2022-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment, procurement, and restricted purpose requirements. See Schedule of Findings and Questioned Costs for chart/table. Background The Emergency Connectivity Fund (ECF) Program provides funding to meet the needs of students and school staff who would otherwise lack access to connected devices and broadband connections sufficient to engage in remote learning. This is referred to as ?unmet need.? In fiscal year 2022, the District spent $472,800 in ECF Program funds to purchase tablet computers for students. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Allowable activities and costs ECF Program recipients must only seek reimbursement for the eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking and receiving reimbursement for eligible equipment 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. Procurement When using ECF Program funds to purchase eligible services and equipment, the FCC requires recipients to comply with all applicable state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. State law and District policy allow for the purchase of goods and services from contracts awarded by another government or group of governments (i.e., a public agency) via an interlocal agreement (RCW 39.34.030). 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 equipment 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 eligible equipment provided to students. Specifically, the District purchased tablet computers based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $472,800. However, the District did not maintain documentation showing it provided each tablet computer paid with program funds to a student or employee with unmet need. Equipment Although the District maintains asset inventories, our audit found its internal controls were ineffective for ensuring it identified and tracked specific equipment charged to the ECF Program, and it could not demonstrate compliance with federal requirements. Procurement Our audit found the District?s internal controls were ineffective for ensuring it followed state law and its own policy when procuring equipment that it charged to the ECF Program. The District paid one contractor $472,800 to purchase tablets using a purchasing cooperative. However, the District could not demonstrate compliance with state law. 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-location and 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 or connection per user and location. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Allowable activities and costs/restricted purpose ? unmet need Although employees in the District?s Finance Department knew that another department received an ECF Program award, they said they did not know the program was federally funded and, therefore, were unaware of all its regulations. Further, they did not know about the requirement to request reimbursement only for actual unmet need, and thought the estimate of unmet need provided during the application process was sufficient to comply with this requirement. Equipment Staff said they did not know the District needed to identify specific pieces of equipment as federally funded at the time it requested reimbursement. Procurement Staff said they did not know the program was federally funded and, therefore, were unaware of all the requirements. Additionally, they did not know that the District?s use of the purchasing cooperative?s contract did not meet all the requirements of state law. Restricted purpose ? per-location and per-user limitations Staff said they did not know the District needed to maintain documentation showing it only provided one device per student and employee. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose ? unmet need Because the District did not have documentation supporting whether it provided eligible equipment to students with actual unmet need, it cannot demonstrate compliance with the program?s requirements. Given the nature of the program and circumstances, it is likely that at least some of the equipment the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students? 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 asset and service inventory records that identify equipment 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. Procurement Without maintaining adequate documentation, the District cannot demonstrate it complied with procurement requirements. Additionally, it cannot be sure all interested service providers had the opportunity to bid and that it obtained the lowest price for the tablet purchases. 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 device or connection per user and location. Recommendation We recommend the District work with the granting agency to determine audit resolution. We further recommend the District establish and follow internal controls to ensure staff fully understand the requirements for ECF awards. Specifically, the District should: ? Request reimbursement only for eligible equipment and services provided to students and staff with unmet need, and maintain documentation demonstrating compliance ? Maintain documentation showing it submitted reimbursement for eligible equipment ? Identify federally funded equipment and maintain inventories that track the use of equipment paid with ECF Program funds ? Comply with state law and its own policy when procuring goods and services paid with ECF Program funds, and keep documentation supporting the procurement methods it used ? 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 purchased 1800 iPads and used the ECF reimbursement to cover a portion of the cost. These iPads were purchased to support K-2nd grade students in the event the District moved to remote learning. Some iPads were distributed to students while others were on carts used in classrooms. 