EDMONDS SCHOOL DISTRICT 15

2023-001 The District did not have adequate internal controls for ensuring compliance with allowable activities and costs, equipment 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: ECF202113227, ECF202112569, and ECF202119898 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $25,510 Prior Year Audit Finding: Yes, Finding 2022-001 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 November 2022, the District requested reimbursement of $2,284,501 in ECF Program funds to pay for laptops and hotspot internet services for students and school staff during the 2021–2022 school year. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program 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 (in other words, warehousing). Equipment The Federal Communications Commission (FCC) requires ECF Program recipients to maintain inventories of the devices and services they have purchased with program funds. The FCC also requires inventory records to include specific elements, such as the type of equipment or service provided, equipment make/model and serial number, name of the students or employees provided the equipment or service, dates they used the equipment or service, and more. 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, 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 hotspot internet service 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 and services 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 and services provided to students and school staff. Specifically, the District purchased 4,500 laptops for students and hotspot internet services for students and staff, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $1,622,101. However, the District did not maintain documentation showing it provided each laptop and hotspot internet services paid with program funds to a student or staff with unmet need. In addition, the District’s internal controls were ineffective for ensuring it uses credits or discounts it received from vendors to offset expenditures it claimed for reimbursement. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Equipment The District maintains asset inventories; however, our audit found the District’s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for 873 hotspot internet services (87 percent) the District purchased with ECF Program funds, it did not include names of the students or employees provided or responsible for the service and the dates they used it. We consider this internal control deficiency to be a significant deficiency. Restricted purpose – per-user limitations Our audit found the District’s internal controls were ineffective for demonstrating it complied with the FCC’s 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. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Allowable activities and costs/restricted purpose – unmet need As communicated in the prior audit finding, District staff thought the determination of unmet need provided during the application process was sufficient to comply with this requirement. Since the funding spanned two fiscal years, the District had already distributed laptops and hotspot internet services and requested reimbursement before the prior audit identified this issue. The District did not take any additional action and is waiting for audit resolution from the federal grantor. Equipment District staff said there was an urgent need to distribute hotspot internet services to students so they could participate in remote learning. Due to extenuating circumstances caused by the COVID-19 pandemic, there was a breakdown in established internal controls. As a result, staff did not retain documentation that identified the students it provided with hotspot internet services. Restricted purpose –per-user limitations As communicated in the prior audit finding, District staff did not know they could not provide more than one device and/or connection per student and employee. Effect of Condition and Questioned Costs Allowable activities and costs/restricted purpose – unmet need We used statistical sampling to select and test 42 laptops and 23 hotspot internet services to determine whether the District had supporting documentation to demonstrate it provided eligible equipment and services to students and staff with actual unmet needs. We noted the District could not demonstrate that it fulfilled the unmet need requirement for 31 student-issued laptops and 20 hotspot internet services. Given the nature of the program and circumstances, it is likely that at least some of the equipment and services the District charged to the award addressed unmet needs. However, the lack of a documented assessment of students’ and staffs’ actual unmet need means that most costs could be unsupported. In total, we identified $13,860 of overpayments for the 31 laptops and 20 hotspot internet services. Based on the projection of our statistical sample, we identified $1,588,189 in total estimated overpayments. Additionally, one of the District’s vendors provided $11,650 in credits and the District did not use the credits to offset expenditures claimed for reimbursement. As such, credits are not eligible for reimbursement. We are questioning the entire amount of $11,650. Federal regulations require the Office of the Washington State Auditor to report known and likely 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. Equipment Without maintaining proper service inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded services. Restricted purpose –per-user limitations Because the District did not maintain documentation, it cannot demonstrate compliance with the FCC’s restrictions. Additionally, we cannot determine whether the District only provided one device or connection per user. Recommendation We recommend the District work with the awarding 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 