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California Public Utilities Commission Performance Audit Report
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CALIFORNIA PUBLIC UTILITIES
COMMISSION
Performance Audit Report
CALIFORNIA ADVANCED SERVICES FUND
PROGRAM
January 1, 2019, through December 31, 2021
M M. C
ALIA OHEN
California State Controller
September 2023
MALIA M. COHEN
CALIFORNIA STATE CONTROLLER
September 25, 2023
Erika Contreras, Secretary of the Senate
State Capitol, Room 305
Sacramento, CA 95814
Dear Ms. Contreras:
Pursuant to Public Utilities Code (PUC) section 912.2 and an interagency agreement between the
State Controller’s Office and the California Public Utilities Commission (CPUC), the State
Controller’s Office conducted a performance audit of the California Advanced Services Fund
(CASF) Program for the period of January 1, 2019, through December 31, 2021.
Our audit determined that:
The CPUC did not consistently implement and administer the CASF Program in accordance
with PUC section 281, other applicable laws, rules, and regulations, and CPUC policies and
procedures for CASF Program processes.
CASF Program funds were not consistently expended in accordance with the approved terms
of grant agreements and PUC section 281.
The CASF Program promotes economic growth, job creation, and the substantial social
benefits of advanced information and communications technologies as required by PUC
section 281. However, the CPUC has not established a method for measuring and obtaining
data about the types and numbers of jobs created as a result of the program. Therefore, we
are unable to report these details as required by PUC section 912.2.
If you have any questions, please contact Roochel Espilla, Chief, State Agency Audits Bureau,
by telephone at (916) 323-5744 or by email at respilla@sco.ca.gov.
Sincerely,
Original signed by
KIMBERLY TARVIN, CPA
Chief, Division of Audits
KT/ac
300 Capitol Mall, Suite 1850, Sacramento, CA 95814 | P.O. Box 942850, Sacramento, CA 94250 | Fax: 916.322.4404
sco.ca.gov
Ms. Erika Contreras
September 25, 2023
Page 2 of 3
cc: Sue Parker, Chief Clerk of the Assembly
California State Assembly
Cara L. Jenkins, Legislative Counsel
California Office of Legislative Counsel
Alice Busching Reynolds, President
California Public Utilities Commission
Karen Douglas, Commissioner
California Public Utilities Commission
Darcie L. Houck, Commissioner
California Public Utilities Commission
John Reynolds, Commissioner
California Public Utilities Commission
Genevieve Shiroma, Commissioner
California Public Utilities Commission
Rachel Peterson, Executive Director
California Public Utilities Commission
Michelle Morales, Director
Administrative Services Division
California Public Utilities Commission
Lalaine Semana, Chief
Accounting Office
Administrative Services Division
California Public Utilities Commission
Shoaib Ur-Rehman, Accounting Administrator II
Accounting Office
Administrative Services Division
California Public Utilities Commission
Rob Osborn, Director
Communications Division
California Public Utilities Commission
Maria Ellis, Deputy Director
Communications Division
California Public Utilities Commission
Selena Huang, Program Manager
Broadband, Video and Market Branch
Communications Division
California Public Utilities Commission
Angela Young, Senior Analyst
Broadband, Video and Market Branch
Communications Division
California Public Utilities Commission
Risa Hernandez, Manager
Carrier Oversight and Programs Branch
Communications Division
California Public Utilities Commission
300 Capitol Mall, Suite 1850, Sacramento, CA 95814 | P.O. Box 942850, Sacramento, CA 94250 | Fax: 916.322.4404
sco.ca.gov
Ms. Erika Contreras
September 25, 2023
Page 3 of 3
Jonathan Lakritz, Manager
Consumer Programs Branch
Communication Division
California Public Utilities Commission
Stacey Matamoros, Chief
Client Solutions Section
Information Technology Services Division
California Public Utilities Commission
Hank Brady, Director
Office of Governmental Affairs
California Public Utilities Commission
Amanda Singh, Senior Legislative Consultant
Office of Governmental Affairs
California Public Utilities Commission
Meghan Cook, Associate Legislative Consultant
Office of Governmental Affairs
California Public Utilities Commission
Angie Williams, Director
Utility Audits, Risk and Compliance Division
California Public Utilities Commission
Mariya “Masha” Vorobyova, Assistant Director
Utility Audits, Risk and Compliance Division
California Public Utilities Commission
300 Capitol Mall, Suite 1850, Sacramento, CA 95814 | P.O. Box 942850, Sacramento, CA 94250 | Fax: 916.322.4404
sco.ca.gov
California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Contents
Audit Report
Summary ............................................................................................................................ 1
Background ........................................................................................................................ 1
Audit Authority .................................................................................................................. 4
Objectives, Scope, and Methodology ............................................................................... 4
Conclusion .......................................................................................................................... 6
Follow-up on Prior Audit Findings .................................................................................. 7
Views of Responsible Officials .......................................................................................... 7
Restricted Use .................................................................................................................... 7
Findings and Recommendations ........................................................................................... 8
Attachment A—2021 California Advanced Services Fund Annual Report
Attachment B—California Public Utilities Commission’s Response to Draft Audit Report
California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Audit Report
Summary The State Controller’s Office (SCO), pursuant to an interagency
agreement with the California Public Utilities Commission (CPUC),
conducted a performance audit of the CPUC’s California Advanced
Services Fund (CASF) Program for the period of January 1, 2019, through
December 31, 2021.
Our audit determined the following:
The CPUC did not consistently implement and administer the CASF
Program in accordance with Public Utilities Code (PUC) section 281,
other applicable laws, rules, and regulations, and CPUC policies and
procedures for CASF Program processes.
CASF Program funds were not consistently expended in accordance
with the approved terms of grant agreements and PUC section 281.
The CASF Program promotes economic growth, job creation, and the
substantial social benefits of advanced information and
communications technologies, as required by PUC section 281.
However, the CPUC has not established a method for measuring and
obtaining data about the types and numbers of jobs created as a result
of the program. Therefore, we are unable to report these details as
required by PUC section 912.2.
Background CASF Program History
The CPUC implemented the CASF Program on December 20, 2007, when
it adopted Decision (D.) 07-12-054, in accordance with PUC section 701.
The CPUC allocated $100 million to the CASF Program, funded by a
0.25% surcharge on revenues collected from end-users for intrastate
telecommunications services, effective January 1, 2008. CASF Program
grants support projects that provide broadband access to unserved and
underserved areas of California.
The CPUC adopted the CASF Program application requirements,
timelines, and scoring criteria for parties to qualify for broadband project
funding in Resolution T-17143, issued on June 12, 2008. The CASF
Program was given a program sunset date of January 1, 2013, and codified
in PUC section 281. Since 2008, the CASF Program has been expanded
numerous times by enacted statutes and CPUC decisions.
