SLD Releases Summary Audit Results
Since 2000, USAC has engaged a public accounting firm to conduct on site audits of selected E-rate recipients. To date, there have been 41 such in depth audits. Until recently, however, there has been little formal indication of the audit findings. Information is now becoming available that indicates a wide range of problems.
The results of the first batch of 18 audits were turned over to the FCC in late 2000. In a report released by the FCC's Office of Inspector General this past June (OIG Report ), the FCC noted that one audit resulted in a major investigation by the FBI and that a $3.8 million civil false claims matter was presented to the Department of Justice. This case is still pending. Of the other 17 audits, the FCC noted that "weaknesses (ranging from regulatory non-compliances to computational errors)" were found in 14 cases involving $8 million in "inappropriate funding disbursements."
A formal report on the remaining audits has not yet been turned over to the FCC, but the FCC's June report notes that "preliminary results indicate that there may be findings at nearly all locations including several millions of dollars in inappropriate disbursements and unsupported costs."
This week, the SLD posted a summary of the auditors' observations on the entire 41 beneficiary audits (Beneficiary Audits ). The summary is informative because it classifies, and provides some measure of the extent of, problems being found, including:
(a) Twenty-two instances of competitive bidding issues including applicant inability to produce copies of reported contracts and/or evidence of compliance with competitive bidding requirements.
(b) Four instances of entity eligibility issues.
(c) Eleven instances of discounts being claimed for services not provided during the applicable program year.
(d) Twenty-three instances of incomplete invoice documentation including bills that did not support the requested reimbursements.
(e) Twenty-three instances of payment issues, more than half of which involved instances in which the undiscounted portion of service charges were not paid by the applicant.
(f) Twenty-six instances of equipment and service issues including the auditors' inability to identify specific equipment from fixed asset records.
(g) Fourteen instances of technology plan issues primarily involving the inability to produce plan approval letters or the lack of monitoring of plan implementation.
(h) One instance in which a contract did not have the performance bonds required by state law.
(i) Five other instances involving issues that, although not program violations, indicated poor control procedures.
These findings should serve as a warning to applicants that E-rate rules are being strictly enforced and a reminder that Item 32 of the Form 471 includes an applicant certification that any and all records relied upon by the application will be retained for five years for audit purposes.
The SLD has begun issuing a BEAR approval letter in a new format and has renamed it the "Form 472 BEAR Notification Letter." A sample of the new letter is available at Sample BEAR Notification Letter.
As before, the BEAR approval letter will be issued to the applicable service provider with a copy to the applicant. The primary difference in procedures is that the new letter will contain invoice approval, reduction, or rejection data on each FRN included on the BEAR. If reimbursement on a specific FRN is reduced or rejected, the FRN synopsis will include a brief "Reimbursement Request Decision Explanation." Examples of these explanations, together with more detailed descriptions of the error conditions, are shown in a table of "Service Provider Invoice Data Errors," previously used by the SLD for vendor invoice processing. The error code and description table is available at Service Provider Invoice Data Errors.
Note that many of the error conditions involve invalid form numbers or dates. In the past, the SLD usually contacted the applicant to attempt to correct these problems before making a final BEAR decision. With the new procedure, the SLD is more likely to simply reject a specific FRN reimbursement request. To be reimbursed, the applicant would then have to correct and resubmit another BEAR for that FRN.
Reminder: The BEAR submission deadline for recurring service charges for the 2001-2002 funding year is October 28, 2002. To allow for the possible need to resubmit BEARs originally filed with errors, applicants should make every attempt to complete their FY 2001 BEARs well before the final deadline.
This week, the SLD posted a slightly revised version of its new CIPA certification guidance for libraries (originally posted last week). The updated version is available at CIPA Guidance .
The revision simply adds facsimile and e-mail options for Category 3 applicants writing to request the restoration of funds reduced or cancelled via a Form 500 or for applicants seeking to confirm Category 4 status.