The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, 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: ECF202200831
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $841,180
Prior Year Audit Finding: Yes, Finding 2022-01
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 2023, the District spent $841,180 in ECF Program funds to purchase 2,000 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 must 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 used solely at the school or held for future use (i.e., warehousing).
Restricted purpose – unmet need
When submitting applications to the Federal Communications Commission (FCC), schools only had to provide an estimate of their students’ and staff’s unmet needs. 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.
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 school staff. Specifically, the District purchased laptops based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $841,180. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student or employee with unmet need.
We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance.
The issue was reported as a finding in the prior audit.
Cause of Condition
Allowable activities and costs/restricted purpose – unmet need
District officials did not know about the requirements 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.
The District received a finding over this issue in the prior audit, but had already purchased these laptops and requested reimbursement before that finding was issued.
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.
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 provided to students and staff with unmet need, and maintain documentation demonstrating compliance.
District’s Response
The Eastmont School District respectfully does not concur with the finding regarding our internal controls for ensuring compliance with allowable activities, costs, and restricted purpose requirements in regard to the Emergency Connectivity Funds.
The District has completed the necessary corrective actions by revising our board policies and procedures to ensure compliance with allowable activities, costs, and restricted purpose requirements. However, these changes were not implemented by the end of the 2022-2023 school year because the audit for the 2021-2022 school year had not been completed until the 2023-2024 school year. Consequently, the District was unable to implement the new process until the audit status for 2021 2022 was confirmed, ensuring that the corrected steps were compliant
The District did not receive any specific guidance from the State Auditor's Office on how to properly document the unmet need identified in the audit. Despite our efforts to seek assistance and clarification, the lack of direction hindered our ability to address the finding promptly.
The necessary changes to our policies and procedures required approval from the Board of Directors. This approval, governed by a strict process, was not obtained until December 2023. We began working on the changes immediately following the previous audit but were constrained by the formal approval process.
The District is disappointed that despite our efforts to comply, the State Auditor's Office issued another finding for the 2022-2023 audit based on a differing opinion on the "unmet" need. This repetition of findings, despite our documented efforts and changes, suggests a misalignment in expectations and understanding.
The audit for the 2022-2023 school year consumed significant resources and taxpayer dollars, which we believe could have been better utilized. The time spent reviewing our information, which was largely unchanged except for the updated policy and procedure, appears redundant. We had asked for documentation and guidance from the State Auditor's Office but did not receive the necessary support or compliance assistance.
The District is committed to maintaining high standards of accountability and compliance. We regret that our efforts to address the audit findings were not deemed timely enough and that this has resulted in an additional finding. We will continue to enhance our processes and seek clearer communication and guidance from the State Auditor's Office to ensure that future audits are more aligned with our compliance efforts.
We hope this response provides a clear understanding of our position and the steps we have taken.
Auditor’s Remarks
We value our partnership with the District in striving for transparency in public service. When auditing federal programs of any kind, governments must provide documentation to substantiate that they met the award requirements. As is our practice and audit standards require, we will review the status of this finding during our next audit. SAO continues to advocate for clear, timely guidance from federal agencies.
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
Title 47 CFR Part 54, Universal Service, Subpart Q, Emergency Connectivity Fund, describes the ECF Program requirements.