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. Additionally, students require access to curriculum and supplemental resources through District licenses that are not available on personal devices without purchasing specific aps. Based on these experiences, unmet need was defined broadly, but within allowed parameters and inventory records were kept, albeit not perfectly. While not every iPad was individually allocated to staff members or students, ECF paid for only a portion of those purchased. A portion of these iPads, which were paid for with other funds, was instead designated to carts for usage within our schools. This strategic decision allowed us to ensure devices were ready and available for immediate distribution if a return to remote learning was required. It's crucial to note that these devices weren't merely "spares." Each school location had an additional inventory for that purpose. Instead, these cart iPads were part of our agile strategy to ensure uninterrupted learning, ready to meet the 'unmet needs' of students at any given moment. We believe that all iPads ordered 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. Devices for remote learning could also be used at school. During the pandemic in Washington State, we experienced times when classrooms, schools and or districts were closed by health department and state regulations because of outbreaks. Districts had to be prepared to support remote learning each day with constantly changing guidance on who was allowed to be in person. 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 off-campus use consistent with the rules we adopt today, we will not prohibit such on-campus use.? SAO did not apply any reasonable measure to reduce questioned costs but did state they know some of the costs are reasonable, 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 iPads 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. Procurement The finding also states the District?s internal controls were ineffective for ensuring we followed state law and policies when procuring equipment due to using a bid that met federal requirements from the OETC, a cooperative that the district has used since 2020. All due diligence backup for bid award and compliance was provided to support utilization of the OETC contract. OETC represents a consortium of governments and has since their inception, including K-12 schools, educational service districts, higher education, government agencies, and libraries. As a non-profit consortium of governments, OETC leverages the buying power of educational entities to procure quality technology at competitive prices, making it a reliable and widely used source across educational institutions. Auditor?s Remarks The State Auditor?s Office is sympathetic to the significant challenges the District faced during the COVID-19 pandemic, and deeply respects its commitment to student learning despite these challenges. SAO knows that in many cases, governments across Washington received significant pandemic-era federal funds without also receiving clear guidance on how to use them. Then, and now, SAO continues to advocate for clear, timely guidance from federal agencies to make sure Washington governments are not put in a difficult position at audit time. However, when auditing federal programs of any kind, governments must provide documentation to substantiate that they met the award requirements. As is our practice and audit standards require, we will review the status of this finding during our next audit. We value our partnership with the District in striving for transparency in public service. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303 Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 47 CFR Part 54, Universal Service, Subpart Q, Emergency Connectivity Fund, describes the ECF Program requirements.
2022-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment, procurement, and restricted purpose requirements. See Schedule of Findings and Questioned Costs for chart/table. Background The Emergency Connectivity Fund (ECF) Program provides funding to meet the needs of students and school staff who would otherwise lack access to connected devices and broadband connections sufficient to engage in remote learning. This is referred to as ?unmet need.? In fiscal year 2022, the District spent $472,800 in ECF Program funds to purchase tablet computers for students. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Allowable activities and costs ECF Program recipients must only seek reimbursement for the eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking and receiving reimbursement for eligible equipment 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. Procurement When using ECF Program funds to purchase eligible services and equipment, the FCC requires recipients to comply with all applicable state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. State law and District policy allow for the purchase of goods and services from contracts awarded by another government or group of governments (i.e., a public agency) via an interlocal agreement (RCW 39.34.030). 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 equipment 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 eligible equipment provided to students. Specifically, the District purchased tablet computers based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $472,800. However, the District did not maintain documentation showing it provided each tablet computer paid with program funds to a student or employee with unmet need. Equipment Although the District maintains asset inventories, our audit found its internal controls were ineffective for ensuring it identified and tracked specific equipment charged to the ECF Program, and it could not demonstrate compliance with federal requirements. Procurement Our audit found the District?s internal controls were ineffective for ensuring it followed state law and its own policy when procuring equipment that it charged to the ECF Program. The District paid one contractor $472,800 to purchase tablets using a purchasing cooperative. However, the District could not demonstrate compliance with state law. 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-location and 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 or connection per user and location. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Allowable activities and costs/restricted purpose ? unmet need Although employees in the District?s Finance Department knew that another department received an ECF Program award, they said they did not know the program was federally funded and, therefore, were unaware of all its regulations. Further, they did not know about the requirement to request reimbursement only for actual unmet need, and thought the estimate of unmet need provided during the application process was sufficient to comply with this requirement. Equipment Staff said they did not know the District needed to identify specific pieces of equipment as federally funded at the time it requested reimbursement. Procurement Staff said they did not know the program was federally funded and, therefore, were unaware of all the requirements. Additionally, they did not know that the District?s use of the purchasing cooperative?s contract did not meet all the requirements of state law. Restricted purpose ? per-location and per-user limitations Staff said they did not know the District needed to maintain documentation showing it only provided one device per student and employee. