Eastmont School District No. 206Local Government

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: ECF202200831 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $841,180 Prior Year Audit Finding: Yes, Finding 2022-01 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 2023, the District spent $841,180 in ECF Program funds to purchase 2,000 laptops 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 must 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 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 needs. 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 and school staff. Specifically, the District purchased laptops based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $841,180. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student or employee with unmet need. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. The issue was reported as a finding in the prior audit. Cause of Condition Allowable activities and costs/restricted purpose – unmet need District officials did not know about the requirements 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. The District received a finding over this issue in the prior audit, but had already purchased these laptops and requested reimbursement before that finding was issued. 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 and school staff 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’ and staff’s 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. 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 and staff with unmet need, and maintain documentation demonstrating compliance. District’s Response The Eastmont School District respectfully does not concur with the finding regarding our internal controls for ensuring compliance with allowable activities, costs, and restricted purpose requirements in regard to the Emergency Connectivity Funds. The District has completed the necessary corrective actions by revising our board policies and procedures to ensure compliance with allowable activities, costs, and restricted purpose requirements. However, these changes were not implemented by the end of the 2022-2023 school year because the audit for the 2021-2022 school year had not been completed until the 2023-2024 school year. Consequently, the District was unable to implement the new process until the audit status for 2021 2022 was confirmed, ensuring that the corrected steps were compliant The District did not receive any specific guidance from the State Auditor's Office on how to properly document the unmet need identified in the audit. Despite our efforts to seek assistance and clarification, the lack of direction hindered our ability to address the finding promptly. The necessary changes to our policies and procedures required approval from the Board of Directors. This approval, governed by a strict process, was not obtained until December 2023. We began working on the changes immediately following the previous audit but were constrained by the formal approval process. The District is disappointed that despite our efforts to comply, the State Auditor's Office issued another finding for the 2022-2023 audit based on a differing opinion on the "unmet" need. This repetition of findings, despite our documented efforts and changes, suggests a misalignment in expectations and understanding. The audit for the 2022-2023 school year consumed significant resources and taxpayer dollars, which we believe could have been better utilized. The time spent reviewing our information, which was largely unchanged except for the updated policy and procedure, appears redundant. We had asked for documentation and guidance from the State Auditor's Office but did not receive the necessary support or compliance assistance. The District is committed to maintaining high standards of accountability and compliance. We regret that our efforts to address the audit findings were not deemed timely enough and that this has resulted in an additional finding. We will continue to enhance our processes and seek clearer communication and guidance from the State Auditor's Office to ensure that future audits are more aligned with our compliance efforts. We hope this response provides a clear understanding of our position and the steps we have taken. Auditor’s Remarks We value our partnership with the District in striving for transparency in public service. 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. SAO continues to advocate for clear, timely guidance from federal agencies. 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.

2022-001 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: ECF202101091 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $1,260,150 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 $1,260,150 in ECF Program funds to purchase 2,500 laptops for students and 500 laptops for 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 must 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 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 needs. 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 eligible equipment provided to students and staff. Specifically, the District purchased laptops, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $1,260,150. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student or employee with unmet need. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition Allowable activities and costs/restricted purpose ? unmet need District officials did not know about the requirements to request reimbursement only for actual unmet need, and they thought the estimate of unmet need provided during the application process was sufficient to comply with this requirement. 