2022-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, 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 $755,937 in ECF Program funds to purchase 1,731 laptops for students and 319 laptops for 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 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 (i.e., warehousing). Procurement When using ECF Program funds to purchase eligible equipment, the Federal Communications Commission (FCC) requires recipients to comply with all applicable state or local procurement 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 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 per student or school employee with unmet need. Description of Condition Allowable activities and costs/restricted purpose ? unmet need The District estimated unmet need for eligible equipment when it applied for ECF Program funds. However, our audit found the District?s internal controls were ineffective for ensuring it documented the determination of actual unmet need and only requested reimbursement for equipment provided to students and staff with unmet need. Specifically, the District purchased 2,050 laptops, based on its estimate of unmet need, and requested reimbursement for these purchases totaling $755,937. However, the District did not maintain documentation sufficient to demonstrate 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 when procuring equipment that it charged to the ECF Program. The District paid one contractor $287,960 to purchase laptops through 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 per user and location for its elementary students. 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 misunderstood the unmet need requirement and thought laptops could be purchased in anticipation of potential future remote learning needs. Further, 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 District?s use of the awarding entity?s contract aligned with its interpretation of an allowable vendor for the goods. However, staff did not realize the District?s use of the contract did not meet all the requirements of state law. Restricted purpose ? per-location and per-user limitations Staff did not fully understand the requirement to maintain documentation to demonstrate 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 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 most costs are unsupported. Because of this, we are questioning the District?s purchase of 1,176 laptops used solely in elementary classrooms, and 319 laptops distributed to teachers and staff. 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 The District spent $131,040 of its ECF award to purchase 300 laptops. Without maintaining adequate documentation, the District cannot demonstrate it complied with the procurement requirements. Additionally, it cannot be sure all interested contractors had the opportunity to bid and that it obtained the lowest price for the purchase. 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 understand the requirements for ECF awards and reach out to the granting agency with any questions. 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 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 in compliance with the ECF Program?s requirements District?s Response The Arlington School District does not concur with the audit finding or the questioned costs. When it comes to the determination of ?unmet need?, the highest authority on the matter, the Federal Communication Commission (FCC), issued guidance which repeatedly stated, ?. . . we think that schools are in the best position to determine whether their students and staff have devices . . . sufficient to meet their remote learning needs, and we recognize that they are making such decisions during the pandemic. We, therefore, will not impose any specific metrics or process requirements on those determinations.? In response to the pandemic and the immense complexities of remote learning, the District determined for the 2021-2022 school year, only district owned devices with pre-loaded applications and security would be allowed to connect to the student wireless network and that all students needed to be issued school owned devices, per our Continuity of Operations Plan. School technology department directors have provided a multitude of reasons and explanations that clearly justified why this had to be the case, including but not limited to, access to curriculum and supplemental resources and tools not able to be accessed on personal devices, web filtering for malicious content, software monitoring of content for timely intervention and support for student?s social and emotional health, ability to automatically authenticate student accounts, ability to provide state required testing not allowed on personal devices, and ability for technology staff to provide direct technical support by remote access. In the approved application for ECF funds, we shared we had about 5,400 students enrolled and that 1,750 of the student chrome books were not able to run the latest version of the operating system and could not be used for state assessments or to run current software applications. We requested funding to replace those devices so that all students would have access at school and at home. The district did not `ware-house? the units and there was no intent to hold extra units for later day use. Further, the application shared we had about 630 instructional staff and that 300 of the staff laptops were purchased as far back as 2012 and would not run the latest software or browsers which also limits staff members? ability to support and instruct students. We requested funding to support a portion of the purchase price of replacing those laptops. The application and request were approved. The unmet need at the time of the application and the need at the time the computers were distributed and placed into the hands of students and staff, did not change. During the 2021-22 school year the district was operating under the governor?s mandated state of emergency and very strict guidelines around COVID-19. Conditions were evolving quickly from week to week. Absences reached an all-time high with students and staff frequently forced to adapt to sudden remote learning due to state required exposure quarantines, and mandated positive test isolations. The district had to be ready to shift at any moment to a fully remote learning environment. Before the pandemic, laptops were not set-up for at-home learning scenarios and hundreds were aging out of their life cycle. Having a district issued device was a critical unmet need in the Arlington School District. Further, using them at school gave the ability for them to be used seamlessly for remote learning. The FCC did not exclude or limit them from being used in classrooms, as their guidance also shared that they were sensitive to providing flexibility during this uncertain time, and that if the devices were purchased with students? remote