only requested reimbursement for equipment and services provided to students and school staff. Specifically, the District purchased 4,500 laptops for students and hotspot internet services for students and staff, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $1,622,101. However, the District did not maintain documentation showing it provided each laptop and hotspot internet services paid with program funds to a student or staff with unmet need. In addition, the District’s internal controls were ineffective for ensuring it uses credits or discounts it received from vendors to offset expenditures it claimed for reimbursement. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Equipment The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for 873 hotspot internet services (87 percent) the District purchased with ECF Program funds, it did not include names of the students or employees provided or responsible for the service and the dates they used it. We consider this internal control deficiency to be a significant deficiency. Restricted purpose – per-user limitations Our audit found the District’s internal controls were ineffective for demonstrating it complied with the FCC’s per-user limitations. Specifically, the District did not maintain documentation showing it monitored or had a tracking process in place to ensure it only provided one device per user. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Allowable activities and costs/restricted purpose – unmet need As communicated in the prior audit finding, District staff thought the determination of unmet need provided during the application process was sufficient to comply with this requirement. Since the funding spanned two fiscal years, the District had already distributed laptops and hotspot internet services and requested reimbursement before the prior audit identified this issue. The District did not take any additional action and is waiting for audit resolution from the federal grantor. Equipment District staff said there was an urgent need to distribute hotspot internet services to students so they could participate in remote learning. Due to extenuating circumstances caused by the COVID-19 pandemic, there was a breakdown in established internal controls. As a result, staff did not retain documentation that identified the students it provided with hotspot internet services. Restricted purpose –per-user limitations As communicated in the prior audit finding, District staff did not know they could not provide more than one device and/or connection per student and employee. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose – unmet need We used statistical sampling to select and test 42 laptops and 23 hotspot internet services to determine whether the District had supporting documentation to demonstrate it provided eligible equipment and services to students and staff with actual unmet needs. We noted the District could not demonstrate that it fulfilled the unmet need requirement for 31 student-issued laptops and 20 hotspot internet services. Given the nature of the program and circumstances, it is likely that at least some of the equipment and services the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students’ and staffs’ actual unmet need means that most costs could be unsupported. In total, we identified $13,860 of overpayments for the 31 laptops and 20 hotspot internet services. Based on the projection of our statistical sample, we identified $1,588,189 in total estimated overpayments. Additionally, one of the District’s vendors provided $11,650 in credits and the District did not use the credits to offset expenditures claimed for reimbursement. As such, credits are not eligible for reimbursement. We are questioning the entire amount of $11,650. Federal regulations require the Office of the Washington State Auditor to report known and likely 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. Equipment Without maintaining proper service inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded services. Restricted purpose –per-user limitations Because the District did not maintain documentation, it cannot demonstrate compliance with the FCC’s restrictions. Additionally, we cannot determine whether the District only provided one device or connection per user. Recommendation We recommend the District work with the awarding 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 • Maintain inventories that include all required elements to track the use of services paid with ECF Program funds • Monitor to confirm it provides no more than one device per student in compliance with the ECF Program’s requirements District’s Response As communicated in the District’s response to the prior audit finding, the District does not concur with the SAO’s interpretation of unmet need in the 2021-2022 audit nor does it concur with the same finding for the audit of the 2022-2023 fiscal year. We believe all Chromebook purchases were allowable and devices were only provided to those with an unmet need. We concur with SAO that we did not retain adequate documentation indicating which staff and students received hotspots and appreciate that SAO noted that there was an urgent need to distribute hotspot internet services to students in order that they could participate in remote learning, and that this urgency and extenuating circumstances resulted in this situation. We recognize there was an error associated with vendor credits in the amount of $2,751.10 but did not claim reimbursement for the other credits totaling $8,898.90 as indicated in the audit finding. We will work to improve our process regarding credits on future invoices. The District will continue to work with the FCC to resolve this finding. Auditor’s Remarks We value our partnership with the District in striving for transparency in public service. 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. SAO continues to advocate for clear, timely guidance from federal agencies. 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.

