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: ECF2190021036 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $355,740 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 the fiscal year 2022, the District spent $355,740 in ECF Program funds to purchase iPads for preschool and Transition to Kindergarten 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 provided 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. Specifically, the District purchased iPads, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $355,740. However, the District did not provide the iPads to the students with unmet need. Instead, they were stored in the District?s warehouse. 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 District staff thought they had complied with the federal requirements by warehousing the EFC-funded iPads. However, employees were not familiar with all the program?s regulations and federal requirements. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose ? unmet need Our audit found 1,210 ECF funded devices, which totaled $355,740, were not distributed to students or staff with unmet need. As a result, we are questioning these 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. 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. District?s Response Bethel School District does not concur with the State Auditor?s office. The District was aware of the Emergency Connectivity Fund (ECF) program requirement, which was to seek reimbursement for devices and services for student and staff who had an ?unmet need.? Due to the unique and challenging circumstances of the COVID-19 pandemic, the district addressed the immediate need of our students, by distributing iPads to students to keep them engaged and allow them to continue their learning progression during the COVID-19 pandemic. Bethel School District followed the Governor?s order and closed all school buildings in March of 2020. Prior to the pandemic, the district provided iPads to all K-12 students, as a part of our Technology commitment to the community. This allowed for a more seamless transition for students and staff to continue to operate and educate students, using the continuous learning models. After applying for and being awarded the ECF grant, our intent was to utilize these funds for our preschool students. We ordered the iPads in June of 2021, however due to distribution delays, the iPads were not received by the first day of school in September of 2021. Due to this delay, Bethel did not want to disrupt student learning, and chose to distribute an older model of iPads to students, that were scheduled for surplus. This allowed our teachers and students to meet and begin their school year without a disruption in their learning. 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.