As of December 31, 2021, the following bills have shaped and expanded
the CASF Program:
Senate Bill 1040 (Chapter 317, Statutes of 2010) extended the
program sunset date to June 30, 2016; authorized the CPUC to collect
an additional $125 million from telecommunication ratepayers; and
created three subaccounts within the California Advanced Services
Fund: the Broadband Infrastructure Grant Account (Infrastructure
Account), the Broadband Infrastructure Revolving Loan Account
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
(Infrastructure Loan Account), and the Rural and Urban Regional
Broadband Consortia Grant Account (Consortia Account).
SB 740 (Chapter 522, Statutes of 2013) added an additional
$90 million to the Infrastructure Account, increasing total CASF
Program funding to $315 million.
Assembly Bill 1299 (Chapter 507, Statutes of 2013) established the
Broadband Public Housing Account (Public Housing Account), which
was funded by reallocating $20 million from the Infrastructure
Account and $5 million from the Infrastructure Loan Account.
Pursuant to AB 1299, any remaining funds not awarded from the
Public Housing Account by December 31, 2016, would be returned to
the original funding accounts, proportionally.
AB 1665 (Chapter 851, Statutes of 2017) eliminated the Infrastructure
Loan Account as of January 1, 2018, and directed that funds remaining
in that account be transferred to the Infrastructure Account; extended
the Infrastructure Account to include funding to households for line-
extension with the aggregate amount of grants awarded not to exceed
$5 million (thus creating the Line Extension Program); created the
Broadband Adoption Account (Adoption Account); and allocated
$300 million to the Infrastructure Account, $10 million to the
Consortia Account, and $20 million to the Adoption Account. The
additional $330 million of funding was to be collected beginning
January 1, 2018, and continuing through the 2022 calendar year.
SB 156 (Chapter 112, Statutes of 2021) amended PUC sections 281,
912.2, and 914.7 and added PUC section 281.2 in order to revise the
CASF Program. Specifically, the goal of providing broadband access
to no less than 98% of California households by no later than
December 31, 2026, was moved from the CASF Program to the
Infrastructure Account. SB 156 also implemented the first year of a
three-year, $6 billion investment in broadband; and created the Federal
Funding Account. This bill also required the CPUC, on or before
April 1, 2023, and biennially thereafter, to conduct a fiscal and
performance audit of the California Advanced Services Fund.
SB 4 (Chapter 671, Statutes of 2021) amended PUC section 281,
extending the goal of the Infrastructure Account to approve funding
for infrastructure projects that will provide broadband access to no less
than 98% of California households by no later than December 31,
2032, rather than December 31, 2026. The bill also authorized the
CPUC, through imposition of a surcharge, to collect up to
$150 million per year.
California Advanced Services Fund Accounts and Programs
Pursuant to PUC section 281(c), five accounts were created within the
California Advanced Services Fund, with the following purposes:
Infrastructure Account grants are used to build or upgrade broadband
infrastructure in areas that are unserved by existing broadband
providers.
Consortia Account grants to regional consortia (typically a group of
several contiguous counties) are used to facilitate the deployment of
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
broadband infrastructure by assisting infrastructure grant applicants in
the project development or grant application process.
Public Housing Account grants and loans to low-income communities
(including, but not limited to, publicly supported housing
developments and other housing developments or mobile home parks
with low-income residents, as determined by the CPUC) are used to
build broadband networks offering free broadband service to these
communities.
Adoption Account grants are used to provide digital literacy education
to communities with limited broadband adoption and free broadband
access to community training rooms or other public spaces.
Federal Funding Account grants are used to connect unserved and
underserved communities by the applicable federal deadlines by
funding last-mile infrastructure projects.
Households and property owners that would otherwise not be able to
afford line extensions to their properties can apply for grants from the Line
Extension Program, which is funded by the Infrastructure Account.
California tribes seeking technical assistance (including market studies,
feasibility studies, and business plans) to improve voice and broadband
communications can apply for money from the Tribal Technical
Assistance Grant Program (Tribal Technical Assistance), which is
supported by state operations funds from the California Advanced
Services Fund.
CASF Program Administration
CPUC’s Communications Division performs administrative duties related
to the CASF Program, including, but not limited to:
Reviewing CASF Program grant applications and recommending
approval. Several CPUC decisions assign Communications Division
staff members the task of approving applications that meet certain
criteria for expedited review;
Reviewing grantee progress and completion reports, and approving
grantee payment requests;
Monitoring the Telecommunications and User Fee Filing System for
electronic reporting and remittance of surcharges and user fees due to
the CPUC from telecommunications corporations and Voice over
Internet Protocol providers; and
Processing and validating broadband data collected from California’s
service providers, providing expertise related to Geographic
Information System mapping for the California Interactive Broadband
Map, and managing related consultant contracts.
As the lead agency for the California Environmental Quality Act (CEQA),
the Infrastructure Planning and CEQA Section of the CPUC’s Energy
Division conducts environmental reviews for construction of broadband
networks in accordance with CEQA.
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
The Accounting Office of the CPUC’s Administrative Services Division
is responsible for receiving and disbursing funds, reconciling surcharges
recorded in Telecommunications and User Fee Filing System with
remittances, and maintaining financial records in FI$Cal in accordance
with the State Administrative Manual.
California Advanced Services Fund Reporting
PUC section 912.2 requires the CPUC to conduct biennial fiscal and
performance audits of the California Advanced Services Fund. The reports
must also include an update to the maps in the California Broadband Task
Force’s final report, data on the types and numbers of jobs created as a
result of the CASF Program, and information specified in PUC
section 914.7.
The CPUC’s annual reports on the California Advanced Services Fund
provide the required update to the maps in the California Broadband Task
Force’s final report; and other information required by PUC section 914.7,
including expenditures, fund recipients, expected benefits, the status of
approved projects, broadband adoption levels, efforts to leverage non-
California Advanced Services Fund moneys, the California Advanced
Services Fund balance, and the projected amount to be collected annually
to fund approved projects. All CASF Program reports, including reports
on fiscal and performance audits, are made available on the CPUC’s
website.
The CPUC issued the 2021 California Advanced Services Fund Annual
Report in April 2022 (Attachment A). The report covers the period of
January 1, 2021, through December 31, 2021. We did not audit the
CPUC’s annual report but performed limited procedures necessary to
achieve our audit objectives.
Audit Authority We conducted this audit at the request of the CPUC, in accordance with
an interagency agreement between the SCO and the CPUC; and in
accordance with PUC section 912.2, which requires biennial fiscal and
performance audits of the California Advanced Services Fund “to ensure
that funds have been expended in accordance with the approved terms of
the grant awards and loan agreements pursuant to Section 281 or 281.2,”
and also requires that the audit findings be reported to the California State
Legislature. In addition, Government Code (GC) section 12410 provides
the SCO with general authority to audit the disbursement of state money
for correctness, legality, and sufficient provisions of law for payment.
