FINDING 2023-001
Subject: Emergency Connectivity Fund Program - Allowable Costs/Cost
Principles, Special Tests and Provisions - Restricted Purpose
Federal Agency: Federal Communications Commission
Federal Program: Emergency Connectivity Fund Program
Assistance Listings Number: 32.009
Federal Award Numbers and Years (or Other Identifying Numbers): FY 2022, FY 2023
Compliance Requirements: Allowable Costs/Cost Principles, Special Tests
and Provisions - Restricted Purpose
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The Emergency Connectivity Fund (ECF) Program established by the American Rescue Plan Act
of 2021 was for the purchase of eligible equipment, advanced communications, and information services
for use by students, school staff, and library patrons at locations that include locations other than at a school
or library. The ECF Program provides funding to meet the remote learning needs of students, school staff,
and library patrons who would otherwise lack access to connected devices and broadband connections
sufficient to engage in remote learning during the COVID-19 emergency period.
To ensure that funding is focused on unmet need, the grantor agency required schools to certify,
as part of their funding application, that they are only seeking support for eligible equipment and/or
broadband connectivity to provide to students and school staff who would otherwise lack access to
connected devices and/or broadband connectivity sufficient to engage in remote learning. The unmet need
at the time of the funding application can be based on an estimate. However, when the school corporation
files the request for reimbursement, only equipment and services provided to students or school staff who
would otherwise lack broadband services and/or devices sufficient to engage in remote learning should be
requested.
The School Corporation made four reimbursement requests during the audit period. All four reimbursement
requests were selected for testing to verify the expenditures were in conformance with the applicable
cost principles. Of the four reimbursement requests tested, issues were identified with three of the
reimbursement requests. The issues identified were as follows:
For two reimbursement requests, the amount requested, in total, exceeded the
expenditures posted to the grant fund. The total amount requested for reimbursement was
$616,800; however, total expenditures in the fund were $615,400. As such, the amount
requested and received exceeded the amount spent out of the grant fund by $1,400. The
School Corporation did not perform a reconciliation, which would have identified the error
and allowed them to move the associated expenses to the grant fund, nor did the School
Corporation return the additional funds to the grantor agency. At the end of the audit
period, the $1,400 was included in the fund's overall ending cash balance.
INDIANA STATE BOARD OF ACCOUNTS
18
LAFAYETTE SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
For one reimbursement request, although an invoice was submitted as evidence of
expenditures, the funding received from the grantor agency was not used to pay the
invoice. Instead, the School Corporation paid for that invoice using a lease and opted
instead to use the funding received over the course of the next five years to cover
maintenance and service costs for school technology. This information was not disclosed
with the initial reimbursement request nor has a substitution request been sent to the
awarding agency. The amount received from the grantor agency and not paid to the
vendor, $500,000, will be considered questioned costs. At the end of the audit period, this
money had not been expended, and was included in the fund's overall ending cash
balance.
The lack of internal controls and noncompliance were isolated to the two reimbursements noted
above.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, costs must meet the following general criteria
in order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal
award as to types or amount of cost items. . . .
(g) Be adequately documented. . . ."
47 CFR 54.1710(a)(1) states in part:
"The FCC Form 471 shall be signed by a person authorized to order eligible services for the
eligible school, library, or consortium and shall include that person's certification under penalty
of perjury that: . . .
(vii) The school or school consortium listed on the FCC Form 471 application is only
seeking support for eligible equipment and/or services provided to students and school
staff who would otherwise lack connected devices and/or broadband services sufficient to
engage in remote learning. . . ."
INDIANA STATE BOARD OF ACCOUNTS
19
LAFAYETTE SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
47 CFR 54.1710(b) states in part:
"(1) A request by an applicant to substitute equipment or service for one identified on its FCC
Form 471 must be in writing.
(2) The Administrator shall approve such written request where:
(i) The equipment or service has the same functionality; and
(ii) This substitution does not violate any contract provisions or state, local, or Tribal
procurement laws. . . . "
47 CFR 54.1711(a)(1) states in part:
"The FCC Form 472 shall be signed by a person authorized to order eligible services for the
eligible school, library, or consortium and shall include that person's certification under penalty
of perjury that: . . .
(iv) The funds sought in the request for reimbursement are for eligible equipment and/or
services that were purchased or ordered in accordance with the Emergency Connectivity
Fund Program rules and requirements in this subpart and received by either the school,
library, or consortium, or the students, school staff, or library patrons as appropriate.
(v) The portion of the costs eligible for reimbursement and not already paid for by another
source was either paid for in full by the school, library, consortium, or will be paid to the
service provider within 30 days of receipt of funds. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, reimbursements in excess of expenditures were received and retained by the
School Corporation. In addition, reimbursements received were not used to pay the invoices for which the
reimbursement was sought.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
Known questioned costs of $500,000 were identified as detailed in the Condition and Context.
INDIANA STATE BOARD OF ACCOUNTS
20
LAFAYETTE SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Recommendation
We recommended that management of the School Corporation establish a system of internal
controls and develop policies and procedures to ensure reimbursement requests are used to pay the
invoices used to support the request and that only the amount spent is requested for reimbursement.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.