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 and school staff 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? and staff?s 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. 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 and staff with unmet need, and maintain documentation demonstrating compliance. District?s Response The District does not concur with the audit finding or the $1.2 million of questioned Costs by the State Auditor's Office. This was during the worldwide 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 documented the determination of actual unmet need and only requested reimbursement for eligible equipment provided to students and staff. Furthermore, District officials did not know about the requirements to request reimbursement only for actual unmet need, and they thought the estimate of unmet need provided during the application process was sufficient to comply with this requirement. The District disagrees with this because the District applied for the funding, and was not required to request reimbursement by using an SPI process. The funds for the purchase of the Chromebooks was directly sent to the vendor, therefore the funds never flowed through the District. Also, during the application process, the District specifically stated that they determined unmet need by replacing 3,000 failing Chromebooks that would allow teachers and students continued access to teaching and learning, and the device could perform to higher standards. If the District did not appropriately determine the unmet need, then why was the funding approved by ECF and sent directly to the vendor? Based on the guidance below, we have spent all funds for allowable costs, and that those costs were reasonable and necessary and for students and staff with unmet needs. Districts were able to determine whether students and staff had unmet needs, and for our district this meant addressing instances where students may have shared a home device with others siblings; the student or staff devices were too old or slow to function properly when running multiple required applications and student owned devices did not have the appropriate security in place to protect students during remote learning especially from unauthorized websites. The district?s technical support could not access personally owned devices to provide for thousands of trouble tickets and support issues students faced during remote learning. The importance of our students using District issued devices was a priority to keep our kids safe. The FCC requires districts to be CIPA compliance when participating in the USAC e-rate program. Providing students with a district-issued device for remote learning allows the district to remain CIPA compliant when filing for e-rate funding. Based on these experiences, unmet need was defined broadly, but within allowed parameters. Due to the necessity for emergency remote learning the District had to equip thousands of students with learning devices and connectivity. The District has an accurate and robust inventory system which allows us to track and safeguard the public assets. Important to note is that during the time of Chromebook distribution, all families were told the District had devices available if there was a need in their home. The district called all families individually to discuss their connectivity needs. Based on that information, the district set up specific times for families to come to their school and pick up materials, and if needed, a device. The FCC stated that ?schools are in the best position to determine whether their students and staff have devices and services sufficient to meet their remote learning needs.? Our district determined that during the checkout process, if a family showed up and specifically asked for a Chromebook, then there was a need within that family. There was no formal documentation, as it was not required by the FCC. From the FCC Report and Order (paragraph 18),? Given the pressing demands on schools, we will not dictate specific data collection requirements, but instead will ask each school or school district to describe how and when they collected the information that they use for the estimates provided in their responses.? SAO reviewed various types of documentation and chose not to accept any documentation presented by the District to even consider reducing questioned costs. The SAO standard of documentation was not provided to the district at any point in time. In fact, guidance on the standard changed between meetings with the SAO, to which we have documentation. 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. We look forward to working with the FCC to resolve this finding and we appreciate the guidance that was provided by the FCC, as noted below: 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 51: ?...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.? SAO did not apply any reasonable measure to reduce questioned costs but did state they know that at least some of the equipment addressed unmet needs, while still choosing to question all costs. That is clearly out of alignment with the FCC Guidance. This determination by the SAO is completely absurd. It is not factually based, and appears to be purely their opinion of what they implied was an appropriate measure of unmet needs. They were unable to produce any actual documentation that required us to act in a way other than what we did. Auditor?s Remarks The State Auditor?s Office did consider all documentation provided by the District related to the audit. 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.