needs in mind consistent with the intent of the rules, they would not prohibit on-campus use. (FCC Order FCC-CIRC21-93-043021, question 53) They further clarified that even if schools had returned to in-class instruction for the coming school year, they were still eligible for ECF support for students or school staff who would?ve otherwise lacked sufficient access to connected devices. The SAO asserts that we did not maintain documentation specific enough to meet their interpretations of the compliance supplement which is issued for the purpose of providing suggested audit practices. However, the highest authority of stated standards for program compliance are set in the establishing rules and the Code of Federal Regulations (CFR) 47 CFR sections 54.1700 et seq. As stated, earlier, the FCC states, ?. . . will not impose any specific metrics or process requirements on those determinations? We consulted with many other districts in the State of Washington who are also receiving similar determinations of audit findings and questioned costs. We disagree with the Auditor?s position on what is sufficient documentation or proof of actions and processes relating to unmet need determinations. We have done a thorough job of tracking the units with appropriately detailed inventory records and placed them in the hands of students and staff with unmet need. The auditors also took exception with procurement for a portion of the funding used for staff laptops. This came as a result of the SAO?s legal team?s analysis concluding in an unfavorable interpretation of the law. The purchasing consortium that was utilized is an extremely reputable long-standing organization which is highly skilled in compliance with procurement laws. They have been providing procurement bid services for many years to schools and higher education entities throughout the region. As a non-profit consortium of governments, they leverage the buying power of educational entities to procure quality technology at competitive prices, making it a reliable and widely used source across educational institutions, while also fully complying with Washington State procurement laws for advertising and more. We would still assert and want our public to know we believe the objectives of the competitive procurement laws and processes were fully honored. The area of the law deemed at issue by the SAO does not invalidate the outcome of the competitive bidding process achieved. The ECF support to meet student needs during the pandemic was absolutely essential. We utilized the ECF support for allowable, reasonable and necessary costs. The District takes it?s compliance with rules and regulations very seriously. Based on the guidance and information that was available to us, and the points outlined above, we strongly assert our approach was both prudent and compliant. We have met the necessary requirements and accomplished the intent of the assistance provided by the FCC. We hold the Washington State Auditor?s Office in high regard and appreciate the work performed by our State Auditors. This pandemic has also been challenging for their Office and teams. However, we do not concur with this finding. We believe it is unwarranted and we are disappointed in their interpretations, especially where such strong and clear rationales from multiple school districts were given to assist them in exercising their professional discretion. 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?s requirements.
2022-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, 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 $755,937 in ECF Program funds to purchase 1,731 laptops for students and 319 laptops for 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 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 (i.e., warehousing). Procurement When using ECF Program funds to purchase eligible equipment, the Federal Communications Commission (FCC) requires recipients to comply with all applicable state or local procurement 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 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 per student or school employee with unmet need. Description of Condition Allowable activities and costs/restricted purpose ? unmet need The District estimated unmet need for eligible equipment when it applied for ECF Program funds. However, our audit found the District?s internal controls were ineffective for ensuring it documented the determination of actual unmet need and only requested reimbursement for equipment provided to students and staff with unmet need. Specifically, the District purchased 2,050 laptops, based on its estimate of unmet need, and requested reimbursement for these purchases totaling $755,937. However, the District did not maintain documentation sufficient to demonstrate 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 when procuring equipment that it charged to the ECF Program. The District paid one contractor $287,960 to purchase laptops through 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 per user and location for its elementary students. 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 misunderstood the unmet need requirement and thought laptops could be purchased in anticipation of potential future remote learning needs. Further, 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 District?s use of the awarding entity?s contract aligned with its interpretation of an allowable vendor for the goods. However, staff did not realize the District?s use of the contract did not meet all the requirements of state law. Restricted purpose ? per-location and per-user limitations Staff did not fully understand the requirement to maintain documentation to demonstrate 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 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 most costs are unsupported. Because of this, we are questioning the District?s purchase of 1,176 laptops used solely in elementary classrooms, and 319 laptops distributed to teachers and staff. 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 The District spent $131,040 of its ECF award to purchase 300 laptops. Without maintaining adequate documentation, the District cannot demonstrate it complied with the procurement requirements. Additionally, it cannot be sure all interested contractors had the opportunity to bid and that it obtained the lowest price for the purchase. 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 understand the requirements for ECF awards and reach out to the granting agency with any questions. 