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: ECF202108067
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $400,000
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 September 2022, the District requested reimbursement of $400,000 in ECF Program funds to pay for mobile hotspot data services for students and staff during the 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 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 and services
purchased for use solely at the school or held for future use (i.e., 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 the 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 Wi-Fi hotspot 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 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 services provided to students and school staff.
Specifically, the District paid for mobile hotspot data services based on its estimate
of unmet need, and it requested reimbursement for these expenses totaling
$400,000. However, the District did not maintain documentation showing it
provided each mobile hotspot paid with program funds to a student or employee
with unmet need.
Equipment
Our audit found the District’s internal controls were ineffective for ensuring it
identified and tracked the services charged to the ECF Program, and it could not
demonstrate compliance with federal requirements. Specifically, for all mobile
hotspot data services paid with ECF Program funds, the District did not include
names of the students or employees provided or responsible for the service and the
dates they used it.
Restricted purpose – per-location and 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 paid for one device’s service per user.
We consider these deficiencies in internal controls to be material weaknesses that
led to material noncompliance.
Cause of Condition
As communicated in the prior audit finding, District officials 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 devices and requested reimbursement before the
prior audit identified this issue. The District did not take any further action, and it
is waiting for audit resolution from the federal grantor.
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 services to students and 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 services the District charged to
the award addressed unmet needs. However, the lack of a documented assessment
of students’ 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.
Equipment
Without maintaining proper service inventory records that identify services paid
with ECF Program funds, as the FCC requires, the District cannot demonstrate
compliance with this requirement, and cannot effectively track the use of federally
funded equipment.
Restricted purpose – per-location and 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 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 documentation showing it submitted reimbursement for eligible
equipment and services
• Identify federally funded services and maintain inventories that track the
use of services paid with ECF Program funds
• Monitor to confirm it provides no more than one device per student and
employee in compliance with the ECF Program’s requirements
District’s Response
The District does not concur with this finding, other than the fact that the device
inventory list did not note which devices had been purchased with federal funds
and that some processes could be improved. This was during the pandemic and we
believe the appropriate level of reporting would be a management letter as all costs were allowable, devices were only provided to those with unmet needs, and all
devices were accounted for.
The District provided network connectivity to students through hotspots and used
the ECF reimbursement to cover a portion of the data services costs. These
hotspots were provided to students to ensure they were able to participate in remote
learning.
Allowable activities and costs, restricted purpose
The audit’s condition states that our internal controls were ineffective for ensuring
we requested reimbursement only for students with a documented unmet need.
Based on the guidance below, we have spent all funds for allowable costs, and those
costs were reasonable and necessary and for students with unmet needs. As
allowed by the FCC, districts were able to determine whether students had unmet
needs, and for our district this meant addressing instances where students may
share a home device with others, the device was too old or slow to function
properly, student owned devices did not have the appropriate security in place to
protect students during remote learning, and operationally the District could not
access personally owned devices to provide the thousands of technical questions
and issues students faced during remote learning. Based on these experiences,
unmet need was defined broadly, but within allowed parameters and inventory
records were kept, albeit not perfectly. The District did create and distribute an
unmet needs survey. However, due to circumstances surrounding the pandemic,
not all families were able to complete the survey. Requests for hotspots also came
through Counselors, Principals, and directly from families through phone calls.
We believe that all hotspot services were utilized with the intent to meet the 'unmet
needs' criteria as per our understanding and interpretation of the guidelines. We,
therefore, maintain that our approach was both prudent and compliant with the
spirit of the guidelines and the finding is thus not warranted.
Per the FCC compliance requirements, the District provided the needed
certification during the application process. The awarded funds were spent in
accordance with the guidance provided by the FCC. The State Auditors' Office in
this case is incorrectly applying the compliance requirements and should not issue
an audit finding.
The following guidance from the Federal Communications Commission, titled
“Emergency Connectivity Fund Common Misconceptions”, “Misconception #2: If
schools have returned to in-class instruction for the upcoming school year, they are
not eligible to participate. Answer: This is false. Equipment and services provided to students or school staff who would otherwise lack sufficient access to connected
devices, and/or broadband internet access connection while off campus are eligible
for Emergency Connectivity Fund Support.”
From the Federal Communications Commission Order FCC-CIRC21-93-043021,
question 77: “We think schools are in the best position to determine whether their
students and staff have devices and broadband services sufficient to meet their
remote learning needs, and we recognize that they are making such decisions in the
midst of a pandemic. We, therefore, will not impose any specific metrics or process
requirements on those determinations.” And from question 53: “…we are sensitive
to the need to provide some flexibility during this uncertain time. If those connected
devices were purchased for the purpose of providing students…with devices for offcampus
use consistent with the rules we adopt today, we will not prohibit such oncampus
use.”
SAO did not apply any reasonable measure to reduce questioned costs but did state
that it is likely that at least some of the costs addressed unmet needs, while still
choosing to question all costs. That is clearly out of alignment with the FCC
guidance.
Equipment
The District has a robust inventory system which allows for the tracking and
safeguarding of public assets including the hotspots purchased with federal funds.
However, the District agrees that it did not track federally funded iPads separately
from non-federally funded ones. Going forward the District will ensure federally
funded items are designated as such and are tracked separately.