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose ? unmet need Because the District did not have documentation supporting whether it provided eligible equipment to students with actual unmet need, it cannot demonstrate compliance with the program?s requirements. Given the nature of the program and circumstances, it is likely that at least some of the equipment the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students? 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 asset and service inventory records that identify equipment 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. Procurement Without maintaining adequate documentation, the District cannot demonstrate it complied with procurement requirements. Additionally, it cannot be sure all interested service providers had the opportunity to bid and that it obtained the lowest price for the tablet purchases. 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 device or connection per user and location. Recommendation We recommend the District work with the granting agency to determine audit resolution. We further recommend the District establish and follow internal controls to ensure staff fully understand the requirements for ECF awards. Specifically, the District should: ? Request reimbursement only for eligible equipment and services provided to students and staff with unmet need, and maintain documentation demonstrating compliance ? Maintain documentation showing it submitted reimbursement for eligible equipment ? Identify federally funded equipment and maintain inventories that track the use of equipment paid with ECF Program funds ? Comply with state law and its own policy when procuring goods and services paid with ECF Program funds, and keep documentation supporting the procurement methods it used ? 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 purchased 1800 iPads and used the ECF reimbursement to cover a portion of the cost. These iPads were purchased to support K-2nd grade students in the event the District moved to remote learning. Some iPads were distributed to students while others were on carts used in classrooms. 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. Additionally, students require access to curriculum and supplemental resources through District licenses that are not available on personal devices without purchasing specific aps. Based on these experiences, unmet need was defined broadly, but within allowed parameters and inventory records were kept, albeit not perfectly. While not every iPad was individually allocated to staff members or students, ECF paid for only a portion of those purchased. A portion of these iPads, which were paid for with other funds, was instead designated to carts for usage within our schools. This strategic decision allowed us to ensure devices were ready and available for immediate distribution if a return to remote learning was required. It's crucial to note that these devices weren't merely "spares." Each school location had an additional inventory for that purpose. Instead, these cart iPads were part of our agile strategy to ensure uninterrupted learning, ready to meet the 'unmet needs' of students at any given moment. We believe that all iPads ordered 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. Devices for remote learning could also be used at school. During the pandemic in Washington State, we experienced times when classrooms, schools and or districts were closed by health department and state regulations because of outbreaks. Districts had to be prepared to support remote learning each day with constantly changing guidance on who was allowed to be in person. 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 off-campus use consistent with the rules we adopt today, we will not prohibit such on-campus use.? SAO did not apply any reasonable measure to reduce questioned costs but did state they know some of the costs are reasonable, 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 iPads 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. Procurement The finding also states the District?s internal controls were ineffective for ensuring we followed state law and policies when procuring equipment due to using a bid that met federal requirements from the OETC, a cooperative that the district has used since 2020. All due diligence backup for bid award and compliance was provided to support utilization of the OETC contract. OETC represents a consortium of governments and has since their inception, including K-12 schools, educational service districts, higher education, government agencies, and libraries. As a non-profit consortium of governments, OETC leverages the buying power of educational entities to procure quality technology at competitive prices, making it a reliable and widely used source across educational institutions. Auditor?s Remarks The State Auditor?s Office is sympathetic to the significant challenges the District faced during the COVID-19 pandemic, and deeply respects its commitment to student learning despite these challenges. SAO knows that in many cases, governments across Washington received significant pandemic-era federal funds without also receiving clear guidance on how to use them. Then, and now, SAO continues to advocate for clear, timely guidance from federal agencies to make sure Washington governments are not put in a difficult position at audit time. However, when auditing federal programs of any kind, governments must provide documentation to substantiate that they met the award requirements. As is our practice and audit standards require, we will review the status of this finding during our next audit. We value our partnership with the District in striving for transparency in public service. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303 Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 47 CFR Part 54, Universal Service, Subpart Q, Emergency Connectivity Fund, describes the ECF Program requirements.