2022-002 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, procurement, and restricted purpose testing. Assistance Listing Number and Title: 32.009, COVID-19 ? Emergency Connectivity Fund Program Federal Grantor Name: Federal Communications Commission Federal Award/Contract Number: ECF202102046, ECF222116037 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $268,992 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 $1,539,758 in ECF Program funds to purchase 4,200 laptops, 600 tablets, and 16 mobile hotspots for students and 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 provided to students and staff with unmet need. Recipients are prohibited from seeking and receiving reimbursement for eligible equipment purchased for use solely at the school or held for future use (i.e., warehousing). Procurement When using ECF Program funds to purchase eligible equipment, the Federal Communications Commission (FCC) requires recipients to comply with all applicable state or local procurement laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. State law and District policy allow for the purchase of goods and services from contracts awarded by another government or group of governments (i.e., a public agency) via an interlocal agreement (RCW 39.34.030). 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, at the time of reimbursement, they could only request program funds for eligible equipment 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 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 requested reimbursement only for eligible equipment provided to students and school staff with a documented unmet need. Specifically, the District purchased 4,800 laptops and tablets based on its estimate of unmet need, and it requested reimbursement for these expenses totaling $1,501,538. However, the District did not ensure it provided each device paid for with program funds to a student or staff member with unmet need. Procurement Our audit found the District?s internal controls were ineffective for ensuring it followed state law and its own policy when procuring equipment that it charged to the ECF Program. The District paid one contractor $176,400 to purchase tablets utilizing a purchasing cooperative. However, the District could not demonstrate compliance with state law. 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 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 District staff said they thought they were operating as the granting agency directed. However, employees were not familiar with all the program?s regulations and federal requirements. Procurement The District?s use of the awarding entity?s contract aligned with its interpretation of an allowable vendor for the goods. However, staff did not realize the District?s use of the contract did not meet all the requirements of state law. Restricted purpose ? per-location and per-user limitations Staff said they knew the District could not provide more than one device per student or staff member. However, the District did not establish a process to ensure it maintained sufficiently detailed records to demonstrate each student or staff member only received one device purchased with ECF Program funds. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose ? unmet need Our audit found 891 ECF-funded devices, which totaled $268,922, 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. Procurement Without maintaining adequate documentation, the District cannot demonstrate it complied with the procurement requirements. Additionally, it cannot be sure all interested contractors had the opportunity to bid and that it obtained the lowest price for the tablet purchases. Restricted purpose ? per-location and per-user limitations Because the District provided some students and staff members 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 provided to students or staff members with unmet need, and maintain documentation demonstrating compliance ? Comply with state law and its own policy when procuring goods and services paid with ECF Program funds, and keep documentation supporting the procurement methods it used ? Monitor to confirm it provides no more than one device per student or staff member in compliance with the ECF Program?s requirements District?s Response The District does not concur with the audit finding or the questioned costs. The District does agree that internal controls and processes could be improved, however this was during the 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 requested reimbursement only for students and staff with a documented unmet need and that some inventory elements for the equipment purchased with ECF funds were missing. Based on the guidance below, we have spent all funds for allowable costs, that 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 and inventory records were kept, albeit, not perfectly. 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 be in person. 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 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.? We feel we followed the original FCC guidance and were able to provide the necessary devices to all of our students during a nationwide pandemic. We feel this was the intent of the funding provided. 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. RCW 39.34.030, Joint powers?Agreements for joint or cooperative action, requisites, effect on responsibilities of component agencies?Joint utilization of architectural or engineering services?Financing of joint projects.