2023-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment 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: ECF202113227, ECF202112569, and ECF202119898 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,510 Prior Year Audit Finding: Yes, Finding 2022-001 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 November 2022, the District requested reimbursement of $2,284,501 in ECF Program funds to pay for laptops and hotspot internet services for students and school staff during the 2021–2022 school year. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Allowable activities and costs ECF Program recipients may only seek reimbursement for eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking reimbursement for eligible equipment and services used solely at the school or held for future use (in other words, warehousing). Equipment The Federal Communications Commission (FCC) requires ECF Program recipients to maintain inventories of the devices and services they have purchased with program funds. The FCC also requires inventory records to include specific elements, such as the type of equipment or service provided, equipment make/model and serial number, name of the students or employees provided the equipment or service, dates they used the equipment or service, and more. Restricted purpose – unmet need When submitting applications to the 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. Restricted purpose – per-location and per-user limitations The FCC imposed per-location and per-user limitations to maximize the use of limited funds. Under the program, eligible schools could only be reimbursed for one connected device and hotspot internet service per student or school employee with unmet need, and no more than one fixed broadband connection per location, such as a student’s or employee’s residence. Description of Condition Allowable activities and costs/restricted purpose – unmet need The District estimated unmet need for eligible equipment and services when it applied for ECF Program funds. However, our audit found the District’s internal controls were ineffective for ensuring it documented the determination of actual unmet need and only requested reimbursement for equipment and services provided to students and school staff. Specifically, the District purchased 4,500 laptops for students and hotspot internet services for students and staff, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $1,622,101. However, the District did not maintain documentation showing it provided each laptop and hotspot internet services paid with program funds to a student or staff with unmet need. In addition, the District’s internal controls were ineffective for ensuring it uses credits or discounts it received from vendors to offset expenditures it claimed for reimbursement. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Equipment The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for 873 hotspot internet services (87 percent) the District purchased with ECF Program funds, it did not include names of the students or employees provided or responsible for the service and the dates they used it. We consider this internal control deficiency to be a significant deficiency. Restricted purpose – per-user limitations Our audit found the District’s internal controls were ineffective for demonstrating it complied with the FCC’s per-user limitations. Specifically, the District did not maintain documentation showing it monitored or had a tracking process in place to ensure it only provided one device per user. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Allowable activities and costs/restricted purpose – unmet need As communicated in the prior audit finding, District staff thought the determination of unmet need provided during the application process was sufficient to comply with this requirement. Since the funding spanned two fiscal years, the District had already distributed laptops and hotspot internet services and requested reimbursement before the prior audit identified this issue. The District did not take any additional action and is waiting for audit resolution from the federal grantor. Equipment District staff said there was an urgent need to distribute hotspot internet services to students so they could participate in remote learning. Due to extenuating circumstances caused by the COVID-19 pandemic, there was a breakdown in established internal controls. As a result, staff did not retain documentation that identified the students it provided with hotspot internet services. Restricted purpose –per-user limitations As communicated in the prior audit finding, District staff did not know they could not provide more than one device and/or connection per student and employee. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose – unmet need We used statistical sampling to select and test 42 laptops and 23 hotspot internet services to determine whether the District had supporting documentation to demonstrate it provided eligible equipment and services to students and staff with actual unmet needs. We noted the District could not demonstrate that it fulfilled the unmet need requirement for 31 student-issued laptops and 20 hotspot internet services. Given the nature of the program and circumstances, it is likely that at least some of the equipment and services the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students’ and staffs’ actual unmet need means that most costs could be unsupported. In total, we identified $13,860 of overpayments for the 31 laptops and 20 hotspot internet services. Based on the projection of our statistical sample, we identified $1,588,189 in total estimated overpayments. Additionally, one of the District’s vendors provided $11,650 in credits and the District did not use the credits to offset expenditures claimed for reimbursement. As such, credits are not eligible for reimbursement. We are questioning the entire amount of $11,650. Federal regulations require the Office of the Washington State Auditor to report known and likely 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. Equipment Without maintaining proper service inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded services. Restricted purpose –per-user limitations Because the District did not maintain documentation, it cannot demonstrate compliance with the FCC’s restrictions. Additionally, we cannot determine whether the District only provided one device or connection per user. Recommendation We recommend the District work with the awarding 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 • Maintain inventories that include all required elements to track the use of services paid with ECF Program funds • Monitor to confirm it provides no more than one device per student in compliance with the ECF Program’s requirements District’s Response As communicated in the District’s response to the prior audit finding, the District does not concur with the SAO’s interpretation of unmet need in the 2021-2022 audit nor does it concur with the same finding for the audit of the 2022-2023 fiscal year. We believe all Chromebook purchases were allowable and devices were only provided to those with an unmet need. We concur with SAO that we did not retain adequate documentation indicating which staff and students received hotspots and appreciate that SAO noted that there was an urgent need to distribute hotspot internet services to students in order that they could participate in remote learning, and that this urgency and extenuating circumstances resulted in this situation. We recognize there was an error associated with vendor credits in the amount of $2,751.10 but did not claim reimbursement for the other credits totaling $8,898.90 as indicated in the audit finding. We will work to improve our process regarding credits on future invoices. The District will continue to work with the FCC to resolve this finding. Auditor’s Remarks We value our partnership with the District in striving for transparency in public service. 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. SAO continues to advocate for clear, timely guidance from federal agencies. 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.

