Audit Bureau claims state agency failed to verify broadband grant spending

Broadband service providers that received millions of dollars in grants aimed at expanding high speed internet in Wisconsin failed to document what they actually spent on their projects, according to a new report from the state Legislative Audit Bureau. 

The bureau said it examined grants administered by the Wisconsin Public Service Commission under two federal programs: the Coronavirus Aid, Relief and Economic Security (CARES) Act and the American Rescue Plan Act (ARPA).

The report raised concerns about spending oversight. 

For example, nearly all the 384 supporting documents the PSC reviewed for CARES Act reimbursements failed to indicate what the grant recipients had actually paid to construct their projects.

What's more, the PSC did not document its efforts to verify that grant recipients had built the high-speed internet infrastructure for which they were reimbursed.

There was also a lack of transparency in the grant decision making process.

An estimated 650,000 Wisconsin residents lack access to high-speed internet, also known as broadband. Hundreds of millions of dollars in state and federal grants have been poured into the solving the problem and much more spending is on the way. 

"However without any written procedures, documented verification efforts, or proper cost accounting, it's still unclear if these dollars are being put to their highest and best use," state Sen. Robert Cowles, a Republican from Green Bay, said in a statement. 

"PSC's lack of oversight and rewriting of application criteria after applications have been submitted has eroded much of my confidence concerning the agency's ability to award future broadband expansion grants," Cowles said.

The Public Service Commission has used ARPA funds to award 83 broadband grants totaling nearly $100 million. It has used CARES Act funds for 12 grants totaling $5.4 million.

But the Legislative Audit Bureau said the PSC failed to establish comprehensive written program policies for the ARPA spending and didn't consistently adhere to its grant application instructions when deciding which projects to fund.

There were problems with the way CARES Act grant recipients were reimbursed.

"We found that 337 of the 384 documents were invoices and 47 documents were payroll reports, receipts, and land easement contracts. (But) an invoice is not proof that a provider paid a cost because, for example, a supplier may accept payment for less than the full invoiced amount," the report said.

Exactly where service was implemented or improved was also uncertain. 

Through spot checks, the PSC has said, it's attempted to verify that grant recipients built the broadband networks for which they were reimbursed and that service was delivered. But the agency did not provide proof for the CARES Act grants, according to the report. 

"PSC did not document its contacts with businesses and residences in the areas covered by the projects, its attempts to ascertain whether it was possible to order broadband service at locations in those areas, or the information it had obtained from the Federal Communications Commission," the report said. 

There was a lack of transparency in the ARPA grant decision-making process. 

A four-member panel, including three PSC employees and one Department of Public Instruction employee, scored the applications and made recommendations to the PSC's three politically-appointed commissioners. 

"We asked PSC to provide us with the scores that panel members had given to each grant application because we expected that PSC would have retained evidence of how the applications were scored," the report said. But the agency said it did not collect that information because it was considered to be the personal notes of the panel members.

The Legislative Audit Bureau recommended the PSC make multiple changes in its broadband spending oversight and report to the Joint Legislative Audit Committee by Nov. 15 on the progress. 

The PSC said it disagreed with expense reimbursement portions of the report. 

It was worth noting that the audit did not find any errors or unallowable expenses, PSC Chairwoman Rebecca Cameron Valcq said in a letter to the Legislative Audit Bureau. 

"Each of the reimbursement requests was supported and accurate per federal guidance and the grant agreement," she said.

PSC Commissioner Ellen Nowak, a Republican, has been critical of how the agency administered the federal broadband grant money. 

She said there was a rush to get the CARES Act grants "out the door," and it led to poor decisions.

"Unlike the previous grant proceedings, the criteria for approval in this proceeding was solely whether the applicant thought they could spend the money by the end of 2020," she said.

Of the three commissioners, Nowak cast the only vote against those awards.

"Even though it wasn't required under the CARES Act, asking applicants to provide a match to the federal dollars would have allowed us to accomplish the same level of broadband deployment but at a lower cost to taxpayers," she said.

Projects that had previously been denied by the commission, but qualified for being resubmitted later, were approved under CARES. 

"All of a sudden they became worthy just because we had money on the table and it had to be spent by the end of the year," Nowak said.

In June, the PSC awarded $125 million in broadband expansion grants for 71 projects aimed at reaching around 83,000 homes and 4,600 businesses.

The projects will impact 45 counties, according to the agency, bringing new or improved internet access to unserved and underserved areas. Altogether there were 194 applications requesting more than $495 million in funding. 

The Legislative Audit Bureau didn't look at state-funded broadband expansion grants, although its review of the CARES and ARPA grants managed by the PSC raised questions about the overall grant approval process and oversight. 

"I think this just demonstrates that the entire program is due for some fundamental changes," Nowak said.