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: 145539
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $193,440
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 $193,440 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).
Restricted Purpose – Unmet Need
When submitting applications to the FCC (Federal Communications Commission), 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 $193,440. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student with unmet need.
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.
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 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.
Restricted Purpose – Per-Location and Per-User Limitations
Because the District provided more than one device per student 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.
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
• 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
The District acknowledges the recommendations from the State Auditor’s Office. In good faith, the District followed guidance from the FCC in administering the ECF grant. This grant was unique in that the FCC paid the vendor directly for the chrome books purchased and it did not run through the business office as part of the typical procurement process. The District would like to emphasize that all devices are accounted for and will be used for the benefit of students in accordance with the intent of the grant.
Auditor’s Remarks
We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue during our next audit.
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.