2023-002 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment 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: ECF2190018221, ECF21990018404
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $244,269
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 $375,768 in ECF Program funds to purchase laptops, tablet computers and Wi-Fi switches and antennas to install internet on its school buses 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 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.
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 and tablet computers based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $244,269. However, the District did not maintain documentation showing it provided each laptop and tablet computer paid with program funds to a student or employee with unmet need.
Equipment
The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included in the inventories all required elements necessary to demonstrate compliance with federal requirements. Specifically, the District did not include:
• Names of the students or employees provided or responsible for 85 laptops
• The date that it placed 93 tablets in service
• The name of the employee provided or responsible for the 27 bus Wi-Fi routers
• All required information for the 27 bus Wi-Fi switches and antennas
• The date that it took one tablet, that was delivered broken, out of service
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
The District conducted a survey in the Spring of 2020 and identified 442 students in need of laptops. However, when distributing the laptops, District staff did not use the survey results and instead assigned laptops to students in fifth and ninth grades to maintain operational efficiency and to limit how often District staff would need to reassign laptops. Additionally, the District purchased tablet computers for its elementary schools after consulting with school staff and estimating how many tablets they should assign at each school.
District staff did not know about the requirement to request reimbursement and assign equipment only to the specific students and staff with unmet need.
Equipment
The District has a process to record most of the elements the program requires as it purchases and receives equipment. The District also allows schools to maintain their own inventory systems and independently track laptops and tablets. However, District and school staff were unaware of all specific information the program required districts to track for equipment they purchased with federal funds.
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 most 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 and therefore questioning the District’s purchase of 450 laptops and 150 tablet computers.
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 and services.
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
District’s Response
Sultan School District does not concur with the audit findings regarding unmet need. The district used devices to support students in a manner we feel is consistent with the guidelines established by the FCC.
Initially, the district had no devices to send home with students, relying instead on a Remote Desktop Technology model that only functioned within the district's wireless network. To facilitate off-campus learning and ensure a safe online experience, the district determined that the unmet need was 100%. A plan to purchase 400-450 student computers annually over three years was accelerated to a single purchase of 1,300 laptops utilizing a lease with an annual payment over 3 years. Despite this purchase, unmet need remained around 40%, leading to a request for 450 laptops and 200 iPads with ECF funds. The district notes that after fulfilling this need, two additional rounds of ECF funding were not accessed as the unmet need had been addressed.
On the issue of equipment inventory compliance, though all devices are accounted for, the district acknowledges missing a caretaker name for 85 laptops, they were assigned to a location, for example to the library rather than the librarian. The district also notes that for 93 tablets, the school year, rather than the exact date, was documented along with the delivery date.
We disagreed on the audit finding regarding bus Wi-Fi routers, noting that the items were purchased and installed as a package and that the switches and antennas did not have a separate serial number to document, the district documented all items as a single ‘package’.
In response to the cause of condition and equipment distribution findings, the district clarified that after the preliminary survey, we addressed much of the unmet need with district funds before requesting ECF funds. Assigning computers to 5th and 9th graders was aimed at operational efficiency and sustainability in coordination with the absolute unmet need. Laptops issued in the 21-22 school year addressed unmet needs and were reissued appropriately in the 22-23 school year to continue to address unmet need in lower grade levels. The district had to purchase higher-end laptops due to supply chain issues, these laptops were more suitable for the specific grade levels (5th and 9th).
The district agreed that staff were unaware of the requirement to assign equipment to specific students and staff identified with unmet need, noting that laptops were assigned to buildings, classrooms, or libraries, and not directly to caretakers in those spaces. Tablets were tracked in various systems with some missing exact checkout dates, but the district did record delivery dates and the school year they were checked out.
The district does not concur with the audit's conclusion that they could not demonstrate compliance with the program's requirements, the district maintains that their unmet need was evident for all students and that all district dedicated funds were exhausted before accessing ECF funds.
Finally, the district acknowledged that proper asset inventory records were not maintained as per FCC requirements and updated their inventory records to include all required information. However, the district did follow state guidelines, which fell short of FCC requirements. To comply with FCC inventory requirements, we have since assigned loaner laptops to a caretaker. Additionally, for the Bus WiFi, we have updated our inventory records to reflect the ‘package’ components to include the switch and antenna. In addition to the remedies we’ve already applied, for future ECF grants, the district agrees to establish and follow internal controls to ensure compliance with the awards – specifically ensuring we update our inventory systems when state and federal standards may differ.
We appreciate the auditor’s work and diligence.
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.