2022-002 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: ECF2190003531 ECF2190003532 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $563,021 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 $563,021 in ECF Program funds to purchase laptops and Wi-Fi hotspot services for students. 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). 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 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 and services when it applied for ECF Program funds. However, our audit found the District did not document its determination of actual unmet need for the equipment provided to students. Specifically, the District purchased laptops and Wi-Fi hotspots services, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $563,021. However, the District did not maintain documentation showing it provided equipment paid with program funds to a student or employee 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 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 The District experienced turnover in the position responsible for managing this program, and current staff could not locate records supporting actual unmet need. Restricted purpose ? per-location and per-user limitations Staff said they did not know about 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 and services 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 and services 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 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. 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 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 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 Chehalis School District does not concur with the audit finding or with the questioned costs. The audit finding addresses documentation/inventory issues. Funds were not misused. 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. The District does agree that internal controls and processes could be improved; however, this was during the pandemic. Our efforts were geared, most importantly, toward the health and safety of students and families. 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 description of condition states that ?The District estimated unmet need for eligible equipment and services when it applied for Emergency Connectivity Fund (ECF) Program funds. However, our audit found the District did not document its determination of actual unmet need for the equipment provided to students. Specifically, the District purchased chromebooks and Wi-Fi hotspots services, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $563,021. However, the District did not maintain documentation showing it provided equipment paid with program funds to a student or employee with unmet need.? And additionally, ?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.? Based on the guidance below, we have spent all funds for allowable costs and those costs were reasonable and necessary and for students with unmet needs. Districts were able to determine whether students had unmet needs, and for our district this meant addressing instances where students may share a home device with others, the device was too old or slow to function properly, student owned devices did not have the appropriate security in place to protect students during remote learning, and operationally the District could not access personally owned devices to provide the thousands of technical questions and issues students faced during remote learning. Based on these experiences, unmet need was defined broadly, but within allowed parameters. Inventory records were kept, albeit, not perfectly in the case of our elementary aged students. Devices for remote learning could also be used at school. During the pandemic in Washington State we experienced times when classrooms, schools and or districts were closed by health department and state regulations because of outbreaks. Districts had to be prepared to support remote learning each day with constantly changing guidance on who was allowed to provide instruction in person. From the Federal Communications Commission (FCC) 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 53: ??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.? During our audit, the State Auditor?s Office (SAO) acknowledged that some of the chromebook expenditures may be reasonable and supported. However, the finding includes 100% questioned costs. The explanation from SAO about this is, ?Since there was a control deficiency in terms of the grant compliance requirements, we were unable to determine costs were reasonable.? We continue to assert that 100% of the costs were reasonable. The District was able to provide documentation of 100% of the purchase of the chromebooks. The chromebooks were purchased to support online student learning during the pandemic. These expenditures are allowable, reasonable and necessary. Of particular note is the fact that the District?s adopted curriculum only works on District-issued chromebooks. Therefore, any student without a suitable chromebook had an unmet need. We continue to communicate with other agencies with the ultimate goal of helping the Federal Communications Commission (FCC) understand that they should not seek any recovery of funds resulting from ?documentation? issues considering the massive public health response, deployment logistics, vague federal guidance, and the effective return to in-person learning. We look forward to working with the FCC to resolve the questioned cost portion of this finding. 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 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.