Objectives, Scope, Our audit objectives were to determine whether:
and Methodology
The CPUC adequately implemented and administered the CASF
Program in accordance with PUC section 281; other applicable laws,
rules, and regulations; and CPUC policies and procedures for CASF
Program processes including, but not limited to, awarding grants and
loans, denying applications, and prioritizing last-mile broadband
access projects;
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
CASF Program funds were expended in accordance with the approved
terms of grant agreements and PUC section 281; and
The CASF Program is producing the intended results of promoting
economic growth, job creation, and the substantial social benefits of
advanced information and communications technologies, as required
by PUC section 281.
The performance audit period was January 1, 2019, through December 31,
2021.
To achieve our audit objectives, we performed the following procedures:
We reviewed reports on prior audits and engagements related to the
CASF Program and followed up on any applicable findings.
We gained an understanding of applicable laws, rules, regulations, and
CPUC policies and procedures for the CASF Program.
We reviewed the California Advanced Services Fund Annual Reports
for calendar years 2019, 2020, and 2021.
We conducted walkthroughs and/or observations and interviewed
CPUC staff members to gain an understanding of CASF Program
activities, processes, and objectives.
We obtained the Communications Division’s CASF Program master
log of awarded and denied grants, and the Accounting Office’s
voucher listing of grant payments made during the audit period.
Upon gaining an understanding of internal controls over the
processing of CASF Program grant applications, we judgmentally
selected grant applications from the CASF Program master log for
testing to determine whether they were properly approved or denied
in accordance with PUC section 281 and other applicable laws, rules,
regulations, and policies and procedures. We tested the following:
o Infrastructure Account—10 of 44 approved applications;
o Consortia Account—four of 13 approved applications; one of five
denied applications;
o Adoption Account—14 of 172 approved applications; two of 13
denied applications;
o Public Housing Account—three of three approved applications;
two of 14 denied applications; and
o Tribal Technical Assistance—six of 30 approved applications;
two of two denied applications.
Errors found were not projected to the intended (total) population.
Upon gaining an understanding of internal controls over the
processing of CASF Program progress payments, we judgmentally
selected payments from the Accounting Office’s voucher listing for
testing to determine whether CASF Program funds were expended in
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
accordance with approved terms of the grant agreements, PUC
section 281, and other applicable laws, rules, regulations, and policies
and procedures. We tested the following:
o Infrastructure Account—27 of 60 payments ($44,923,003 of
$60,403,387);
o Consortia Account—11 of 99 payments ($786,400 of
$2,809,429);
o Adoption Account—21 of 138 payments ($6,359,520 of
$7,753,958); and
o Public Housing Account—18 of 182 payments ($790,866 of
$3,523,560).
Errors found were not projected to the intended (total) population.
We determined whether broadband availability and adoption data and
maps were updated promptly and accurately.
We gained an understanding of and evaluated the CPUC’s process for
collecting, validating, and analyzing data related to broadband service,
including information about the speed, quality, and availability of
broadband service.
We determined whether the CPUC was properly tracking data on the
types and numbers of jobs created as a result of the CASF Program.
We did not audit the CPUC’s financial statements. We limited our audit
scope to planning and performing audit procedures necessary to achieve
our audit objectives. Our consideration of internal control was limited to
gaining an understanding of the transaction flows and financial
management system, and determining the auditing procedures that were
appropriate under the circumstances for the purpose of providing a
conclusion based on our audit objectives.
We conducted this performance audit in accordance with generally
accepted government auditing standards. Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.
Conclusion Our audit determined the following:
The CPUC did not consistently implement and administer the CASF
Program in accordance with PUC section 281, other applicable laws,
rules, and regulations, and CPUC policies and procedures for CASF
Program processes. We found the following instances of
noncompliance:
o The CPUC approved Infrastructure Account grant applications
that did not meet the minimum performance criteria described in
the program guidelines. Specifically, four of the 10 grant
applications that we examined stated that affordable broadband
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
plans would be offered to low-income customers; however, the
applicant limited eligibility by using a definition of “low-income
customers” that did not comply with the CPUC’s program
guidelines (see Finding 1).
o The CPUC did not verify that one consortium met annual audit
requirements (see Finding 2).
o The CPUC approved an Adoption Account grant application that
did not meet expedited review criteria and miscalculated three
grant budget amounts (see Finding 3).
CASF Program funds were not consistently expended in accordance
with the approved terms of grant agreements and PUC section 281,
resulting in improper payments totaling $638,106; and we were unable
to verify that certain grantee reimbursements, totaling $4,353,033
were actual expenditures directly related to grant activities because the
grantees did not submit adequate supporting documentation (see
Findings 1, 2, 3, and 4); and
The CASF Program promotes economic growth, job creation, and the
substantial social benefits of advanced information and
communications technologies as required by PUC section 281.
However, the CPUC has not established a method for measuring and
obtaining data about the types and numbers of jobs created as a result
of the program. Therefore, we are unable to report these details as
required by PUC section 912.2 (see Finding 5).
Follow-up on The CPUC has satisfactorily resolved the findings noted in our prior audit
Prior Audit report for the period of January 1, 2016, through December 31, 2018,
reissued on April 13, 2021.
Findings
Views of We issued a draft report on July 17, 2023. CPUC representatives
Responsible responded by letter dated August 10, 2023. The CPUC agreed with the
audit results, and indicated that it has taken steps to correct the noted
Officials
deficiencies. This final audit report includes the CPUC’s response as
Attachment B.
Restricted Use This report is solely for the information and use of the California State
Legislature, the CPUC, and the SCO; it is not intended to be, and should
not be, used by anyone other than these specified parties. This restriction
is not intended to limit distribution of this audit report, which is a matter
of public record and is available on the SCO website at www.sco.ca.gov.
Original signed by
KIMBERLY TARVIN, CPA
Chief, Division of Audits
September 25, 2023
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Findings and Recommendations
FINDING 1— Some grant applications did not meet program criteria
Inadequate
The CPUC approved 44 Infrastructure Account grant applications, for a
controls over the
total awarded amount of $138,580,482, during the audit period. We
Infrastructure
judgmentally selected 10 of the 44 approved grant applications for testing.
Account resulting
We determined that the CPUC had approved four grant applications, all
in noncompliance submitted by the same applicant, that did not meet the minimum
with program performance criteria described in the CASF Program guidelines.
guidelines and
improper and The program’s criteria require that applicants offer affordable broadband
questioned plans to households with incomes that would qualify for the California
Alternate Rates for Energy program. Instead, the applicant limited
payments
eligibility to households that qualified for the National School Lunch
Program, the Community Eligibility Provision of the National School
Lunch Program, or the Supplemental Security Income program for senior
citizens. The applicant could have offered affordable broadband plans to
more low-income families if it had complied with the CASF Program
definition of “low-income customers.”