2023-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment 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: ECF202113227, ECF202112569, and ECF202119898 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,510 Prior Year Audit Finding: Yes, Finding 2022-001 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 November 2022, the District requested reimbursement of $2,284,501 in ECF Program funds to pay for laptops and hotspot internet services for students and school staff during the 2021–2022 school year. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Allowable activities and costs ECF Program recipients may only seek reimbursement for eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking reimbursement for eligible equipment and services used solely at the school or held for future use (in other words, warehousing). Equipment The Federal Communications Commission (FCC) requires ECF Program recipients to maintain inventories of the devices and services they have purchased with program funds. The FCC also requires inventory records to include specific elements, such as the type of equipment or service provided, equipment make/model and serial number, name of the students or employees provided the equipment or service, dates they used the equipment or service, and more. Restricted purpose – unmet need When submitting applications to the 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. Restricted purpose – per-location and per-user limitations The FCC imposed per-location and per-user limitations to maximize the use of limited funds. Under the program, eligible schools could only be reimbursed for one connected device and hotspot internet service per student or school employee with unmet need, and no more than one fixed broadband connection per location, such as a student’s or employee’s residence. Description of Condition Allowable activities and costs/restricted purpose – unmet need The District estimated unmet need for eligible equipment and services when it applied for ECF Program funds. However, our audit found the District’s internal controls were ineffective for ensuring it documented the determination of actual unmet need and only requested reimbursement for equipment and services provided to students and school staff. Specifically, the District purchased 4,500 laptops for students and hotspot internet services for students and staff, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $1,622,101. However, the District did not maintain documentation showing it provided each laptop and hotspot internet services paid with program funds to a student or staff with unmet need. In addition, the District’s internal controls were ineffective for ensuring it uses credits or discounts it received from vendors to offset expenditures it claimed for reimbursement. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Equipment The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for 873 hotspot internet services (87 percent) the District purchased with ECF Program funds, it did not include names of the students or employees provided or responsible for the service and the dates they used it. We consider this internal control deficiency to be a significant deficiency. Restricted purpose – per-user limitations Our audit found the District’s internal controls were ineffective for demonstrating it complied with the FCC’s per-user limitations. Specifically, the District did not maintain documentation showing it monitored or had a tracking process in place to ensure it only provided one device per user. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Allowable activities and costs/restricted purpose – unmet need As communicated in the prior audit finding, District staff thought the determination of unmet need provided during the application process was sufficient to comply with this requirement. Since the funding spanned two fiscal years, the District had already distributed laptops and hotspot internet services and requested reimbursement before the prior audit identified this issue. The District did not take any additional action and is waiting for audit resolution from the federal grantor. Equipment District staff said there was an urgent need to distribute hotspot internet services to students so they could participate in remote learning. Due to extenuating circumstances caused by the COVID-19 pandemic, there was a breakdown in established internal controls. As a result, staff did not retain documentation that identified the students it provided with hotspot internet services. Restricted purpose –per-user limitations As communicated in the prior audit finding, District staff did not know they could not provide more than one device and/or connection per student and employee. