Woodland School District No. 404 September 1, 2021 through August 31, 2022 2022-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment, 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: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $213,157 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 $213,157 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 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). 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 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. 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 requested reimbursement only for eligible equipment provided to students and school staff with a documented unmet need. Specifically, the District purchased laptops, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $213,157. However, the District did not maintain documentation showing it provided each laptop 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 included all required elements in the inventories. Specifically, the District could not identify all laptops purchased with ECF Program funds. 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 vendor $213,157 for laptops, but did not perform a competitive, formal sealed bidding process, as its policy required. 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. District staff who were authorized to order eligible equipment and services did not review and sign the funding application or the reimbursement requests, and did not know about the required certifications stating that the District was only seeking reimbursement for eligible equipment provided to students or employees with unmet need. Equipment The District?s IT Department did not track laptops purchased with program funds separately from other District-funded devices, and did not have procedures in place to ensure its asset listing contained all the required information. Procurement Staff did not know that the District?s policy required a competitive, formal sealed bidding process for technology purchases more than $75,000, and thought that obtaining three verbal or written quotes was sufficient to comply with procurement requirements. Restricted purpose ? per-location and per-user limitations The IT Department did not track laptops purchased with program funds separately from other devices. Also, staff said they were not aware of the requirement to maintain documentation showing the District only provided 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 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. Equipment Without maintaining proper asset and service inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded equipment and services. Procurement Because the District did not follow the competitive, formal sealed bidding process, as required by its own policy, 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 retain adequate 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 inventories that include all required elements to track the use of equipment and services paid with ECF Program funds ? Comply with state law and its own policy when procuring goods and services paid with ECF Program funds ? Monitor to confirm it provides no more than one device per student and employee, and no more than one broadband connection per location, in compliance with the ECF Program?s requirements District?s Response The district has received E-Rate funds for many years and was not aware that the ECF funds were different from those funds received in the past. The annual instructions issued from the Office of Superintendent of Public Instruction did not identify the ECF program as being different from the usual E-Rate funds received so they were not included as such. I received notification from OSPI on May 12, 2023 that a new account code would be added and that the ECF funds were considered a direct award from the FCC. When the ECF program was first announced the district was not going to participate as we did not believe we had an unmet need. We later received notification from our contractor that the FCC had clarified the regulations and if we have a policy that shows we only allow district owned and managed devices on our network and we can estimate how many devices (staff and student) would be needed if the school or some schools went back to remote learning, we would qualify for funding. Based on this information and a review of our policies, we applied for and received the funds. The finding states that we do not have internal controls in place to ensure we have all required elements for our inventories. The vendor was not able to provide serial numbers for this order but we were able to back into the dates the Chromebooks were entered into inventory and accounted for all 600 student devices and the students to which they were assigned. This also shows that we met the restricted purpose of one device per student or staff member. The district received 3 quotes for the large order, but did not issue a sealed bid, not understanding that the requirement was for supplies or equipment that were greater than $75,000 in aggregate to require sealed bids. Due to supply issues during Covid only one vendor was able to provide the requested devices in a timely manner. 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.