2020-001 The District lacked adequate internal controls for ensuring compliance with federal requirements for time-and-effort documentation. CFDA Number and Title: 84.027 Special Education Grants to States 84.173 Special Education Preschool Grants Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of the Superintendent of Public Instruction Pass-through Award/Contract Number: 306839, 366329 Questioned Cost Amount: $0 Background The objective of the Special Education program is to ensure all children with disabilities receive special education and related services to meet their needs. During fiscal year 2020, the District spent $1,126,647 in Special Education program funds, of which $1,072,746 was for payroll costs. Federal regulations require recipients to establish and follow internal controls for ensuring compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established program controls. The District is responsible for ensuring it supports salaries and benefits charged to applicable federal grants with adequate time-and-effort documentation, as federal regulations and the Office of Superintendent of Public Instruction (OSPI) require. OSPI?s time-and-effort documentation requirements are more restrictive than the federal requirements. OSPI allows time and effort to be documented differently, depending on the number and type of activities employees perform. OSPI lets districts operating under a fixed-schedule system to document time and effort differently. This alternative documentation must include a supporting schedule and management certification affirming that only eligible employees will participate in the fixed-schedule system, and that the system documenting employee?s work schedules includes sufficient controls for ensuring accuracy. Districts must submit this management certification to OSPI in order to use the fixed-schedule system. Description of Condition We used a statistical sampling method to select 26 timesheets to audit that had time charged to the Special Education program. We found that the District?s internal controls were ineffective for ensuring all 26 timesheets and supporting schedules included sufficient information to support time worked in the program, as federal regulations and OSPI require. Specifically, the timesheets and schedules did not document actual time spent on specific cost objectives each day. Additionally, the District did not submit the required management certification to OSPI. We consider these issues to be a material weakness, which led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition District staff did not fully understand OSPI?s time-and-effort documentation requirements for the fixed-schedule system. Additionally, the District did not dedicate the necessary time and resources for evaluating its own internal controls and ensuring time-and-effort documentation complied with OSPI?s requirements. Effect of Condition and Questioned Costs The District?s noncompliance with grant requirements could jeopardize future federal funding, and it could be required to return federal funds to the grantor. By not keeping proper time-and-effort records, the District did not comply with OSPI?s documentation requirements for supporting payroll costs charged to the federal program. Further, the District cannot assure federal grantors the $41,206 in payroll costs that we tested were accurate and valid. Based on our testing, 100 percent of the payroll records we examined lacked sufficient time-and-effort records. However, the District provided alternative documentation demonstrating employees worked in the Special Education program during the tested time period, and that it charged allowable payroll costs to the program; therefore, we are not questioning costs. Recommendation We recommend District staff dedicate the necessary time and resources for fully understanding OSPI?s time-and-effort documentation requirements. We also recommend the District establish effective internal controls for ensuring all payroll costs charged to applicable federal programs comply with OSPI?s requirements. District?s Response While we appreciate the Washington State Auditor?s Office (SAO) efforts to help our District improve, Eastmont School District was disappointed to learn of SAO?s decision to issue a finding related to the time and effort reporting for classified staff working in our Special Education program. We take great pride in ensuring that we meet legal and accountability requirements for all funds received in order to ensure that future funding opportunities are not jeopardized. We take exception to the statement that District staff did not fully understand OSPI?s time-and-effort documentation requirements. OSPI issued Bulletin 048-17 ?Guidelines for Charging Compensation to Federal Grants in September 2017. The District was aware of this guidance and believed we were following reporting requirements. The method used to collect time-and-effort for the staff assigned to work in our Special Education program was reviewed by SAO during their 2017-2018 audit of this same program. SAO made no mention of any concerns and did not provide the District with any recommendations to change our time-and-effort documentation reporting as a result of that audit. The District continued with this method of time-and-effort reporting through the 2020-2021 reporting year. We also take exception that the District did not dedicate the necessary time and resources for evaluating its own internal controls and ensuring time-and-effort documentation complied with OSPI requirements. SAO was provided with additional documentation to substantiate payroll costs charged to this federal program. Specifically, the documentation provided evidence that explained how classified staff are assigned to work directly in serving students in this program with the highest needs and how our Director of Special Education works with Building Administrators in monitoring those assignments throughout the year. In addition, District accounting staff regularly meet to review all time and-effort reports as required by the OSPI Bulletin. The District will work to modify the time-and-effort collection for classified staff to ensure it meets compliance. We respect our relationship with the SAO team and appreciate the ability to have on-going dialog with SAO during our annual audit as well as between audits when complex issues arise. Auditor?s Remarks We respectfully remind the District it is their responsibility for establishing and maintaining effective internal controls over compliance with the requirements for federal programs, which includes time-and-effort documentation. Audits do not relieve the District of that ongoing responsibility. We appreciate the seriousness with which the District takes matters of compliance and accountability. We will review the corrective steps the District has taken to resolve this issue during our next audit. 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. Office of Superintendent of Public Instruction Addendum to Bulletin 048-17, Guidelines for Charging Employee Compensation to Federal Grants establishes requirements for documenting time-and-effort, including fixed schedule systems.

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