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose – unmet need We used statistical sampling to select and test 42 laptops and 23 hotspot internet services to determine whether the District had supporting documentation to demonstrate it provided eligible equipment and services to students and staff with actual unmet needs. We noted the District could not demonstrate that it fulfilled the unmet need requirement for 31 student-issued laptops and 20 hotspot internet services. Given the nature of the program and circumstances, it is likely that at least some of the equipment and services the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students’ and staffs’ actual unmet need means that most costs could be unsupported. In total, we identified $13,860 of overpayments for the 31 laptops and 20 hotspot internet services. Based on the projection of our statistical sample, we identified $1,588,189 in total estimated overpayments. Additionally, one of the District’s vendors provided $11,650 in credits and the District did not use the credits to offset expenditures claimed for reimbursement. As such, credits are not eligible for reimbursement. We are questioning the entire amount of $11,650. Federal regulations require the Office of the Washington State Auditor to report known and likely 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. Equipment Without maintaining proper service inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded services. Restricted purpose –per-user limitations Because the District did not maintain documentation, it cannot demonstrate compliance with the FCC’s restrictions. Additionally, we cannot determine whether the District only provided one device or connection per user. Recommendation We recommend the District work with the awarding 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 • Maintain inventories that include all required elements to track the use of services paid with ECF Program funds • Monitor to confirm it provides no more than one device per student in compliance with the ECF Program’s requirements District’s Response As communicated in the District’s response to the prior audit finding, the District does not concur with the SAO’s interpretation of unmet need in the 2021-2022 audit nor does it concur with the same finding for the audit of the 2022-2023 fiscal year. We believe all Chromebook purchases were allowable and devices were only provided to those with an unmet need. We concur with SAO that we did not retain adequate documentation indicating which staff and students received hotspots and appreciate that SAO noted that there was an urgent need to distribute hotspot internet services to students in order that they could participate in remote learning, and that this urgency and extenuating circumstances resulted in this situation. We recognize there was an error associated with vendor credits in the amount of $2,751.10 but did not claim reimbursement for the other credits totaling $8,898.90 as indicated in the audit finding. We will work to improve our process regarding credits on future invoices. The District will continue to work with the FCC to resolve this finding. Auditor’s Remarks We value our partnership with the District in striving for transparency in public service. 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. SAO continues to advocate for clear, timely guidance from federal agencies. 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.

2023-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment 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: ECF202113227, ECF202112569, and ECF202119898 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,510 Prior Year Audit Finding: Yes, Finding 2022-001 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 November 2022, the District requested reimbursement of $2,284,501 in ECF Program funds to pay for laptops and hotspot internet services for students and school staff during the 2021–2022 school year. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Allowable activities and costs ECF Program recipients may only seek reimbursement for eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking reimbursement for eligible equipment and services used solely at the school or held for future use (in other words, warehousing). Equipment The Federal Communications Commission (FCC) requires ECF Program recipients to maintain inventories of the devices and services they have purchased with program funds. The FCC also requires inventory records to include specific elements, such as the type of equipment or service provided, equipment make/model and serial number, name of the students or employees provided the equipment or service, dates they used the equipment or service, and more. Restricted purpose – unmet need When submitting applications to the 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. Restricted purpose – per-location and per-user limitations The FCC imposed per-location and per-user limitations to maximize the use of limited funds. Under the program, eligible schools could only be reimbursed for one connected device and hotspot internet service per student or school employee with unmet need, and no more than one fixed broadband connection per location, such as a student’s or employee’s residence. Description of Condition Allowable activities and costs/restricted purpose – unmet need The District estimated unmet need for eligible equipment and services when it applied for ECF Program funds. However, our audit found the District’s internal controls were ineffective for ensuring it documented the determination of actual unmet need and only requested reimbursement for equipment and services provided to students and school staff. Specifically, the District purchased 4,500 laptops for students and hotspot internet services for students and staff, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $1,622,101. However, the District did not maintain documentation showing it provided each laptop and hotspot internet services paid with program funds to a student or staff with unmet need. In addition, the District’s internal controls were ineffective for ensuring it uses credits or discounts it received from vendors to offset expenditures it claimed for reimbursement. