2022-001 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: ECF202101091 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $1,260,150 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 $1,260,150 in ECF Program funds to purchase 2,500 laptops for students and 500 laptops for 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 must only seek reimbursement for the 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). Restricted purpose ? unmet need When submitting applications to the Federal Communications Commission (FCC), schools only had to provide an estimate of their students? and staff?s unmet needs. 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 eligible equipment provided to students and staff. Specifically, the District purchased laptops, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $1,260,150. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student or employee with unmet need. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition Allowable activities and costs/restricted purpose ? unmet need District officials did not know about the requirements to request reimbursement only for actual unmet need, and they thought the estimate of unmet need provided during the application process was sufficient to comply with this requirement. 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. 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 and staff with unmet need, and maintain documentation demonstrating compliance. District?s Response The District does not concur with the audit finding or the $1.2 million of questioned Costs by the State Auditor's Office. This was during the worldwide pandemic and we believe the appropriate level of reporting would be a management letter because all costs were allowable and devices were only provided to those with unmet need. The audit?s condition states that our internal controls were ineffective for ensuring we documented the determination of actual unmet need and only requested reimbursement for eligible equipment provided to students and staff. Furthermore, District officials did not know about the requirements to request reimbursement only for actual unmet need, and they thought the estimate of unmet need provided during the application process was sufficient to comply with this requirement. The District disagrees with this because the District applied for the funding, and was not required to request reimbursement by using an SPI process. The funds for the purchase of the Chromebooks was directly sent to the vendor, therefore the funds never flowed through the District. Also, during the application process, the District specifically stated that they determined unmet need by replacing 3,000 failing Chromebooks that would allow teachers and students continued access to teaching and learning, and the device could perform to higher standards. If the District did not appropriately determine the unmet need, then why was the funding approved by ECF and sent directly to the vendor? Based on the guidance below, we have spent all funds for allowable costs, and that those costs were reasonable and necessary and for students and staff with unmet needs. Districts were able to determine whether students and staff had unmet needs, and for our district this meant addressing instances where students may have shared a home device with others siblings; the student or staff devices were too old or slow to function properly when running multiple required applications and student owned devices did not have the appropriate security in place to protect students during remote learning especially from unauthorized websites. The district?s technical support could not access personally owned devices to provide for thousands of trouble tickets and support issues students faced during remote learning. The importance of our students using District issued devices was a priority to keep our kids safe. The FCC requires districts to be CIPA compliance when participating in the USAC e-rate program. Providing students with a district-issued device for remote learning allows the district to remain CIPA compliant when filing for e-rate funding. Based on these experiences, unmet need was defined broadly, but within allowed parameters. Due to the necessity for emergency remote learning the District had to equip thousands of students with learning devices and connectivity. The District has an accurate and robust inventory system which allows us to track and safeguard the public assets. Important to note is that during the time of Chromebook distribution, all families were told the District had devices available if there was a need in their home. The district called all families individually to discuss their connectivity needs. Based on that information, the district set up specific times for families to come to their school and pick up materials, and if needed, a device. The FCC stated that ?schools are in the best position to determine whether their students and staff have devices and services sufficient to meet their remote learning needs.? Our district determined that during the checkout process, if a family showed up and specifically asked for a Chromebook, then there was a need within that family. There was no formal documentation, as it was not required by the FCC. From the FCC Report and Order (paragraph 18),? Given the pressing demands on schools, we will not dictate specific data collection requirements, but instead will ask each school or school district to describe how and when they collected the information that they use for the estimates provided in their responses.? SAO reviewed various types of documentation and chose not to accept any documentation presented by the District to even consider reducing questioned costs. The SAO standard of documentation was not provided to the district at any point in time. In fact, guidance on the standard changed between meetings with the SAO, to which we have documentation. The District has internal controls over asset inventory and provided equipment only to students and staff with unmet needs, and all costs were allowable, reasonable and necessary. We look forward to working with the FCC to resolve this finding and we appreciate the guidance that was provided by the FCC, as noted below: The following guidance from the Federal Communications Commission, titled ?Emergency Connectivity Fund Common Misconceptions?, ?Misconception #2: If schools have returned to in-class instruction for the upcoming school year, they are not eligible to participate. Answer: This is false. Equipment and services provided to students or school staff who would otherwise lack sufficient access to connected devices, and/or broadband internet access connection while off campus are eligible for Emergency Connectivity Fund Support.? From the Federal Communications Commission Order FCC-CIRC21-93-043021, question 77: ?We think schools are in the best position to determine whether their students and staff have devices and broadband services sufficient to meet their remote learning needs, and we recognize that they are making such decisions in the midst of a pandemic. We, therefore, will not impose any specific metrics or process requirements on those determinations.? And from question 51: ?...we are sensitive to the need to provide some flexibility during this uncertain time. If those connected devices were purchased for the purpose of providing students...with devices for off-campus use consistent with the rules we adopt today, we will not prohibit such on-campus use.? SAO did not apply any reasonable measure to reduce questioned costs but did state they know that at least some of the equipment addressed unmet needs, while still choosing to question all costs. That is clearly out of alignment with the FCC Guidance. This determination by the SAO is completely absurd. It is not factually based, and appears to be purely their opinion of what they implied was an appropriate measure of unmet needs. They were unable to produce any actual documentation that required us to act in a way other than what we did. Auditor?s Remarks The State Auditor?s Office did consider all documentation provided by the District related to the audit. 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.