Finding 11953 (2022-003)

Material Weakness
Requirement
ABIN
Questioned Costs
$1
Year
2022
Accepted
2024-02-06

AI Summary

  • Core Issue: The District lacked adequate internal controls to ensure compliance with federal requirements for allowable activities, procurement, and restricted purposes related to the Emergency Connectivity Fund.
  • Impacted Requirements: The District failed to document actual unmet needs for reimbursements, did not follow procurement laws, and did not track device distribution per FCC limitations.
  • Recommended Follow-Up: Implement training for staff on compliance requirements, establish robust documentation processes, and enhance internal controls to monitor procurement and reimbursement practices.

Finding Text

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Kent School District No. 415 September 1, 2021 through August 31, 2022 2022-003 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: CPF Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: Prior Year Audit Finding: $9,289,675 N/A 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 $9,405,485 in ECF Program funds to purchase tablets, mobile hotspots, routers, and broadband services 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 and receiving reimbursement for eligible equipment and services purchased for use solely at the school or held for future use (i.e., 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 procurement laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. State law and District policy allows for the purchase of goods and services from contracts awarded by another government or group of governments via an interlocal agreement or contract, often referred to as “piggybacking.” If entering into such an agreement, the District must confirm the awarding entity followed all procurement laws and regulations applicable to the awarding entity when selecting the service provider. 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-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. Description of Condition Allowable activities and costs/restricted purpose – unmet need The District estimated unmet need for eligible equipment and services when it applied for ECF Program funds. However, our audit found the District’s internal controls were ineffective for ensuring it documented the determination of actual unmet need and only requested reimbursement for equipment and services provided to students and school staff. Specifically, the District purchased tablet computers, Wi-Fi hotspots and routers, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $9,405,845. However, the District did not maintain documentation showing it provided each tablet computer, Wi-Fi hotspot, and router 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 contractor $9,062,998 for tablet computers using a purchasing cooperative. However, the District did not maintain documentation showing it verified the awarding entity met the most restrictive procurement practices applicable to that entity. The District also paid two contractors a total of $254,768 for mobile hotspots, but did not obtain quotes from three or more qualified sources, as its policy requires. 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. 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. District staff who were authorized to order eligible equipment and services did not know about the required certifications stating that the District was only seeking reimbursement for eligible equipment and/or services provided to students or employees with unmet need. Procurement Staff did not know they needed to obtain procurement documentation from the awarding agency to verify the process complied with procurement requirements before purchasing. Staff also did not know they needed to retain documentation to support the procurement history of the mobile hotspots purchased from the two contractors. Restricted purpose – per-location and per-user limitations Staff said they did not know the District could not provide more than one device and/or connection 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 and services 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 and services 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 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 tablet purchases and wireless services. Restricted purpose – per-location and per-user limitations Because the District provided some students and staff more than one device and received reimbursement for them, it did not comply with the FCC’s requirement. As noted in the allowable activities and costs section above, we are questioning the costs for these devices and services. 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 or 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 showing it complied with procurement requirements • Provide no more than one device per student and staff in compliance with the ECF Program’s requirements District’s Response It is KSD’s position that all expenditures and actions associated with our implementation of the Emergency Connectivity Fund (ECF) during the Pandemic were entirely consistent with the spirit and intent of this emergency federal program. KSD’s understanding is that a vast majority of districts audited in this program are receiving findings, and that state officials are in discussions with the Federal Communications Commission (FCC) to achieve greater regularity clarity moving forward. The district appreciates the State Auditor’s acknowledgement in a June 5th Seattle Times editorial that greater clarity would have prevented nearly all of the issues confronting school districts in this most recent audit cycle. We agree. Under the emergency conditions of the Pandemic, KSD was approved for funding by the Federal Communications Commission (FCC) and mobilized quickly to provide the devices necessary to equip students and staff for an emergency remote or hybrid program of instruction. Based on the instructional program design, the district provided devices to students and staff who needed them based on a number of factors, including whether they had a device to begin with, or whether their existing device was up to technical standards, including whether it had all required software and security features to support the program. The district acknowledges that it is not able to produce the time-stamped documentation required by SAO to verify the district’s process for determining “unmet student need”; doing so would have apparently required a student-bystudent, staff-by-staff signature certification process during a Pandemic period where such methods would seem highly impractical. The district also acknowledges that it did not request and retain the competitive bid documentation from the purchasing cooperative used to procure some of the devices. Finally, it acknowledges the limitations of our asset management inventory to prove, at a historical moment in time, that we did not have multiple devices allocated to one student, or any devices in temporary inventory that were funded with these ECF funds. As a policy, KSD only allocates multiple devices to a student or staff person when one is temporarily dysfunctional. The ECF audit findings are an issue of statewide concern. We join the voices from districts across the state asserting that more intergovernmental coordination could have greatly reduced unintended impacts on school districts during this audit cycle. 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.