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. The State Auditor’s Office 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: ECF202108067
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $400,000
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 September 2022, the District requested reimbursement of $400,000 in ECF Program funds to pay for mobile hotspot data services for students and staff during the 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 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 and services
purchased for use solely at the school or held for future use (i.e., 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 the 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 Wi-Fi hotspot 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 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 services provided to students and school staff.
Specifically, the District paid for mobile hotspot data services based on its estimate
of unmet need, and it requested reimbursement for these expenses totaling
$400,000. However, the District did not maintain documentation showing it
provided each mobile hotspot paid with program funds to a student or employee
with unmet need.
Equipment
Our audit found the District’s internal controls were ineffective for ensuring it
identified and tracked the services charged to the ECF Program, and it could not
demonstrate compliance with federal requirements. Specifically, for all mobile
hotspot data services paid with ECF Program funds, the District did not include
names of the students or employees provided or responsible for the service and the
dates they used it.
Restricted purpose – per-location and 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 paid for one device’s service per user.
We consider these deficiencies in internal controls to be material weaknesses that
led to material noncompliance.
Cause of Condition
As communicated in the prior audit finding, District officials 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 devices and requested reimbursement before the
prior audit identified this issue. The District did not take any further action, and it
is waiting for audit resolution from the federal grantor.
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 services to students and 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 services the District charged to
the award addressed unmet needs. However, the lack of a documented assessment
of students’ 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.
Equipment
Without maintaining proper service inventory records that identify services paid
with ECF Program funds, as the FCC requires, the District cannot demonstrate
compliance with this requirement, and cannot effectively track the use of federally
funded equipment.
Restricted purpose – per-location and 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 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 documentation showing it submitted reimbursement for eligible
equipment and services
• Identify federally funded services and maintain inventories that track the
use of services paid with ECF Program funds
• Monitor to confirm it provides no more than one device per student and
employee in compliance with the ECF Program’s requirements
District’s Response
The District does not concur with this finding, other than the fact that the device
inventory list did not note which devices had been purchased with federal funds
and that some processes could be improved. This was during the pandemic and we
believe the appropriate level of reporting would be a management letter as all costs were allowable, devices were only provided to those with unmet needs, and all
devices were accounted for.
The District provided network connectivity to students through hotspots and used
the ECF reimbursement to cover a portion of the data services costs. These
hotspots were provided to students to ensure they were able to participate in remote
learning.
Allowable activities and costs, restricted purpose
The audit’s condition states that our internal controls were ineffective for ensuring
we requested reimbursement only for students with a documented unmet need.
Based on the guidance below, we have spent all funds for allowable costs, and those
costs were reasonable and necessary and for students with unmet needs. As
allowed by the FCC, districts were able to determine whether students had unmet
needs, and for our district this meant addressing instances where students may
share a home device with others, the device was too old or slow to function
properly, student owned devices did not have the appropriate security in place to
protect students during remote learning, and operationally the District could not
access personally owned devices to provide the thousands of technical questions
and issues students faced during remote learning. Based on these experiences,
unmet need was defined broadly, but within allowed parameters and inventory
records were kept, albeit not perfectly. The District did create and distribute an
unmet needs survey. However, due to circumstances surrounding the pandemic,
not all families were able to complete the survey. Requests for hotspots also came
through Counselors, Principals, and directly from families through phone calls.
We believe that all hotspot services were utilized with the intent to meet the 'unmet
needs' criteria as per our understanding and interpretation of the guidelines. We,
therefore, maintain that our approach was both prudent and compliant with the
spirit of the guidelines and the finding is thus not warranted.
Per the FCC compliance requirements, the District provided the needed
certification during the application process. The awarded funds were spent in
accordance with the guidance provided by the FCC. The State Auditors' Office in
this case is incorrectly applying the compliance requirements and should not issue
an audit finding.
The following guidance from the Federal Communications Commission, titled
“Emergency Connectivity Fund Common Misconceptions”, “Misconception #2: If
schools have returned to in-class instruction for the upcoming school year, they are
not eligible to participate. Answer: This is false. Equipment and services provided to students or school staff who would otherwise lack sufficient access to connected
devices, and/or broadband internet access connection while off campus are eligible
for Emergency Connectivity Fund Support.”
From the Federal Communications Commission Order FCC-CIRC21-93-043021,
question 77: “We think schools are in the best position to determine whether their
students and staff have devices and broadband services sufficient to meet their
remote learning needs, and we recognize that they are making such decisions in the
midst of a pandemic. We, therefore, will not impose any specific metrics or process
requirements on those determinations.” And from question 53: “…we are sensitive
to the need to provide some flexibility during this uncertain time. If those connected
devices were purchased for the purpose of providing students…with devices for offcampus
use consistent with the rules we adopt today, we will not prohibit such oncampus
use.”
SAO did not apply any reasonable measure to reduce questioned costs but did state
that it is likely that at least some of the costs addressed unmet needs, while still
choosing to question all costs. That is clearly out of alignment with the FCC
guidance.
Equipment
The District has a robust inventory system which allows for the tracking and
safeguarding of public assets including the hotspots purchased with federal funds.
However, the District agrees that it did not track federally funded iPads separately
from non-federally funded ones. Going forward the District will ensure federally
funded items are designated as such and are tracked separately.
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. The State Auditor’s Office 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.