The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, procurement, 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: COVID-19 ECF202105559 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $206,910 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 $206,910 in ECF Program funds to purchase laptops for students and school staff. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Allowable activities and costs ECF Program recipients may only seek reimbursement for the eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking reimbursement for eligible equipment and services purchased for use solely at the school or held for future use (e.g., warehousing). Procurement When using ECF Program funds to purchase eligible services and equipment, the Federal Communications Commission (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. 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 did not document its determination of actual unmet need for the equipment provided to students and school staff. Specifically, the District purchased laptops based on its estimate of unmet need, and it requested reimbursement for this purchase totaling $206,910. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student or employee with unmet need. 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. Specifically, the District paid one service provider $206,910 for laptops, and it could not demonstrate compliance with procurement requirements. 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 District staff 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. Procurement The staff member responsible for bidding was on leave when the District purchased the devices. The staff member who made the purchase did not know about the requirements for procuring equipment in accordance with state bid law and District policy. Restricted purpose ? per-location and per-user limitations Staff said they were not aware of the requirement to maintain documentation showing the District 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 and school staff with actual unmet need, it cannot demonstrate compliance with the program?s requirements. Given the nature of the program and circumstances, it is likely that at least some of the equipment the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students? and staff?s actual unmet need means that all costs are unsupported. Since we do not have a reasonable basis for estimating how much of the District?s expenditures are allowable, we are questioning all unsupported costs. Federal regulations require the State Auditor?s Office to report known questioned costs that are greater than $25,000 for each type of compliance requirement. We question costs when we find the District does not have adequate documentation to support expenditures. Procurement Without maintaining documentation showing the procurement method used, 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 laptop 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 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 ? 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 concurs with the auditor. The district will ensure that processes are followed by all purchases going through the district office for approval before purchase. Purchases are now through an online system InformedK12 to help ensure procedures are followed. The district would like to note that this finding is because the district did not go out to bid for the student Chromebooks. The bid step was overlooked due to the quick turnaround to purchase devices to make sure all students had Chromebooks for the pandemic. 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 grant requirements. As is our practice and audit standards require, we will review the status of this finding during our next audit. We value our partnership with the District in striving for transparency in public service Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 47 CFR Part 54, Universal Service, Subpart Q, Emergency Connectivity Fund, describes the ECF Program requirements.
The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, procurement, 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: COVID-19 ECF202105559 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $206,910 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 $206,910 in ECF Program funds to purchase laptops for students and school staff. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Allowable activities and costs ECF Program recipients may only seek reimbursement for the eligible devices and services provided to students and staff with unmet need. Recipients are prohibited from seeking reimbursement for eligible equipment and services purchased for use solely at the school or held for future use (e.g., warehousing). Procurement When using ECF Program funds to purchase eligible services and equipment, the Federal Communications Commission (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. 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 did not document its determination of actual unmet need for the equipment provided to students and school staff. Specifically, the District purchased laptops based on its estimate of unmet need, and it requested reimbursement for this purchase totaling $206,910. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student or employee with unmet need. 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. Specifically, the District paid one service provider $206,910 for laptops, and it could not demonstrate compliance with procurement requirements. 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 District staff 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. Procurement The staff member responsible for bidding was on leave when the District purchased the devices. The staff member who made the purchase did not know about the requirements for procuring equipment in accordance with state bid law and District policy. Restricted purpose ? per-location and per-user limitations Staff said they were not aware of the requirement to maintain documentation showing the District 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 and school staff with actual unmet need, it cannot demonstrate compliance with the program?s requirements. Given the nature of the program and circumstances, it is likely that at least some of the equipment the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students? and staff?s actual unmet need means that all costs are unsupported. Since we do not have a reasonable basis for estimating how much of the District?s expenditures are allowable, we are questioning all unsupported costs. Federal regulations require the State Auditor?s Office to report known questioned costs that are greater than $25,000 for each type of compliance requirement. We question costs when we find the District does not have adequate documentation to support expenditures. Procurement Without maintaining documentation showing the procurement method used, 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 laptop 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 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 ? 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 concurs with the auditor. The district will ensure that processes are followed by all purchases going through the district office for approval before purchase. Purchases are now through an online system InformedK12 to help ensure procedures are followed. The district would like to note that this finding is because the district did not go out to bid for the student Chromebooks. The bid step was overlooked due to the quick turnaround to purchase devices to make sure all students had Chromebooks for the pandemic. 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 grant 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.