Review process for payment requests needs improvement
The CPUC processed 60 payments, totaling $60,403,387, from the
Infrastructure Account during the audit period. We judgmentally selected
27 payments, totaling $44,923,003, for testing. Each of the 27 payments
included numerous reimbursement requests for expense items such as
labor, equipment, supplies, and services. We found that the CPUC made
improper payments of $583,646 to one grantee because the grantee had
included the same costs on multiple invoices. We also identified payments,
totaling $3,774,798, for which CPUC should have obtained additional or
alternative supporting documentation prior to payment. Because
additional or alternative supporting documents were not available for
review, we could not determine whether the costs were allowable.
The CPUC lacked an adequate review process to ensure that payments
were properly reviewed and adequately supported. According to CPUC
staff members, payment requests were reviewed by an analyst, a senior
telecommunications engineer, and the supervisor. However, we found no
documentation to support this review process.
Improper payments
We noted that the CPUC made an $8,567,534 payment to one grantee; this
amount included $583,646 for which the grantee did not provide
supporting documentation. We found that the unsupported amount
consisted of two payment requests—one for $261,977 and one for
$321,669—that the grantee had included on previous invoices and that the
CPUC had already paid. As a result, the CPUC made a total of $583,646
in improper payments to this grantee. The CPUC did not know that these
duplicate payments had been made until we identified them during our
audit. CPUC representatives informed us that the CPUC had offset the
improper payment with future amounts owed and stated that total
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
payments to the grantee did not exceed the total grant amount. We did not
conduct any additional audit procedures related to the offset as the offset
occurred in a future audit period outside of the scope of this review.
Lack of adequate supporting documentation
We found that $3,774,798, or 8.4% of the $44,923,003 in payments that
we tested, had been approved without adequate documentation or
justification to support that the expenditures had been incurred for
CASF Program projects.
The following table summarizes the payments lacking adequate support
(amounts are rounded to the nearest dollar):
Payments Lacking Adequate Support Amount
Expenditures supported only by general ledger data $1,060,792
Pro-rated and unsupported expenditures 1,324,525
Unsupported handling fee 1,389,481
Total $3,774,798
Expenditures supported only by general ledger data
CPUC staff members considered general ledgers to be adequate support
for payment. Although general ledgers compile and summarize financial
transactions, they do not replace source documents demonstrating that the
expense occurred, was recorded accurately, and was associated with an
approved CASF Program project. The CPUC paid $1,274,839 based on
information reported in general ledgers. The CPUC did not request
supporting documentation before approving payment. During the audit,
the CPUC requested invoices from the grantee and provided support for
$214,047 reported in the general ledgers. This reduced the questioned
costs to $1,060,792.
Pro-rated and unsupported expenditures
The CPUC approved pro-rated and unsupported payments, totaling
$1,324,525. These payments also lacked adequate documentation or
justification. For example, the CPUC reimbursed pro-rated amounts
(50% of costs) for expenses such as office rent, cellphones, fuel, and
vehicle expenses although the grantee provided no justification for the pro
rata calculations. CPUC staff members indicated that the costs had been
deemed valid and that the costs were within the total project budget.
However, costs that are deemed valid must be adequately supported and
justified.
Unsupported handling fee
We questioned whether the CPUC should have approved the
reimbursement of a 10% handling fee per invoice for a grantee responsible
for two CASF Program projects that we tested. These 10% charges were
in addition to project management costs, administrative staff costs, and
hourly review and support charges per invoice. CPUC staff members
informed us that the 10% handling fee was considered part of the projects’
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
administrative costs. However, we reviewed the proposed budgets for the
two projects and did not identify any proposed indirect or administrative
costs in the budget. CPUC staff members allowed the charges because the
total reimbursed was less than approved project budget.
CPUC staff members indicated that as of 2020, the CPUC is no longer
allowing the grantee to charge a 10% handling fee because projects are
now eligible for 90-100% funding, instead of 60%. However, the
percentage of funding should not determine whether the CPUC allows
grantees to charge additional fees. We tested eight payments, totaling
$13,894,810, with the 10% handling fee, and we questioned $1,389,481 in
reimbursed handling fees.
GC sections 13400 through 13407 require state agencies to establish and
maintain internal controls, a system of policies and procedures adequate
to ensure compliance with applicable laws and other requirements, and
including an effective system of internal review.
Appendix 1, Section 6, “Performance Criteria,” of CPUC D.18-12-018,
states:
At a minimum, all CASF Infrastructure projects must meet the
performance criteria outlined below:
Project Completion: All CEQA-exempt projects must be completed
within 12 months, and all other projects shall be completed within
24 months after receiving authorization to construct.
Pricing: All applicants shall commit to serve customers in the
project area at the prices provided in the application for two years
after completion of the project.
Speeds: All households in the proposed project areas must be
offered a broadband Internet service plan with speeds of at least 10
Mbps [megabits per second] download and 1 Mbps upload.
Latency: All projects shall provide service at a maximum of 100 ms
[milliseconds] of latency.
Data Caps: All projects implementing data caps shall provide a
minimum of 190 GBs [gigabytes] per month.
Affordability: All projects shall provide an affordable broadband
plan for low-income customers.
Appendix 1, Section 3., “Definitions” of CPUC D.18-12-018, states, in
part:
“Low-income areas” means areas identified by the median income
within a Census Block Group having median income less than the CARE
[California Alternate Rates for Energy program] standard for a
household of 4, which will be updated annually. Through May 31, 2019,
this value is $50,200.
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Appendix A, Section 6. “Performance Criteria,” of CPUC D.21-03-006,
states:
At a minimum, all CASF Infrastructure projects must meet the
performance criteria outlined below:
Project Completion: All CEQA-exempt projects must be completed
within 12 months, and all other projects shall be completed within
24 months after receiving authorization to construct.
Pricing: All applicants shall commit to serve customers in the
project area at the prices provided in the application for two years
after completion of the project.
Speeds: All households in the proposed project areas must be
offered a broadband Internet service plan with speeds of at least 10
Mbps download and 1 Mbps upload.
Latency: All projects shall provide service at a maximum of 100 ms
of latency.
Data Caps: All projects implementing data caps shall provide a
minimum of 190 GBs per month.
Affordability: All projects shall provide an affordable broadband
plan for low-income customers.
Appendix A, Section 3., “Definitions” of CPUC D.21-03-006, states, in
part:
“Low income customers” are households with incomes that would
qualify for California Alternate Rates for Energy (CARE) pursuant to
Pub. Util. Code §739.1(a) and D.16-11-022 at 18 (or as updated in a
successor decision). As noted above, for a household of four the income
threshold is $52,400 through May 31, 2021. The threshold is updated
regularly in the CARE proceeding, A.19-11-003, et.al.
