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Highlights

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.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Federal Communications Commission 1. 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.
Closed - Implemented
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.
Federal Communications Commission 2. 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.
Closed - Implemented
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.
Federal Communications Commission 3. 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.
Closed - Implemented
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.
Schools and Libraries Corp. 4. 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.
Closed - Implemented
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.
Federal Communications Commission 5. 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.
Closed - Implemented
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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