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 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 in compliance with the ECF Program?s requirements District?s Response The Arlington School District does not concur with the audit finding or the questioned costs. When it comes to the determination of ?unmet need?, the highest authority on the matter, the Federal Communication Commission (FCC), issued guidance which repeatedly stated, ?. . . we think that schools are in the best position to determine whether their students and staff have devices . . . sufficient to meet their remote learning needs, and we recognize that they are making such decisions during the pandemic. We, therefore, will not impose any specific metrics or process requirements on those determinations.? In response to the pandemic and the immense complexities of remote learning, the District determined for the 2021-2022 school year, only district owned devices with pre-loaded applications and security would be allowed to connect to the student wireless network and that all students needed to be issued school owned devices, per our Continuity of Operations Plan. School technology department directors have provided a multitude of reasons and explanations that clearly justified why this had to be the case, including but not limited to, access to curriculum and supplemental resources and tools not able to be accessed on personal devices, web filtering for malicious content, software monitoring of content for timely intervention and support for student?s social and emotional health, ability to automatically authenticate student accounts, ability to provide state required testing not allowed on personal devices, and ability for technology staff to provide direct technical support by remote access. In the approved application for ECF funds, we shared we had about 5,400 students enrolled and that 1,750 of the student chrome books were not able to run the latest version of the operating system and could not be used for state assessments or to run current software applications. We requested funding to replace those devices so that all students would have access at school and at home. The district did not `ware-house? the units and there was no intent to hold extra units for later day use. Further, the application shared we had about 630 instructional staff and that 300 of the staff laptops were purchased as far back as 2012 and would not run the latest software or browsers which also limits staff members? ability to support and instruct students. We requested funding to support a portion of the purchase price of replacing those laptops. The application and request were approved. The unmet need at the time of the application and the need at the time the computers were distributed and placed into the hands of students and staff, did not change. During the 2021-22 school year the district was operating under the governor?s mandated state of emergency and very strict guidelines around COVID-19. Conditions were evolving quickly from week to week. Absences reached an all-time high with students and staff frequently forced to adapt to sudden remote learning due to state required exposure quarantines, and mandated positive test isolations. The district had to be ready to shift at any moment to a fully remote learning environment. Before the pandemic, laptops were not set-up for at-home learning scenarios and hundreds were aging out of their life cycle. Having a district issued device was a critical unmet need in the Arlington School District. Further, using them at school gave the ability for them to be used seamlessly for remote learning. The FCC did not exclude or limit them from being used in classrooms, as their guidance also shared that they were sensitive to providing flexibility during this uncertain time, and that if the devices were purchased with students? remote needs in mind consistent with the intent of the rules, they would not prohibit on-campus use. (FCC Order FCC-CIRC21-93-043021, question 53) They further clarified that even if schools had returned to in-class instruction for the coming school year, they were still eligible for ECF support for students or school staff who would?ve otherwise lacked sufficient access to connected devices. The SAO asserts that we did not maintain documentation specific enough to meet their interpretations of the compliance supplement which is issued for the purpose of providing suggested audit practices. However, the highest authority of stated standards for program compliance are set in the establishing rules and the Code of Federal Regulations (CFR) 47 CFR sections 54.1700 et seq. As stated, earlier, the FCC states, ?. . . will not impose any specific metrics or process requirements on those determinations? We consulted with many other districts in the State of Washington who are also receiving similar determinations of audit findings and questioned costs. We disagree with the Auditor?s position on what is sufficient documentation or proof of actions and processes relating to unmet need determinations. We have done a thorough job of tracking the units with appropriately detailed inventory records and placed them in the hands of students and staff with unmet need. The auditors also took exception with procurement for a portion of the funding used for staff laptops. This came as a result of the SAO?s legal team?s analysis concluding in an unfavorable interpretation of the law. The purchasing consortium that was utilized is an extremely reputable long-standing organization which is highly skilled in compliance with procurement laws. They have been providing procurement bid services for many years to schools and higher education entities throughout the region. As a non-profit consortium of governments, they leverage the buying power of educational entities to procure quality technology at competitive prices, making it a reliable and widely used source across educational institutions, while also fully complying with Washington State procurement laws for advertising and more. We would still assert and want our public to know we believe the objectives of the competitive procurement laws and processes were fully honored. The area of the law deemed at issue by the SAO does not invalidate the outcome of the competitive bidding process achieved. The ECF support to meet student needs during the pandemic was absolutely essential. We utilized the ECF support for allowable, reasonable and necessary costs. The District takes it?s compliance with rules and regulations very seriously. Based on the guidance and information that was available to us, and the points outlined above, we strongly assert our approach was both prudent and compliant. We have met the necessary requirements and accomplished the intent of the assistance provided by the FCC. We hold the Washington State Auditor?s Office in high regard and appreciate the work performed by our State Auditors. This pandemic has also been challenging for their Office and teams. However, we do not concur with this finding. We believe it is unwarranted and we are disappointed in their interpretations, especially where such strong and clear rationales from multiple school districts were given to assist them in exercising their professional discretion. 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?s requirements.