Appendix 1, Section XI., “Payment” of CPUC D.12-02-015 states, in part:
Payment will be based upon receipt and approval of invoices/other
supporting documents showing the expenditures incurred for the project
in accordance with the CASF funding submitted by the CASF recipient
in their application.
Appendix 1, Section 14., “Payment,” of CPUC D.18-12-018 states, in part:
. . . Payments are based on submitted receipts, invoices, and other
supporting documentation showing expenditures incurred for the project
in accordance with the approved CASF funding budget included in the
CASF grantee’s application.
Recommendation
We recommend that the CPUC:
Provide adequate oversight to ensure that staff members approve grant
applications and process payments from the Infrastructure Account
that comply with program requirements and PUC section 281;
Establish adequate internal controls to ensure that payments are
adequately supported and comply with program requirements
established by PUC section 281 and the CPUC;
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Review payments to identify any additional improper payments and
recover any improper payments made to grantees; and
Improve procedures to adequately document the review and approval
process.
Review process for payment requests needs improvement
FINDING 2—
Inadequate
The CPUC processed 99 payments, totaling $2,809,429, from the
controls over the
Consortia Account during the audit period. We judgmentally selected
Consortia Account
11 payments, totaling $786,400, for testing from three (out of the 13 total)
resulting in
approved consortia grant applications. We found expenses not in
noncompliance
accordance with program guidelines and a lack of adequate supporting
with program documentation, resulting in improper and questioned payments totaling
guidelines and $286,443.
improper and
questioned Each of the 11 payments that we tested included numerous reimbursement
payments requests for expense items such as labor, services, supplies, conferences,
and travel. We found that eight of the 11 payments included expenses that
were not directly related to consortia activities, resulting in improper
payments, totaling $1,449, and $284,994 in expenses for which the CPUC
should have obtained additional documentation and explanation prior to
reimbursement. The items of expense needing additional documentation
were reimbursements to Consortia A and B.
The following table shows, by Consortium, amounts tested, improper
payment amounts, and questioned payment amounts (amounts are rounded
to the nearest dollar):
Amount Amount Improper Questioned
Consortia
Paid Tested Payments Payments
Consortium A $ 299,999 $ 299,999 $ 1,449 $ 275,994
Consortium B 248,210 248,210 - 9,000
Consortium C 238,191 238,191 - -
Total $ 786,400 $ 786,400 $ 1,449 $ 284,994
Improper payments
Consortium A claimed $1,449 in purchases that were not directly related
to allowable consortia activities. For example, Consortium A classified a
desk fan, an iPhone case, a desk chair, a USB hub, and a surge protector
under the activity of assisting infrastructure applicants in the project
development or grant application process; and it classified a floor lamp
under the activity of identifying potential CASF Program infrastructure
projects. These items are not directly related to either of the activities
mentioned, and therefore are not allowable expenses.
Lack of adequate supporting documentation
Consortium A requested $112,500 in start-up costs consisting of
consulting services, supplies, and website administration costs. The
Consortium’s Work Plan required it to document start-up activities in a
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Start-up Period Report submitted no later than three months after
completing the start-up activities. However, Consortium A did not submit
the required Start-up Period Report; nor did it provide adequate
documentation in place of the Start-up Period Report to support that the
costs were related to approved grant activities. Consortium A provided
invoices. However, without other documentation to demonstrate that the
costs were for approved grant activities, we could not determine the
validity, accuracy, and propriety of these start-up costs. As a result, we
questioned the entire $112,500.
We also questioned $163,494 in progress payments for the following
reasons:
Consortium A submitted several invoices, totaling $151,358 that
lacked adequate supporting documentation. All consultant invoices
included only a basic description, with no additional documentation to
support the charges. The Consortium’s executive director received
$124,108 in addition to $82,000 in start-up costs. The invoices for the
executive director’s services included only the description “CASF
Grant Implementation and Coordination Services.” The invoices for
the director’s services did not include the number of hours worked or
a description of tasks performed. The description on two other
consultants’ invoices were “Support Services” and “Support services
for Broadband Implementation Project.” There was no detailed
description of what services were provided, when the services were
provided, or a timesheet to support the hours charged. Another invoice
with the description “Website Administration,” at $8,000, was
submitted without additional details or supporting documentation. We
also noted that the owner of the website administration company was
related to the Consortium’s executive director. CPUC staff members
did not question the invoices or request additional information to
substantiate the charges.
Consortium A’s executive director made purchases, totaling $12,136,
that we could not verify were directly related to the CASF Program.
The executive director purchased items such as antivirus protection;
Zoom; Dropbox; subscriptions to the Wall Street Journal, The
Washington Post, The New York Times, Los Angeles Times,
Los Angeles Business Journal, Desert Sun, and The Press Enterprise;
printer paper, ink cartridges, and toner, in addition to billing printing
costs. Although these purchases may have been used for CASF
Program consortia activities, we question whether the CPUC should
have allowed full reimbursement for these indirect costs. In addition,
some subscriptions were associated with the executive director’s
personal or consulting business email address. CPUC did not have any
policies or procedures regarding indirect costs associated with
consortia activities, and CPUC staff members considered all indirect
costs to be allowable.
Consortium B budgeted $6,000 for yearly indirect costs in its application.
The Consortium billed $3,000 in each biannual progress payment, but did
not provide any support for the calculation of its indirect costs. CPUC staff
members did not request supporting documentation for indirect costs
because the amount did not exceed the $6,000 approved in the annual
budgets. Consortium B’s budget specified that the indirect costs were
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
associated with producing the semi- annual and annual progress reports
and submitting payment requests. However, these specific tasks could
have been separately accounted for as direct costs. We question the $9,000
reimbursed for indirect costs due to a lack of supporting documentation.
Lack of adequate review
The lack of adequate review by CPUC staff members allowed
Consortium A to bill and receive more than the maximum funding of
$150,000 for its first year. The Consortium received $265,086 for the first
year of the grant period, $115,086 more than the maximum funding
allowed. Although CPUC limited reimbursements for the second year to
$34,913, the payments did not comply with the budgets from
Consortium A’s approved annual work plans.
Oversight and administrative issues should be addressed
We also identified oversight and administrative issues with Consortium A
that CPUC should address with the Consortium. Consortium A acts as its
own fiscal agent, resulting in reduced program oversight and a greater risk
of the improper use of grant funds. In addition, Consortium A did not meet
its annual audit requirements.
Reduced program oversight
Each regional consortium is required to retain at least one fiscal agent to
represent it when sponsoring an application, administering fiscal activities,
receiving and dispersing funds, and ensuring that it is complying with the
approved terms of a grant agreement. A fiscal agent may be a local public
institution, a town, or a certified telecommunications carrier.
