While schools and libraries benefit from the E-rate program which provides the largest federal resource to help schools get connected to high speed networks, there are serious accountability and compliance requirements that applicants need to adhere to. On January 30, 2017 the USAC Schools and Libraries Committee approved 28 audits of which 26 were tied to applicants and auditors are recommending nearly $1 million in recovery from these audits.
Here are top deficiencies in the 26 applicant audits:
- The beneficiary lacked the necessary resources to make effective use of services and equipment
- Inadequate discount calculation process – documentation did not support figures in Block 4 of the Form 471
- Beneficiary over invoiced the SLD by not deducting credits from the BEAR amount
- Lack of documentation – beneficiary did not substantiate the competitive bidding process
- Form 471 funding request exceeded discounted price. The beneficiary did not apply all credits in calculating the pre-discount and discounted costs of internal connections reported it its funding request
- Missing equipment and lack of documentation of equipment received
These are SLD audit procedures taken from one of the approved applicant audits:
1. Application Process
We obtained an understanding of the Beneficiary’s processes relating to the application and use of Erate Program funds. Specifically, for the FRNs audited, we examined documentation to support its effective use of funding. We also used inquiry to determine if any individual schools or entities related to the Beneficiary are receiving USAC funded services through separate FCC Forms 471 and FRNs.
We obtained an understanding of the Beneficiary’s processes relating to the application and use of Erate Program funds. Specifically, for the FRNs audited, we examined documentation to support its effective use of funding. We also used inquiry to determine if any individual schools or entities related to the Beneficiary are receiving USAC funded services through separate FCC Forms 471 and FRNs.
2. Competitive Bid Process
For the FRNs audited, we obtained and examined documentation to determine whether all bids received were properly evaluated and that price of the eligible services was the primary factor considered. We also obtained and examined evidence that the Beneficiary waited the required 28 days from the date the FCC Form 470 was posted on USAC’s website before signing contracts with the selected service providers. We reviewed the service provider contracts to determine whether they were properly executed. We evaluated the services and equipment requested and purchased for cost effectiveness as well.
For the FRNs audited, we obtained and examined documentation to determine whether all bids received were properly evaluated and that price of the eligible services was the primary factor considered. We also obtained and examined evidence that the Beneficiary waited the required 28 days from the date the FCC Form 470 was posted on USAC’s website before signing contracts with the selected service providers. We reviewed the service provider contracts to determine whether they were properly executed. We evaluated the services and equipment requested and purchased for cost effectiveness as well.
3. Calculation of the Discount Percentage
For the FRNs audited, we obtained and examined documentation to understand the methodology used by the Beneficiary to calculate the discount percentage. We also obtained and examined documentation supporting the discount percentage calculation and determined if the calculations were accurate.
For the FRNs audited, we obtained and examined documentation to understand the methodology used by the Beneficiary to calculate the discount percentage. We also obtained and examined documentation supporting the discount percentage calculation and determined if the calculations were accurate.
4. Invoicing Process
For the FRNs audited, we obtained and examined invoices for which payment was disbursed by USAC to determine that the equipment and services claimed on the FCC Form 474 Service Provider Invoices (SPIs) and corresponding service provider bills were consistent with the terms and specifications of the service provider agreements. We also examined documentation to determine whether the Beneficiary paid its non-discounted share in a timely manner.
For the FRNs audited, we obtained and examined invoices for which payment was disbursed by USAC to determine that the equipment and services claimed on the FCC Form 474 Service Provider Invoices (SPIs) and corresponding service provider bills were consistent with the terms and specifications of the service provider agreements. We also examined documentation to determine whether the Beneficiary paid its non-discounted share in a timely manner.
5. Site Visits
For the FRNs audited, we performed a physical inventory to evaluate the location and use of equipment and services to determine whether it was delivered and installed, located in eligible facilities, and utilized in accordance with the Rules. We evaluated whether the Beneficiary had the necessary resources to support the equipment and services for which funding was requested. We also evaluated the equipment and services purchased by the Beneficiary to determine whether funding was used in an effective manner.
For the FRNs audited, we performed a physical inventory to evaluate the location and use of equipment and services to determine whether it was delivered and installed, located in eligible facilities, and utilized in accordance with the Rules. We evaluated whether the Beneficiary had the necessary resources to support the equipment and services for which funding was requested. We also evaluated the equipment and services purchased by the Beneficiary to determine whether funding was used in an effective manner.
6. Reimbursement Process
For the FRNs audited, we obtained and examined invoices submitted for reimbursement for the services delivered to the Beneficiary and performed procedures to determine whether USAC was invoiced properly. Specifically, we reviewed invoices associated with the SPI forms for services and equipment USAC Audit No. SL2016BE042 Page 8 of 9 provided to the Beneficiary. We verified that the services and equipment claimed on the SPI forms and corresponding service provider bills were consistent with the terms and specifications of the service provider agreements and eligible in accordance with the E-rate Program Eligible Services List.
For the FRNs audited, we obtained and examined invoices submitted for reimbursement for the services delivered to the Beneficiary and performed procedures to determine whether USAC was invoiced properly. Specifically, we reviewed invoices associated with the SPI forms for services and equipment USAC Audit No. SL2016BE042 Page 8 of 9 provided to the Beneficiary. We verified that the services and equipment claimed on the SPI forms and corresponding service provider bills were consistent with the terms and specifications of the service provider agreements and eligible in accordance with the E-rate Program Eligible Services List.
7. Record Keeping
We determined whether the Beneficiary’s record retention policies and procedures are consistent with the E-rate Program rules. Specifically, we determined whether the Beneficiary was able to provide the documentation requested in the audit notification, for the FRNs audited, as well as retained and provided the documentation requested in our other audit procedures.
We determined whether the Beneficiary’s record retention policies and procedures are consistent with the E-rate Program rules. Specifically, we determined whether the Beneficiary was able to provide the documentation requested in the audit notification, for the FRNs audited, as well as retained and provided the documentation requested in our other audit procedures.
8. CIPA Compliance
We obtained and examined documentation to determine whether the Beneficiary complied with the FCC’s CIPA requirements. Specifically, we obtained and evaluated the Beneficiary’s Internet Safety Policy, and obtained an understanding of the process by which the Beneficiary communicated and administered the policy.
We obtained and examined documentation to determine whether the Beneficiary complied with the FCC’s CIPA requirements. Specifically, we obtained and evaluated the Beneficiary’s Internet Safety Policy, and obtained an understanding of the process by which the Beneficiary communicated and administered the policy.
9. Final Risk Assessment
Based on the performance of the above audit procedures for the sampled FRNs, we considered any noncompliance detected during the audit and its effect on the FRNs excluded from the initial sample. We also considered whether any significant risks identified during the audit that may not have resulted in exceptions on the FRNs audited could affect the other FRNs.
Based on the performance of the above audit procedures for the sampled FRNs, we considered any noncompliance detected during the audit and its effect on the FRNs excluded from the initial sample. We also considered whether any significant risks identified during the audit that may not have resulted in exceptions on the FRNs audited could affect the other FRNs.
SLD’s auditors checklist can be viewed here.
