2023-001 The District did not have adequate internal controls with allowable activities and costs, equipment and restricted purpose requirement.
Assistance Listing Number and Title: 32.009, COVID-19 – Emergency Connectivity Fund Program
Federal Grantor Name: Federal Communication Commission
Federal Award/Contract Number: WL21-ECF-47101
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $260,866
Prior Year Audit Finding: 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 2023, the District spent $260,866 in ECF Program funds to purchase laptops for students.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program 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 (in other words, 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.
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 documented the determination of actual unmet need and only requested reimbursement for equipment provided to students. Specifically, the District purchased laptops, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $260,866. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student with unmet need.
Equipment
The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for all laptops purchased with ECF Program funds, the District did not include names of the students provided or responsible for the equipment and the dates they used it.
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.
We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance.
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. Further, District staff who were authorized to order eligible equipment 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 asset inventory system did not track when it assigned the ECF-purchased laptops during the school year. As a result, the District was unable to produce adequate documentation to demonstrate all required information was tracked throughout the audit period.
Restricted Purpose – Per-Location and Per-User Limitations
Staff said they were unaware of the requirement to maintain documentation showing it only provided one device per student.
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 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’ 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 Office of the Washington State Auditor 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 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.
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.
Recommendation
We recommend the District work with the awarding 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
• Provide 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
Thank you for your comprehensive recommendations regarding our utilization of ECF Program funds. The district concurs with the finding. We acknowledge the importance of ensuring compliance and accountability in our use of these resources.
Regarding the recommendation to collaborate with the awarding agency for audit resolution, we will promptly initiate communication to address any outstanding issues and work diligently to resolve them in accordance with regulatory requirements.
Additionally, we understand the significance of establishing robust internal controls to safeguard against misuse and ensure adherence to program guidelines. We will take the following actions to strengthen our internal controls:
1. Reimbursement Requests: We will institute a thorough review process to ensure that reimbursement requests are submitted only for eligible equipment and services provided to students and staff with identified unmet need. Documentation demonstrating compliance will be meticulously maintained to facilitate transparency and accountability.
2. Inventory Management: We will enhance our inventory management practices to include all necessary elements for tracking the use of equipment and services procured with ECF Program funds. This will enable us to accurately monitor the allocation and utilization of resources, thereby mitigating the risk of mismanagement or loss.
3. Device and Connection Allocation: To align with the requirements of the ECF Program, we will strictly adhere to the provision of no more than one device per student and employee, as well as no more than one broadband connection per location. This measure will ensure equitable distribution and optimize the impact of the resources allocated.
By implementing these measures, we are committed to upholding the integrity of the ECF Program and maximizing its benefits for our students and staff. We appreciate your guidance and will proactively work towards achieving full compliance with program regulations.
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. The State Auditor’s Office 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, the State Auditor’s Office 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.