Consortium A submitted a request to act as its own fiscal agent, and the
CPUC’s Communications Division Director approved the request on
April 27, 2021. Although the CASF Program guidelines do not explicitly
state that a consortium cannot act as its own fiscal agent, approving
Consortium A’s request increased the risks associated with a lack of
segregation of duties.
As a result of the CPUC allowing Consortium A to act as its own fiscal
agent, the Consortium’s executive director became the responsible
individual for fiscal agent duties, including performing administrative
tasks such as record keeping, in addition to being the Project Manager
responsible for completing the majority of activities noted on the annual
work plan. Consortium A’s executive director was therefore able to review
and approve invoices, maintain records, receive and disburse funds, ensure
that the Consortium was complying with the approved terms of the grant
agreement, and provide consulting services. Personnel costs previously
budgeted for the previous fiscal agent’s two employees and a travel budget
totaling $22,400 were reallocated to the executive director’s budget.
Consulting services billed to the CASF Program grant were provided by
three individuals for the entire grant period. These individuals, one of
whom was the executive director, were on Consortium A’s Executive
Committee when the Consortium became its own fiscal agent. Therefore,
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
members of the Executive Committee were able to review and approve
one another’s invoices and purchases. The lack of adequate segregation of
duties increases the risks that noncompliance with program guidelines will
not be prevented, detected, or corrected on a timely basis.
Annual audit requirements not met
Consortium A’s grant was approved for three years starting on
November 1, 2019. Therefore, the annual audit of its expenditures should
be from November 1 to October 31 of each year in the grant period.
Consortium A’s annual audits did not meet the requirements for the first
two years of the grant period.
Grant Year 1 (November 1, 2019, through October 31, 2020)
An audit for the fiscal year ended June 30, 2020, was conducted on the
fiscal agent’s financial statements instead of on Consortium A’s
expenditures. Per CPUC D.18-10-032 (section 2.5.2, “Discussion”), “a
general audit of the fiscal agent’s overall organization would not fulfill the
annual audit required by Pub. Util. Code, §281(g)(2).”
In addition, the annual audit report submitted by Consortium A did not
meet statutory requirements. PUC section 281 requires a description of
activities completed during the prior year, how each activity promotes the
deployment of broadband services, and the cost associated with each
activity; and the number of project applications for which the Consortium
provided assistance. CPUC staff members did not request these items
before approving the annual year-end payment request.
Grant Year 2 (November 1, 2020, through October 31, 2021)
Consortium A received $149,893 from the CPUC for its Grant Year 2
expenses. During our audit, we noted an unexplained difference between
the reimbursement amount for Grant Year 2 and the expenses disclosed in
the Consortium’s audited annual financial report for the same period. We
learned that the CPUC had not received the Consortium’s complete
audited annual financial report; instead, it received only the auditor’s
opinion page.
We requested and received the entire audited annual financial report. The
report disclosed $60,111 in grant revenues and $60,153 in total expenses.
The related notes to the financial statements indicated that 65% of
Consortium A’s grant revenue was from the Southern California
Association of Governments and 35% was from CPUC. Therefore, only
$21,039 of the revenues was related to the CASF Program.
Section VIII.A., “Disbursement of Grant Funding,” of the CPUC’s
Administrative Manual (Version 7, April 2019) for consortia grants states,
in part:
A grant recipient may request reimbursement of start-up costs up to 25%
of entire approved grant [amount] prior to its first Bi-annual Progress
Payment Request. If a grant recipient requests an initial start-up cost
payment, then a Start-Up Period Report is required. Such request must
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
be supported by documentation, e.g. receipts, invoices, quotes, etc. The
Start-Up Period Report must be submitted no later than three months
after the completion of the start-up activities. Subsequent disbursements
are on a bi-annual progress report-review basis.
Appendix 1, Section 1.2, “Amount Available for Grants,” of
CPUC D.18-10-032 states, in part:
Amount of Grant Funding Allocations
. . . the Commission [CPUC] will continue to award grants based only
upon the budgeted level of program activities approved for each
Consortium, subject to a maximum funding cap of $150,000 per year per
Consortium. . . . Where an application seeks multi-year funding,
however, the application must still present year-by-year annual Work
Plans and budgets. . . .
Appendix 1, Section 1.4, “Account Objective and Allowable Activities”
of CPUC D.18-10-032 states, in part:
Consistent with the revised objective, the Commission will fund grantees
for activities consistent with the statutory mandate specified in Pub. Util.
Code §281:
Collaborating with the Commission to engage regional consortia,
local officials, internet service providers (ISPs), stakeholders, and
consumers regarding priority areas and cost-effective strategies to
achieve the broadband access goal.
Identifying potential CASF infrastructure projects, along with other
opportunities, where providers can expand and improve their
infrastructure and service offerings to achieve the goal of reaching
98% broadband deployment in each consortia region.
Assisting infrastructure applicants in the project development or
grant application process.
Conducting activities such as the following, as long as they lead to
infrastructure applications:
o Support project permitting activities.
o Engaging local government officials and communities to better
understand and explain regional broadband needs and solutions.
o Conducting an inventory of public assets (e.g. rights-of-ways,
publicly owned towers, public utility poles, equipment housing,
publicly owned property) and aggregate demand, including
speed tests and the identification and updates of priority areas.
Assisting the Commission in publicizing requests for wireline
testing volunteers in areas, as needed.
. . . The CASF program will only fund consortia activity directly related
to and in support of infrastructure applications.
Appendix 1, Section 1.13, “Payment,” of CPUC D.18-10-032 states “All
requests for progress payments and reimbursements must be supported by
documentation, e.g., receipts, invoices, quotes, etc.”
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
PUC section 281(g)(2) states:
Each consortium shall conduct an annual audit of its expenditures for
programs funded pursuant to this subdivision and shall submit to the
commission an annual report that includes both of the following:
(A) A description of activities completed during the prior year, how each
activity promotes the deployment of broadband services, and the
costs associated with each activity.
(B) The number of project applications assisted.
Recommendation
We recommend that the CPUC:
Establish adequate internal controls to ensure that payments are
adequately supported and comply with program requirements
established by PUC section 281 and the CPUC;
Develop policies and procedures, and provide adequate managerial
review to ensure that grant payments from the Consortia Account
comply with CASF Program requirements and PUC section 281;
Recover the improper payments made to Consortium A;
Establish adequate internal controls to ensure that consortia meet the
annual audit requirements of PUC section 281(g)(2); and
To reduce the risks associated with a lack of segregation of duties,
reconsider allowing Consortia A to act as its own fiscal agent.
