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FCC Inspector General Reports on Potential E-rate Abuses

The Federal Communications Commission's Office of Inspector General

(OIG) released its semi-annual report December 6, providing new information about its ongoing investigations of the E-rate program and a tough warning about the extent of abuses it is finding.

The OIG said it is currently tracking 26 investigations, including 16 that were begun in the past year. It said that the cases being tracked "range in dollar value from a $4,000 false statement case to several cases in which the program has committed hundreds of millions of dollars of E-rate funding."

The OIG also reported that the Justice Department's Antitrust Division has established a task force to conduct investigations of the Universal Service Fund that is made up of attorneys from each of the division's seven field offices and the National Criminal Office.

The OIG concluded, "The results of audits and the allegations under investigation lead us to believe the program is subject to unacceptably high risk of malfeasance through noncompliance and program weaknesses." The OIG said it would request $2 million in its fiscal 2004 budget request to provide for additional oversight of the Universal Service Fund. However, it acknowledged that its efforts so far had been hampered by its inability to get access to adequate auditing resources.

The inspector general said that its involvement in investigations had provided it with additional insight into particular program areas. "For example, we noticed that many of the cases being referred for investigation alleged that no competitive procurement process took place and that, as a result, the cost of the goods and services was inflated." The report noted that private schools are not subjected to the same competitive bidding requirements of public institutions, and that this has been recognized as a problem.

The inspector general said "another overarching concern" was the need for "a suspension/debarment program to preclude chronically noncompliant participants from obtaining funding." It noted that the FCC's Wireline Competition Bureau had asked the Universal Service Administrative Company to develop a suspension/debarment process that will be included in a future rule-making.

The inspector general said that an audit of 18 beneficiaries in the program's first year had turned up approximately $8 million in appropriate funding disbursements. It said that a "major investigation" involving the OIG and the FBI had been referred as a civil false claims suit to the Department of Justice. In addition, the OIG said it had worked out some issues and that Justice was now prepared to pursue E-rate-related prosecutions under the False Claims Act.

The full report is available by clicking here.

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