FCC needs controls over E-Rate program, GAO says

The Federal Communications Commission’s Education Rate program, which spends $2 billion yearly in subsidies for Internet and phone services to schools and libraries, needs a strong risk assessment to curb fraud, a new report from the Government Accountability Office states.

The FCC has operated the E-Rate program since 1998 to reimburse eligible schools and libraries for telecommunications services and equipment. The program is administered by the nonprofit Universal Service Administrative Co. (USAC) and funded by consumers through the Universal Service Fund.

Even though the FCC and administrative company have set up internal controls to ensure integrity of the program, they haven't done a comprehensive risk assessment to fix apparent gaps in the auditing structure, the report dated Oct. 29 stated.

For example, of the 64 schools and libraries audited more than once over three years, GAO found 36 had repeat audit findings of the same rule violation. GAO found that the current beneficiary audit process lacks documented and approved policies and procedures.

“The design of E-Rate’s internal control structure may not appropriately consider program risks,” the report states. “GAO found, for example, that USAC’s application review process incorporates a number of different types and levels of reviews but that it was not clear whether this design was effectively and efficiently targeting resources to risks.”

To improve internal controls, GAO recommended that the FCC:

• Conduct a robust risk assessment of the E-Rate program.
• Based on the risk assessment, examine overall the design of E-Rate program to ensure alignment of internal controls to deal with risks.
• Implement a systematic approach to assess internal controls.
• Develop procedures to periodically monitor internal controls.

FCC officials agreed with the recommendations. However, the USAC disagreed with the GAO’s allegation that no robust risk assessment had been performed and said a 2008 review of the E-Rate program was such an assessment.