FINDING 3— Improper grant applications
Inadequate
The CPUC approved 172 Adoption Account grant applications, with a
controls over the
total awarded amount of $14,655,648, during the audit period. We
Adoption Account
judgmentally selected 14 of the 172 approved grant applications for
resulting in
testing. We identified one grant application that was improperly approved
noncompliance
by expedited review and three grant budget amounts that were
with program
miscalculated.
guidelines and
improper and To receive a grant by expedited review, applicants must propose to serve
questioned low-income populations. Projects that do not meet this criteria must be
payments approved by the CPUC via resolution. The grant application indicated that
the median income level of the community was $98,953, and that the
project would not serve a low-income community. Therefore, this project
should have been approved by the CPUC via resolution.
In addition, CPUC staff members miscalculated three grant budget
amounts, overstating the funding amount allowable for the related projects
by approximately $47,784. CPUC staff members erroneously included
costs funded by other sources in the budget, and calculated a staffing and
labor budget amount that exceeded the 85% limit for budget line items.
We found no indication that the calculated budget amounts were subject
to secondary or supervisory review.
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Review process for payment requests needs improvement
The CPUC processed 138 payments, totaling $7,753,958, from the
Adoption Account during the audit period. We judgmentally selected
21 payments, totaling $6,359,520, for testing. Each of the 21 payments
included numerous reimbursement requests for expense items such as
labor, equipment, services, and costs for COVID-19 mitigation efforts. We
found that 12 of the 21 payments included improper payments totaling
$31,226, and $293,241 in payments that lacked adequate supporting
documentation.
Improper payments
The CPUC reimbursed two grantees for items that were not in their
approved budgets, resulting in unallowable costs of $29,060. These
unallowable costs were for the purchase of advertising software and
mobile storage units. In addition, the CPUC allowed 100% reimbursement
of purchase costs up to $750 for in-classroom computing devices and up
to $150 for take-home computing devices. However, the CASF Program
guidelines allow reimbursement of up to 85% of eligible program costs.
We found that the CPUC improperly paid approximately $2,166 due to
this reimbursement method and other calculation errors.
Lack of adequate supporting documentation
In addition, the CPUC reimbursed a grantee $34,304 for costs that were
supported by documentation of questionable validity. An invoice from the
grantee included purchases of 15 Chromebooks with minimum system
specifications (Intel Celeron, 4GB RAM) at a unit price of $750. The price
of a basic Chromebook is generally less than $400. Additional review and
follow-up should have been performed before payment. In addition,
invoices for furnishings and printers were from home-based businesses.
We questioned these costs because we could not determine the validity of
the invoices provided by the grantee. Based on the invoices, one of the
vendors and the grantee had the same address, which appears to be a co-
working space. In addition, the cost of items on the invoice appears to be
significantly higher than market price.
In five of the 21 payments tested, we found that the CPUC had reimbursed
$258,937 for staffing and labor costs that included only grantee-provided
spreadsheets as supporting documentation. Although some spreadsheets
included the total hours by employee or classification and the billing rates,
the spreadsheets were not supported by timesheets, and the billing rates
were not predetermined by the grant/contract. Furthermore, the
reimbursement request lacked adequate details of the tasks performed by
the employees and how their time related directly to grant activities. We
could not trace the staffing and labor costs documented in grantee-
provided spreadsheets to source documents such as timesheets, payroll
records, or paystubs. Due to the lack of adequate supporting
documentation, we could not verify whether the staffing and labor
expenditures were incurred and directly related to grant activities.
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
GC sections 13400 through 13407 require state agencies to establish and
maintain internal controls, including a system of policies and procedures
adequate to ensure compliance with applicable laws and other
requirements, and an effective system of internal review.
Appendix 1, Section 1.6, “Eligible Projects,” of CPUC D.19-02-008
states, in part:
The Commission may fund up to 85 percent of the eligible program costs
and may reimburse the following:
a. Education and outreach efforts (including travel, up to 10% of
approved grant amount) and materials;
b. Acceptable computing devices (does not include smartphones)
within limits;
o In-classroom computing devices
o Take home computing devices (for Digital Literacy projects
only);
c. Software;
d. Printers;
e. Routers;
f. Provision of technical support for the computing devices subsidized
through this program;
g. Desks and chairs to furnish a designated space for digital literacy or
broadband access;
h. For Digital Literacy Projects, gathering, preparing, creating and
distributing digital literacy curriculum; and
i. Staff including digital literacy instructors, staff for monitoring the
designated space, or staff for administering call centers (if
applicable).
Note 17 to Appendix 1, Section 1.6, “Eligible Projects,” specifies that the
85 percent cap applies to individual budget line items in addition to the
overall budget.
Appendix 1, Section 1.7, “Subsidy Levels,” of CPUC D.19-02-008 states,
in part:
The Commission may fund up to 85 percent of the eligible program costs
listed [in Section 1.6].
Reimbursement for computing devices used in community training
rooms or other public space, such as local government centers, senior
centers, schools, public libraries, nonprofit organizations, and
community-based organizations, [is] limited to $750 per device, with a
cap of 15 devices per designated space or project. . . .
. . . Reimbursement for take-home computing devices [is] capped at $150
per device, limited to one computing device per eligible household, and
limited to $10,000 per application/project location. . . .
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Appendix 1, Section 1.11, “Expedited Review,” of CPUC D.19-02-008
states, in part:
Projects meeting the below criteria may be eligible for expedited review.
The Commission assigns staff the task of approving applications that
meet all of the following criteria:
a. Applicant is proposing to serve a low-income population. . . .
Appendix 1, Section 1.15, “Payment,” Item f., of CPUC D.19-02-008,
states:
Payment will be based upon receipt and approval of invoices and other
supporting documentation showing [that] the expenditures incurred for
the project are in accordance with their approved application and budget.
Recommendation
We recommend that the CPUC:
Establish adequate policies and procedures to ensure that payments
are adequately supported and comply with program requirements
established by PUC section 281 and the CPUC;
Provide adequate managerial review to ensure that grant approvals and
payments from the Adoption Account comply with CASF Program
requirements and PUC section 281; and
Recover any improper payments made to grantees.
Review process for payment requests needs improvement
FINDING 4—
Inadequate
AB 1299 (Chapter 507, Statutes of 2013) made available $20 million for
controls over the
Public Housing Account grants and loans to finance publicly supported
Public Housing
community (PSC) infrastructure projects, and $5 million to finance PSC
Account resulting
adoption projects. Since October 2018, the entire $5 million allocated for
in noncompliance PSC adoption projects has been awarded. As these payments were made
with program during the audit period, we included them in the population for testing.
guidelines and
improper payments Improper payments
CPUC processed 182 Public Housing Account payments, totaling
$3,523,560, during the audit period. We judgmentally selected 18 Public
Housing Account payments totaling $790,866 for testing. Eleven of the
payments were for PSC infrastructure projects, and seven were for PSC
adoption projects. We noted no exceptions in the 11 payments for PSC
infrastructure projects. However, we found that five of the seven payments
for PSC adoption projects included warranty costs, totaling $21,785, for
refurbished computing devices. These costs were not eligible for
reimbursement because the Public Housing Account guidelines do not
indicate warranty costs as an eligible item.
