The Universal Service Administrative Company has released Arthur Andersen's post-commitment audit of 18 E-rate beneficiaries and the funding they received in Year 1 of the program.
The circumstances surrounding one beneficiary were referred to Andersen's Business Fraud & Investigation Services for further review. The Schools and Libraries Committee discussed the matter in executive session at its quarterly meeting on Oct. 22.
The audits were targeted at schools and libraries that had received large amounts of money, particularly in the internal connections area. The reviews also included a selection from all four applicant categories-public and private schools, school districts, consortia and libraries. The reviews involved, among others, the school districts of New York City, Los Angeles, Chicago and Milwaukee, the New York and Milwaukee Public Libraries and the Puerto Rico Department of Education and Illinois State Board of Education.
In a letter accompanying the report, USAC said that the first round of reviews "demonstrated that applicants are attempting to comply with program rules and that they are generally successful in doing so." As a result of the reviews, it said, it had prepared a "best practices" document and guidelines on what documents should be retained by applicants and service providers. Nevertheless, it acknowledged, some problems were identified:
- A "small number of beneficiaries" were unable to provide satisfactory evidence of compliance with competitive bidding requirements;
- In "a few cases," fund were spent on ineligible services;
- In one case, documentation indicated that funds were spent on projects outside of the funding year and invoices were based on estimated, not actual, costs.
In its report, Andersen noted a case in which $2.6 million worth of Internet services could not be linked to specific schools, as the applicant had indicated its in submission. In another case, it said an applicant and its vendor were unable to provide invoices or other documentation to support the correct allocation of $1.958 million in reimbursements. Andersen said it was also unable to physically account for all of the E-rate-supported equipment purchases during its site visits to that beneficiary. In two other instances, it said the school had not yet paid its portion of the price of the bill because it was not satisfied with network connectivity test results. Andersen noted that in both cases the SLD had funded its portion of the price and had not been notified that the remaining funds were being withheld.
Schools and Libraries Committee members said that they were generally pleased with the results, particularly because they concerned the program's first funding year, when there was a good deal of confusion about the program. Committee member Anne Bryant described the results as "pretty amazing," and Committee chair K.G. Ouye said she was "very pleased" with the audit. Members were particularly happy that all of the beneficiaries did, in fact, have an approved technology plan in place at the time they applied.
USAC has already widened its post-commitment auditing activities and expects to do more in the future. Previously, it was reported that it hoped to engage the Defense Contracting Auditing Agency to help out, but USAC CEO Cheryl Parrino reported at the meeting that that agency was "no longer interested or able to perform" the work for USAC. Parrino said USAC would be issuing an RFP for auditing support, as well as drawing on its own internal resources and those of the Federal Communications Commission.
The SLD provides information on the documents that E-rate applicants should retain copies of at