Corrective Action Plan

Finding ref number: 2022-003 Finding caption: The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, procurement, and restricted purpose requirements. Name, address, and telephone of District contact person: Benjamin Rarick, Associate Superintendent of Finance 12033 SE 256th Kent, WA 98031 Corrective action the auditee plans to take in response to the finding: As of the date of this Report, the district has already made its final claims under the Electronic Connectivity Fund (ECF) Program. Accordingly, the district will await further guidance from the FCC and OSPI to understand what additional steps or corrective actions are necessary by KSD to ensure compliance. Anticipated date to complete the corrective action: October, 2024

Categories

Questioned Costs Procurement, Suspension & Debarment Subrecipient Monitoring

Other Findings in this Audit

  • 11954 2022-002
    Material Weakness
  • 11955 2022-002
    Material Weakness
  • 11956 2022-002
    Material Weakness
  • 11957 2022-002
    Material Weakness
  • 11958 2022-001
    Significant Deficiency Repeat
  • 11959 2022-001
    Significant Deficiency Repeat
  • 11960 2022-001
    Significant Deficiency Repeat
  • 11961 2022-001
    Significant Deficiency Repeat
  • 11962 2022-001
    Significant Deficiency Repeat
  • 11963 2022-001
    Significant Deficiency Repeat
  • 11964 2022-001
    Significant Deficiency Repeat
  • 588395 2022-003
    Material Weakness
  • 588396 2022-002
    Material Weakness
  • 588397 2022-002
    Material Weakness
  • 588398 2022-002
    Material Weakness
  • 588399 2022-002
    Material Weakness
  • 588400 2022-001
    Significant Deficiency Repeat
  • 588401 2022-001
    Significant Deficiency Repeat
  • 588402 2022-001
    Significant Deficiency Repeat
  • 588403 2022-001
    Significant Deficiency Repeat
  • 588404 2022-001
    Significant Deficiency Repeat
  • 588405 2022-001
    Significant Deficiency Repeat
  • 588406 2022-001
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
32.009 Covid-19 - Emergency Connectivity Fund Program $9.29M
10.553 School Breakfast Program $1.59M
84.367 Improving Teacher Quality State Grants $1.16M
10.555 National School Lunch Program $924,422
84.334 Gaining Early Awareness and Readiness for Undergraduate Programs $616,835
84.027 Special Education_grants to States $600,302
84.424 Student Support and Academic Enrichment Program $468,071
84.048 Career and Technical Education -- Basic Grants to States $262,164
93.566 Refugee and Entrant Assistance_state Administered Programs $228,790
84.365 English Language Acquisition State Grants $227,813
10.582 Fresh Fruit and Vegetable Program $208,558
84.173 Special Education_preschool Grants $132,492
84.060 Indian Education_grants to Local Educational Agencies $91,836
10.559 Summer Food Service Program for Children $90,473
84.425 Covid 19 - Education Stabilization Fund $72,910
84.010 Title I Grants to Local Educational Agencies $23,829
10.558 Child and Adult Care Food Program $14,278
84.173 Covid 19 - Special Education_preschool Grants $9,312
10.665 Schools and Roads - Grants to States $8,428
10.649 Covid 19 - Pandemic Ebt Administrative Costs $5,814
12.U01 Jrotc Program $2,103