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Pursuant to a congressional request, GAO commented on the Federal Communications Commission's (FCC) implementation of section 254(h) of the Communications Act of 1934, focusing on: (1) whether FCC has the authority to establish two not-for-profit corporations--the Schools and Libraries Corporation and the Rural Health Care Corporation; and (2) the federal laws, employment rules, and congressional oversight that govern the operation of the corporations. GAO noted that: (1) FCC exceeded its authority when it directed the National Exchange Carriers Association, Inc. to create the Schools and Libraries Corporation and the Rural Health Care Corporation; (2) the Government Corporation Control Act specifies that an agency may establish or acquire a corporation to act as an agency only by or under a law of the United States specifically authorizing the action; (3) these entities act as the agents of the FCC and, therefore, could only be created pursuant to specific statutory authority; (4) because FCC has not been provided such authority, creation of the two corporations violated the Government Corporation Control Act; (5) since FCC's Order required that private corporations be established; they are not subject to statues that impose obligations on federal entities and federal employees in the areas of employment practices, procurement, lobbying and political activity, ethics, and disclosure of information to the public; (6) on the other hand, each of the corporations is subject to federal statues applicable to private corporations, unless outside the coverage of the statue; and (7) Congress has no direct oversight over the corporations.

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