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Equipment The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for 873 hotspot internet services (87 percent) the District purchased with ECF Program funds, it did not include names of the students or employees provided or responsible for the service and the dates they used it. We consider this internal control deficiency to be a significant deficiency. Restricted purpose – per-user limitations Our audit found the District’s internal controls were ineffective for demonstrating it complied with the FCC’s per-user limitations. Specifically, the District did not maintain documentation showing it monitored or had a tracking process in place to ensure it only provided one device per user. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Allowable activities and costs/restricted purpose – unmet need As communicated in the prior audit finding, District staff thought the determination of unmet need provided during the application process was sufficient to comply with this requirement. Since the funding spanned two fiscal years, the District had already distributed laptops and hotspot internet services and requested reimbursement before the prior audit identified this issue. The District did not take any additional action and is waiting for audit resolution from the federal grantor. Equipment District staff said there was an urgent need to distribute hotspot internet services to students so they could participate in remote learning. Due to extenuating circumstances caused by the COVID-19 pandemic, there was a breakdown in established internal controls. As a result, staff did not retain documentation that identified the students it provided with hotspot internet services. Restricted purpose –per-user limitations As communicated in the prior audit finding, District staff did not know they could not provide more than one device and/or connection per student and employee. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose – unmet need We used statistical sampling to select and test 42 laptops and 23 hotspot internet services to determine whether the District had supporting documentation to demonstrate it provided eligible equipment and services to students and staff with actual unmet needs. We noted the District could not demonstrate that it fulfilled the unmet need requirement for 31 student-issued laptops and 20 hotspot internet services. Given the nature of the program and circumstances, it is likely that at least some of the equipment and services the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students’ and staffs’ actual unmet need means that most costs could be unsupported. In total, we identified $13,860 of overpayments for the 31 laptops and 20 hotspot internet services. Based on the projection of our statistical sample, we identified $1,588,189 in total estimated overpayments. Additionally, one of the District’s vendors provided $11,650 in credits and the District did not use the credits to offset expenditures claimed for reimbursement. As such, credits are not eligible for reimbursement. We are questioning the entire amount of $11,650. Federal regulations require the Office of the Washington State Auditor to report known and likely 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. Equipment Without maintaining proper service inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded services. Restricted purpose –per-user limitations Because the District did not maintain documentation, it cannot demonstrate compliance with the FCC’s restrictions. Additionally, we cannot determine whether the District only provided one device or connection per user. Recommendation We recommend the District work with the awarding 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 • Maintain inventories that include all required elements to track the use of services paid with ECF Program funds • Monitor to confirm it provides no more than one device per student in compliance with the ECF Program’s requirements District’s Response As communicated in the District’s response to the prior audit finding, the District does not concur with the SAO’s interpretation of unmet need in the 2021-2022 audit nor does it concur with the same finding for the audit of the 2022-2023 fiscal year. We believe all Chromebook purchases were allowable and devices were only provided to those with an unmet need. We concur with SAO that we did not retain adequate documentation indicating which staff and students received hotspots and appreciate that SAO noted that there was an urgent need to distribute hotspot internet services to students in order that they could participate in remote learning, and that this urgency and extenuating circumstances resulted in this situation. We recognize there was an error associated with vendor credits in the amount of $2,751.10 but did not claim reimbursement for the other credits totaling $8,898.90 as indicated in the audit finding. We will work to improve our process regarding credits on future invoices. The District will continue to work with the FCC to resolve this finding. Auditor’s Remarks We value our partnership with the District in striving for transparency in public service. 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. SAO continues to advocate for clear, timely guidance from federal agencies. 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.

