However, the FCC directed the establishment of the Schools and Libraries Corporation. To date, the Corporation has conducted over 130 outreach sessions informing schools and libraries about the program. NECA has 66 staff, the majority of whom are part of the program integrity assurance operation, which reviews the applications for compliance with the program’s eligibility requirements. Concerns Over Key Compliance Checks

To ensure compliance with FCC rules and regulations, the Corporation relies on a combination of applicants’ self-certifications, third-party reviews, and its own procedures. Instead, the Corporation focuses on reviewing the information submitted by applicants in their subsequent application for discounts (Form 471). As indicated above, the Corporation has already applied these three tests to more than one-half of the 32,600 applications it has received. Key Program Procedures Have Not Yet Been Finalized

The Corporation has not yet finalized all the procedures, systems, and internal controls that it needs in order to make funding commitments and approve vendor compensation for the discounted services provided to applicants. However, the procedures are still subject to change. The Corporation itself estimates that the invoices for payment could begin as soon as 15 days after commitment letters are sent. Verification of Soundness of Internal Controls Not Planned to Be Completed Before Funds Are Committed

In December 1997, FCC’s Chairman requested the Corporation to contract with an independent auditor to verify that the program’s processes and procedures provide the controls needed to mitigate against fraud, waste, and abuse. As noted earlier, applicants and vendors could begin sending in forms and invoices for funds disbursement as soon as 15 days after commitment letters have been sent out. It is therefore important that the Corporation have all of its disbursement procedures, systems, and controls in place and reviewed by the independent auditor before commitment letters are issued. FCC’s combined “Strategic Plan for Fiscal Years 1997-2002 and Annual Performance Plan for Fiscal Year 1999,” prepared in response to the Results Act, mentions the schools and libraries program in the context of a large number of telecommunications initiatives. An annual performance goal is to consist of two parts: (1) the performance measure that represents the specific characteristic of the program used to gauge performance and (2) the target level of performance to be achieved during a given fiscal year for the measure. Recommendations

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, we recommend that the FCC Chairman direct the Chief Executive Officer of the Schools and Libraries Corporation to complete the following actions 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. 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.
Why GAO Did This Study

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.

What GAO Found

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.