and staff with unmet need, and maintain documentation demonstrating compliance • Maintain inventories that include all required elements to track the use of services paid with ECF Program funds • Monitor to confirm it provides no more than one device per student in compliance with the ECF Program’s requirements District’s Response As communicated in the District’s response to the prior audit finding, the District does not concur with the SAO’s interpretation of unmet need in the 2021-2022 audit nor does it concur with the same finding for the audit of the 2022-2023 fiscal year. We believe all Chromebook purchases were allowable and devices were only provided to those with an unmet need. We concur with SAO that we did not retain adequate documentation indicating which staff and students received hotspots and appreciate that SAO noted that there was an urgent need to distribute hotspot internet services to students in order that they could participate in remote learning, and that this urgency and extenuating circumstances resulted in this situation. We recognize there was an error associated with vendor credits in the amount of $2,751.10 but did not claim reimbursement for the other credits totaling $8,898.90 as indicated in the audit finding. We will work to improve our process regarding credits on future invoices. The District will continue to work with the FCC to resolve this finding. 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, equipment, and restricted purpose requirements. "See Schedule of Findings and Questioned Costs for chart/table" 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 $1,726,650 in ECF Program funds to purchase 5,400 laptops for 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). Equipment The Federal Communications Commission (FCC) requires ECF Program recipients to maintain inventories of the devices and services they have purchased with program funds. The FCC also requires the inventory records to include specific elements, such as the type of equipment or service provided, equipment make/model and serial number, name of the students or employees provided the equipment or service, dates they used the equipment or service, and more. 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, 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. Specifically, the District purchased laptops, based on its estimate of unmet need, and it requested reimbursement for these purchases totaling $1,726,650. However, the District did not maintain documentation showing it provided each laptop paid with program funds to a student with an unmet need. Equipment The District maintains asset inventories; however, our audit found the District?s internal controls were ineffective for ensuring it included all required elements necessary to demonstrate compliance with federal requirements. Specifically, for all laptops purchased with ECF Program funds, the District did not include names of the students provided or responsible for the equipment and the dates they used it. Further, the District?s inventory listing included 368 laptops listed as ?location not found,? and it included an additional 149 laptops that could not be reconciled to the total number of laptops purchased with program funds. 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 or connection 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 Although employees in the District?s finance and information technology departments knew the program was federally funded, they were unaware of all its regulations. Further, they thought the estimate of unmet need provided during the application process was sufficient to comply with this requirement. They did not perform additional procedures to only request reimbursement for specific students who had unmet need. Equipment The District converted asset inventory systems during the same period as it was receiving ECF-purchased laptops. As a result, the District was unable to produce adequate documentation to demonstrate all required information was tracked throughout the audit period. 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. Additionally, our audit found the District purchased 900 laptops to keep in inventory for future use, which the ECF Program prohibits, and the District claimed and received reimbursement for sales tax that exceeded the actual amount paid by $3,747. 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. Equipment Without maintaining proper asset and service inventory records, as the FCC requires, the District cannot demonstrate compliance with this requirement. Because of the missing information, the District cannot effectively track the use of federally funded equipment. Restricted purpose ? per-location and per-user limitations As noted in the allowable activities and costs section above, we are questioning the costs for these devices. Because the District did not maintain documentation, it cannot demonstrate compliance with the FCC?s restrictions. Additionally, we cannot determine whether the District only provided one device per user and location. 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 ? Maintain inventories that include all required elements to track the use of equipment paid with ECF Program funds ? Provide no more than one device per student and employee in compliance with the ECF Program?s requirements District?s Response The District does not concur with the entirety of the audit finding or the questioned costs. The District does agree 900 of the 5,400 Chromebooks were purchased with the intent to be stored for future student needs. These Chromebooks are not eligible for reimbursement and we agree that this aspect of the finding is valid. However, for the remaining 4,500 Chromebooks we believe all costs were allowable and devices were only provided to those with an unmet need. Based on the guidance below, with the exception of the 900 Chromebooks mentioned above, we have spent all funds for allowable costs, and that those costs were reasonable and necessary for school staff and for students with unmet needs. 