Schools and Libraries Corporation:

Actions Needed to Strengthen Program Integrity Operations Before Committing Funds

T-RCED-98-243: Published: Jul 16, 1998. Publicly Released: Jul 16, 1998.

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GAO discussed issues related to the Schools and Libraries Corporation's operating procedures and internal controls, focusing on: (1) its progress in reviewing applications; (2) the scope and timing of key compliance tests; (3) the status of its efforts to finalize its operating procedures; and (4) the status of the independent audit to determine whether the Corporation has developed an appropriate set of internal controls to mitigate against fraud, waste, and abuse.

GAO noted that: (1) the Corporation has made substantial progress in establishing an operational framework for the program that is consistent with relevant Federal Communications Commission (FCC) orders; (2) with regard to processing applications, the Corporation has worked with schools and libraries to inform them about the program and its application procedures; (3) during the initial application period, which began on January 30, 1998, and ended on April 15, 1998, schools and libraries sent in over 32,600 applications for discounts; (4) however, processing these applications has taken longer than either the Corporation or FCC expected; (5) the Corporation relies on a combination of applicants' self-certifications, third-party reviews, and its own procedures to ensure compliance with FCC's rules and regulations; (6) the Corporation tests applications for compliance with rules on the eligibility of applicants and requested services, and on the amount of requested discounts; (7) also, while the Corporation plans to conduct additional tests and reviews to ensure that applications are consistent with program rules, their scope and timing have not been finalized; (8) while the Corporation has established procedures for initially reviewing the applications, it has not yet finalized all necessary procedures and related internal controls for the program; (9) GAO is particularly concerned about this because the Corporation estimates that invoices for payment could begin to arrive as soon as 15 days after commitment letters are sent out; (10) the FCC Chairman has called for an independent audit of the Corporation's internal controls to help mitigate against fraud, waste, and abuse; (11) since applicants and vendors could begin submitting forms and invoices for disbursement of funds as soon as 15 days after they receive their commitment letters, it is important that the Corporation have all of its disbursement procedures, systems, and controls in place and reviewed by the independent auditor before sending these letters; (12) the FCC has not developed performance goals and measures for this program consistent with the requirements of the Government Performance and Results Act of 1993; (13) FCC's Strategic Plan for Fiscal Year 1997-2002 and Annual Performance Plan for Fiscal Year 1999 mentions the schools and libraries program in the context of a large number of telecommunications initiatives, but establishes no specific performance measures or target levels of performance to be achieved by the program; and (14) the Corporation is still developing and finalizing some of its procedures and controls, and they are subject to change.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: Before issuing commitment letters for those applications identified as high risk, the Corporation should conduct detailed reviews of the technology plans and related documents to determine whether the applicants have the resources to effectively use the services requested and whether the applications are in compliance with FCC rules regarding eligibility.

    Agency Affected: Schools and Libraries Corp.

    Status: Closed - Implemented

    Comments: On July 16, 1998, FCC's Chairman directed the Corporation to implement the recommendation. As a result, the Corporation conducted detailed reviews of 358 high dollar applications, 226 high unit cost applications, and six applications for schools with large endowments prior to issuing funding commitment letters. The Corporation did not commit discount funding to three of the applications that were found to contain ineligible services.

    Recommendation: To help strengthen the Corporation's program integrity assurance operations and help ensure that funding is properly directed to eligible applicants, for eligible and appropriate services, and at appropriate discount levels, the Chairman, FCC, should direct the CEO of the Schools and Libraries Corporation to, before issuing any further funding commitment letters to applicants, obtain a report from its independent auditor that finds that the Corporation has developed an appropriate set of internal controls to mitigate against waste, fraud, and abuse.

    Agency Affected: Federal Communications Commission

    Status: Closed - Implemented

    Comments: FCC's Chairman directed the Corporation to accept the recommendation on July 16,1998. During their review, the independent accountants identified weaknesses in the Corporation's review procedures and program objectives, which the Corporation modified to the accountants' satisfaction. On November 4, 1998, the independent accounting firm reported that the Corporation's internal controls were suitably designed to prevent or detect material departures from its program objectives. As a result of waiting for the accountants to complete their work and correcting the weaknesses identified, the Corporation had stronger internal controls and more precise program objectives in place before making funding commitments to applicants.

    Recommendation: To help strengthen the Corporation's program integrity assurance operations and help ensure that funding is properly directed to eligible applicants, for eligible and appropriate services, and at appropriate discount levels, the Chairman, FCC, should direct the CEO of the Schools and Libraries Corporation to, before issuing any funding commitment letters to applicants, finalize procedures, automated systems, and internal controls for the post-commitment phase of the program's funding cycle, including funds disbursement.

    Agency Affected: Federal Communications Commission

    Status: Closed - Implemented

    Comments: On July 16, 1998, FCC's Chairman directed the Corporation to implement the recommendation. In early November 1998, the Corporation finalized the procedures, automated systems, and internal controls needed for making timely funding commitments and approving compensation to vendors for services provided to program applicants. After these procedures were finalized, the Corporation issued the first funding commitment letters to applicants in November 1998.

    Recommendation: To help strengthen the Corporation's program integrity assurance operations and help ensure that funding is properly directed to eligible applicants, for eligible and appropriate services, and at appropriate discount levels, the Chairman, FCC, should direct the Chief Executive Officer (CEO) of the Schools and Libraries Corporation to, before issuing any funding commitment letters to applicants, conduct detailed reviews of a random sample of applications to assess not only the soundness of these applications but also the overall effectiveness of the Corporation's program integrity procedures for detecting ineligible applicants, ineligible services, and inappropriate discount levels as defined by FCC orders. Should these reviews reveal systemic weaknesses in program integrity procedures or their implementation, the Corporation should take corrective actions before committing any funds.

    Agency Affected: Federal Communications Commission

    Status: Closed - Implemented

    Comments: On July 16, 1998, FCC's Chairman directed the Corporation to implement the recommendation. As a result, the Corporation sampled 100 applications, and found approximately $106,000 in ineligible items. A second review of 300 applications found approximately $314,000 in requested funding that would have gone to ineligible items. Based on these results, the Corporation decided to strengthen its review procedures by requiring its staff to perform complete manual reviews of every requested item in all 32,000 applications. These reviews were completed in February 1999 when the Corporation committed approximately $1.7 billion in discount funding to 26,785 applicants.

    Recommendation: The Chairman, FCC, should direct responsible FCC staff to develop goals, measures, and performance targets for the schools and libraries program that are consistent with the requirements of the Government Performance and Results Act. These measures should be defined by the end of this federal fiscal year so that data collection and analysis activities can begin during the program's first funding cycle and goals can be communicated to future applicants.

    Agency Affected: Federal Communications Commission

    Status: Closed - Implemented

    Comments: The Federal Communication Commission's Fiscal Year 2002 Budget Estimates (dated April 2001) included the goal to have 93 percent of public school instructional classrooms connected to the Internet by 2002. The plan states that performance for the program will be reported through analysis of data included in the Universal Service Administrator's Annual Report and data from the National Center for Educational Statistics.

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