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Lack of adequate supporting documentation
We noted that Communications Division staff members did not require
documentation to support that the grantee had provided for 15% of its
adoption project costs in order to be reimbursed for the other 85% of its
costs. Of the seven payments for PSC adoption projects that we tested, six
payments representing $29,000 in matching funds lacked adequate
supporting documentation. Without validating the grantee’s claimed
matching funds against supporting documentation, the CPUC could not
ensure that only 85% of adoption project costs was reimbursed.
GC sections 13400 through 13407 require state agencies to establish and
maintain internal controls, including a system of policies and procedures
adequate to ensure compliance with applicable laws and other
requirements, and an effective system of internal review.
Appendix B, Section 2.1. “Funds Requested,” of CPUC D.14-12-039
states:
The applicant must indicate the amount of funding requested, i.e.,
whether it is applying for a grant only or a combination of a grant and a
loan. . . . The Commission will fund up to 85 percent of the costs for
adoption projects for residents in PSCs, including reimbursement of the
following adoption activities/items:
Education and outreach efforts and materials;
Desks and chairs to furnish a designated space for digital literacy;
Acceptable computers and devices (excluding smartphones) and
software intended for use either in a computer lab or their household;
Digital literacy instructors;
Printers for a computer lab or other designated space for digital
literacy;
Routers; and
Provision of residential (not network) technical support.
In order to obtain reimbursement, grantees must also provide sufficient
documentation, such as receipt for the goods or documentation of hours
worked.
Appendix 2, Section 2.1., “Funds Requested,” of CPUC D.18-06-032
states, in part:
The applicant must indicate the amount requested. As stated in
Section 2.1.2, the Commission will fund up to 85 percent of the costs for
adoption projects for residents in PSCs, including reimbursement of the
following adoption activities/items:
Education and outreach efforts and materials;
Desks and chairs to furnish a designated space for digital literacy;
Acceptable computers and devices (excluding smartphones) and
software intended for use either in a computer lab or their household;
Digital literacy instructors;
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Printers for a computer lab or other designated space for digital
literacy;
Routers; and
Provision of residential (not network) technical support.
In order to obtain reimbursement, grantees must also provide sufficient
documentation, such as receipt for the goods or documentation of hours
worked.
Appendix B, Section V., sub-section 2.6., “Proposed Project Description,”
of CPUC D.14-12-039 states, in part:
. . . The Applicant may provide the 15 percent match using the following
(1) donations from residents in exchange for devices; (2) donations of
devices or software from third parties; and (3) volunteer personnel hours
worked to train residents. Applicants must identify the goods and/or
hours worked and [their] monetary value. . . .
Appendix 2, Section 2.6., “Proposed Project Description,” of CPUC
D.18-06-032 states, in part:
. . . The Applicant may provide the 15 percent match using the following
(1) donations from residents in exchange for devices; (2) donations of
devices or software from third parties; and (3) volunteer personnel hours
worked to train residents. Applicants must identify the goods and/or
hours worked and [their] monetary value.
Appendix B, Section X., “Payment,” of CPUC D.14-12-039 states, in part:
. . . Payment will be based upon receipt and approval of invoices/other
supporting documents showing the expenditures incurred for the project
in accordance with the CASF [Program] funding submitted by the
[California Advanced Services Fund grant] recipient in their
application. . . .
Appendix 2, page 19, “Payment,” of CPUC D.18-06-032 states, in part:
. . . Payment will be based upon receipt and approval of invoices/other
supporting documentation showing the expenditures incurred for the
project in accordance with the CASF [Program] funding submitted by
the [Public Housing Account grant] recipient in their application. . . .
The Public Housing Account no longer funds broadband adoption
projects. However, eligible applicants can apply for digital literacy project
grants from the Broadband Adoption Account, which funds up to 85% of
eligible program costs.
Recommendation
We recommend that the CPUC:
Establish adequate policies and procedures to ensure that grantees’
total project costs, including matching funds, are adequately
documented and supported;
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Provide adequate managerial review to ensure that grant payments
from the Public Housing Account comply with CASF Program
requirements and PUC section 281; and
Recover any improper payments made to grantees.
FINDING 5— The CPUC did not collect the required job creation data because the CPUC
Types and numbers has no procedures or methodology for calculating and tracking the types
of jobs created and numbers of jobs created as a result of the CASF Program.
cannot be reported
on as required by We requested the CPUC’s documentation on the types and numbers of
jobs created by the CASF Program during the audit period. However, the
statute
CPUC has not been tracking this information. CPUC staff members
indicated that it is difficult to measure the types and numbers of jobs
created. Although we understand that it would be difficult for the CPUC
to report the exact number of indirect jobs created, methodologies exist for
estimating the number of indirect jobs created. Furthermore, direct job
creation is reportable. For example, infrastructure projects can result in
broadband providers hiring additional employees to build new broadband
infrastructure; consultants may be hired to assist in consortia activities or
to conduct studies for tribal technical assistance; and digital literacy
instructors may be hired for broadband adoption projects.
CPUC staff members indicated that PUC section 912.2 does not state the
manner in which job creation should be measured. Although this is a valid
statement, to meet PUC section 912.2 requirements, the CPUC is
nevertheless responsible for determining how it would measure the types
and numbers of jobs created.
PUC section 912.2 states:
On or before April 1, 2023, and biennially thereafter, the commission
shall conduct a fiscal and performance audit of the implementation and
effectiveness of the California Advanced Services Fund to ensure that
funds have been expended in accordance with the approved terms of the
grant awards and loan agreements pursuant to Section 281 or 281.2 and
shall report its findings to the [California State] Legislature. The reports
shall include an update to the maps in the final report of the California
Broadband Task Force and data on the types and numbers of jobs created
as a result of the program administered by the commission pursuant to
Section 281 or 281.2 and shall include information specified in
Section 914.7.
Recommendation
We recommend that the CPUC establish procedures and a methodology
and begin tracking and measuring job creation to facilitate meeting the
PUC section 912.2 reporting requirements.
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California Public Utilities Commission California Advanced Services Fund Program – Performance Audit
Attachment A—
2021 California Advanced Services Fund Annual Report
Attachment B—
California Public Utilities Commission’s Response
to Draft Audit Report
State Controller’s Office
Division of Audits
Post Office Box 942850
Sacramento, CA 94250
www.sco.ca.gov
S23-CSF-0001