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.? Per the FCC guidance above, Districts were allowed to determine whether students had unmet needs, and for the Edmonds School District, this meant addressing instances where the device was too old or too slow to function properly in a remote learning environment or where a student was required to share a device with others needing to access remote learning. Student-owned devices are not guaranteed to have the appropriate level of security, including web filtering to prevent malicious content which is a requirement of the FCC in order to comply with Children?s Internet Protection Act and be eligible for eRate funding. It is primarily for this reason that the district does not consider a student with a non-district computer as having their learning needs met. In addition to this, the district could not access personally-owned devices to provide answers and support to 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. 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. Throughout the 2021-2022 and 2022-2023 school years, each of our students in all grades was expected to take their Chromebook home on a nightly basis, in order to be adequately prepared to pivot to remote learning, should they be directed to do so. SAO did not apply any reasonable measure to reduce questioned costs but did state they know some of the costs are reasonable, while still choosing to question all costs. We believe that is out of alignment with the FCC guidance. The State Auditor?s Office indicated that ?. . . the District did not maintain documentation showing it monitored or had a tracking process in place to ensure it only provided one device or connection per user and location.? We disagree. We looked up each student in the Skyward data system prior to issuing a Chromebook, to confirm that the previously assigned device was three years old or more, and to ensure that each student only received a single district-issued Chromebook. The device provided was recorded in the system under the student?s account. The data systems used by the district to track Chromebook assignments do so in real-time. As such, were unable to go backwards in time to the specific date requested by the auditors. The district will work with the FCC to resolve this finding. The district will determine, in consultation with the FCC, any impacts to funds received in the current year (2022-2023). In the future, the District will request further clarifications on direct federal award requirements that do not have clear guidance at the time of award or will not accept the awarded funds. 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.

2019-001 The District improperly claimed students as eligible and was over awarded $37,024.50. ?See Schedule of Findings and Questioned Costs for chart/table? Background The Indian Education Grant is designed to help address unique cultural, language, and educationally related academic needs of American Indian and Alaska Native students. Funding is determined through a formula, based on the Indian student count submitted in the application. The District spent $47,639 for the Indian Education program in the 2018-19 school year. Description of Condition The District must have on file an Indian Student Eligibility Certificate Form completed in full and signed and dated by the parents or guardians to document eligible Indian students. This form serves as the official record of the eligibility determination for each individual student included in the count. There must be one form for each student. The District claimed more students on its grant application than it had student eligibility forms. The issue was not reported as a finding in the prior audit. Cause of Condition The District did not have a process in place to verify it had a valid Indian student count before submitting the grant application. One employee was responsible for obtaining, verifying, and maintaining the required forms with no independent review. Effect of Condition and Questioned Costs The District claimed 193 students for the 2018-19 school year, when only 43 completed student eligibility forms could be verified. As confirmed by the awarding agency, the District received excess funding of $246.83 for each student. Because 150 students were reported in error, the known questioned costs totaled $37,024.50. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the District ensure it has and maintains all student eligibility forms before claiming students for funding. District?s Response The District concurs and thanks the Auditor?s Office for their work in documenting and reporting this audit issue. The District will use the information provided to ensure that Indian Student Eligibility Certificate Forms are completed in full and signed and dated by the parents or guardians to document eligibility of Indian students claimed for funding purposes. Auditor?s Remarks We appreciate the District?s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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. 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. 20 USC 7427(a): ?The Secretary shall require that, as part of an application for a grant under this subpart, each applicant shall maintain a file, with respect to each Indian child for whom the local educational agency provides a free public education, that contains a form that sets forth information establishing the status of the child as an Indian child eligible for assistance under this subpart, and that otherwise meets the requirements of subsection (b)?.

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