Actions Taken to Implement Key Operational Recommendations

We found that the Corporation has taken actions to implement the key recommendations we believed should be completed before issuing any funding commitment letters to applicants. Specifically, the Corporation has sampled applications that were already processed to identify and correct any systemic weaknesses in its program integrity review procedures; finalized the program’s procedures, automated systems, and internal controls; and obtained a report from its independent accountants that the Corporation had suitably designed its internal controls to prevent or detect material departures from program objectives, as of November 4, 1998, in conformity with criteria set forth by the Corporation in its “Management’s Statement of Universal Service Discount Mechanism Program Objectives and Internal Control Objectives.”
In addition, the Corporation is following our recommendation to complete its special reviews of high-risk applications before issuing funding commitment letters to these applicants. One recommendation, however, still needs to be implemented: FCC needs to develop adequate goals, performance targets, and measures for the program. These represent about $1.2 billion of the $2 billion requested by all applicants for the program’s first year. In many ways, the Corporation is still in a start-up mode and continues to need help in resolving operational problems. We subsequently met with officials from the Schools and Libraries Division, the Common Carrier Bureau of the Federal Communications Commission, and PricewaterhouseCoopers.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Schools and Libraries Corporation's progress in implementing GAO's July 16, 1998, recommendations for improving its procedures and internal controls.

What GAO Found

GAO noted that: (1) the Corporation has taken actions to implement the key recommendations that GAO believed needed to be completed prior to issuing any funding commitment letters to applicants; (2) these included: (a) sampling processed applications to identify and correct any systemic weaknesses in program integrity review procedures; (b) finalizing the program's procedures, automated systems, and internal controls; and (c) obtaining a report from its independent accountants on the suitability of the Corporation's internal controls to prevent or detect material departures from its program objectives; (3) the Corporation is taking action on GAO's recommendation to complete special reviews of high-risk applicants before issuing commitment letters to these applicants; (4) the Federal Communications Commission (FCC) has not yet implemented GAO's recommendation to develop adequate goals, performance targets, and measures for the program; (5) with GAO's key operational recommendations implemented, the Corporation began issuing its funding commitments for the first year to applicants in late November 1998; (6) the program still faces major challenges as it moves into new operational areas, such as reviewing and authorizing reimbursements to vendors; and (7) given the fact that the program is still essentially in a start-up mode, close oversight by FCC will be especially important in helping to identify and resolve operational problems.