2023-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment 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: ECF202113227, ECF202112569, and ECF202119898 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,510 Prior Year Audit Finding: Yes, Finding 2022-001 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 November 2022, the District requested reimbursement of $2,284,501 in ECF Program funds to pay for laptops and hotspot internet services for students and school staff during the 2021–2022 school year. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Allowable activities and costs ECF Program recipients may only seek reimbursement for eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking reimbursement for eligible equipment and services used solely at the school or held for future use (in other words, warehousing). Equipment The Federal Communications Commission (FCC) requires ECF Program recipients to maintain inventories of the devices and services they have purchased with program funds. The FCC also requires inventory records to include specific elements, such as the type of equipment or service provided, equipment make/model and serial number, name of the students or employees provided the equipment or service, dates they used the equipment or service, and more. Restricted purpose – unmet need When submitting applications to the 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. Restricted purpose – per-location and per-user limitations The FCC imposed per-location and per-user limitations to maximize the use of limited funds. Under the program, eligible schools could only be reimbursed for one connected device and hotspot internet service per student or school employee with unmet need, and no more than one fixed broadband connection per location, such as a student’s or employee’s residence. Description of Condition Allowable activities and costs/restricted purpose – unmet need The District estimated unmet need for eligible equipment and services when it applied for ECF Program funds. However, our audit found the District’s internal controls were ineffective for ensuring it documented the determination of actual unmet need and only requested reimbursement for equipment and services provided to students and school staff. Specifically, the District purchased 4,500 laptops for students and hotspot internet services for students and staff, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $1,622,101. However, the District did not maintain documentation showing it provided each laptop and hotspot internet services paid with program funds to a student or staff with unmet need. In addition, the District’s internal controls were ineffective for ensuring it uses credits or discounts it received from vendors to offset expenditures it claimed for reimbursement. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Equipment The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for 873 hotspot internet services (87 percent) the District purchased with ECF Program funds, it did not include names of the students or employees provided or responsible for the service and the dates they used it. We consider this internal control deficiency to be a significant deficiency. Restricted purpose – per-user limitations Our audit found the District’s internal controls were ineffective for demonstrating it complied with the FCC’s per-user limitations. Specifically, the District did not maintain documentation showing it monitored or had a tracking process in place to ensure it only provided one device per user. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Allowable activities and costs/restricted purpose – unmet need As communicated in the prior audit finding, District staff thought the determination of unmet need provided during the application process was sufficient to comply with this requirement. Since the funding spanned two fiscal years, the District had already distributed laptops and hotspot internet services and requested reimbursement before the prior audit identified this issue. The District did not take any additional action and is waiting for audit resolution from the federal grantor. Equipment District staff said there was an urgent need to distribute hotspot internet services to students so they could participate in remote learning. Due to extenuating circumstances caused by the COVID-19 pandemic, there was a breakdown in established internal controls. As a result, staff did not retain documentation that identified the students it provided with hotspot internet services. Restricted purpose –per-user limitations As communicated in the prior audit finding, District staff did not know they could not provide more than one device and/or connection per student and employee. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose – unmet need We used statistical sampling to select and test 42 laptops and 23 hotspot internet services to determine whether the District had supporting documentation to demonstrate it provided eligible equipment and services to students and staff with actual unmet needs. We noted the District could not demonstrate that it fulfilled the unmet need requirement for 31 student-issued laptops and 20 hotspot internet services. Given the nature of the program and circumstances, it is likely that at least some of the equipment and services the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students’ and staffs’ actual unmet need means that most costs could be unsupported. In total, we identified $13,860 of overpayments for the 31 laptops and 20 hotspot internet services. Based on the projection of our statistical sample, we identified $1,588,189 in total estimated overpayments. Additionally, one of the District’s vendors provided $11,650 in credits and the District did not use the credits to offset expenditures claimed for reimbursement. As such, credits are not eligible for reimbursement. We are questioning the entire amount of $11,650. Federal regulations require the Office of the Washington State Auditor to report known and likely 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. Equipment Without maintaining proper service inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded services. Restricted purpose –per-user limitations Because the District did not maintain documentation, it cannot demonstrate compliance with the FCC’s restrictions. Additionally, we cannot determine whether the District only provided one device or connection per user. Recommendation We recommend the District work with the awarding 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 • Maintain inventories that include all required elements to track the use of services paid with ECF Program funds • Monitor to confirm it provides no more than one device per student in compliance with the ECF Program’s requirements District’s Response As communicated in the District’s response to the prior audit finding, the District does not concur with the SAO’s interpretation of unmet need in the 2021-2022 audit nor does it concur with the same finding for the audit of the 2022-2023 fiscal year. We believe all Chromebook purchases were allowable and devices were only provided to those with an unmet need. We concur with SAO that we did not retain adequate documentation indicating which staff and students received hotspots and appreciate that SAO noted that there was an urgent need to distribute hotspot internet services to students in order that they could participate in remote learning, and that this urgency and extenuating circumstances resulted in this situation. We recognize there was an error associated with vendor credits in the amount of $2,751.10 but did not claim reimbursement for the other credits totaling $8,898.90 as indicated in the audit finding. We will work to improve our process regarding credits on future invoices. The District will continue to work with the FCC to resolve this finding. Auditor’s Remarks We value our partnership with the District in striving for transparency in public service. 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. SAO continues to advocate for clear, timely guidance from federal agencies. 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.