Auburn School District No. 408
September 1, 2021 through August 31, 2022
2022-003 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: N/A
Pass-through Entity Name: N/A
Pass-through Award/Contract
Number:
N/A
Known Questioned Cost Amount: $850,897
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 $850,897 in ECF
Program funds to purchase laptops and tablet computers 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 grant requirements and monitoring the effectiveness of established
controls.
Allowable activities and costs
ECF Program recipients may 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 purchased for use
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’ 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 with unmet need.
Specifically, the District purchased laptops and tablet computers, based on its
estimate of unmet need, and it requested reimbursement for these purchases totaling
$850,897. However, the District did not maintain documentation showing it
provided each laptop and tablet computer 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 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
Employees in the District’s finance department did not know the ECF Program was
federally funded and, therefore, were unaware of all of its regulations. Further,
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.
Restricted purpose – per-location and per-user limitations
Staff did not know the District could not provide more than one device per student
and, therefore, did not establish a process to ensure each student would only receive
one computer purchased with ECF Program 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 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 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 provided some students with more than one device 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 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 in compliance with the ECF
Program’s requirements
District’s Response
In reference to the recent audit conducted by the State Auditor's Office (SAO)
concerning our District's Emergency Connectivity Fund (ECF) expenditures, we
write to formally dispute the findings, particularly the ones related to questioned
costs (QC). After a thorough review of the findings and the corresponding
references to the Federal Communications Commission (FCC) guidelines, we
assert that the audit conclusions are misaligned with the established federal
provisions.
The audit pointed out certain inadequacies in our internal control mechanisms, a
condition we acknowledge had room for improvement, especially during the
challenging pandemic period. Nevertheless, it is our contention that a lower level
of reporting would have sufficed in addressing these issues since all the
expenditures were justified, and devices were distributed strictly based on
ascertained unmet needs.
The audit erroneously insinuated that our controls failed to ensure reimbursement
requests were solely for students with documented unmet needs, further mentioning
that due to an indication with some inventory records for about 10% of the
equipment procured with ECF funds were amiss. We do not understand where SAO
came to this conclusion as the data provided did not indicate this. We insist that all
expenditures were legitimate, necessary, and aimed at addressing the dire needs of
students, as outlined by the FCC guidelines. The broad definition of unmet needs,
as experienced by our district, encompassed various scenarios including shared,
outdated, or inadequately secured home devices, which hindered effective remote
learning.
Moreover, the audit's critique ignores the dynamic and unpredictable nature of the
pandemic, which necessitated a flexible and responsive approach to remote
learning readiness, as corroborated by FCC's directives. The FCC, in its guidance,
clearly emphasized the discretion of schools in determining the unmet needs for
remote learning resources, without imposing any rigid metrics or processes.
The SAO's approach in disregarding the provided documentation, and not applying
any reasonable measures to reduce questioned costs, starkly contrasts with FCC's
understanding and allowances during these uncertain times. The SAO's stance to
challenge all costs appears to deviate from the FCC's empathetic and flexible
guidelines designed to aid districts in navigating through the pandemic's
challenges.
In light of these circumstances, we are earnestly engaging with the FCC to rectify
this matter and ensure our compliance with all pertinent regulations, while
continuously enhancing our internal controls and processes. We highly value the
FCC's guidance and remain committed to implementing any recommended
corrective actions to satisfy both the SAO's and FCC’s requirements.
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.