Summary

The Telecommunications Act of 1996 expanded universal service affordable, nationwide telephone service to eligible schools and libraries and authorized the Federal Communications Commission (FCC) to implement a program to help these institutions acquire modern telecommunications services. The Schools and Libraries Corporation was established in late 1997 to run the program. In testimony before Congress last year, GAO recommended that the Corporation (1) analyze a random sample of processed applications to determine if there are any systemic weaknesses in the application review procedures; (2) complete the design of the program's operational procedures, automated systems, and internal controls; and (3) obtain a report from its independent accountants showing that the Corporation has developed an appropriate set of internal controls to mitigate against waste, fraud, and abuse. (See GAO/T-RCED-98-243 July 1998.) This report assesses the Corporation's progress in implementing GAO's recommendations and highlights additional issues that need to be monitored.

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.