An audit of the SLC by Congress’ investigative arm has turned up inconsistencies in the agency’s procedures. Result: you’ll have to wait even longer for your discount.

The General Accounting Office (GAO) told the SLC it must tighten its program integrity assurance controls before committing any funds this year. The GAO’s report means that schools and libraries won’t see eRate discounts until at least the fall.

The GAO had audited the SLC at the request of Sen. John McCain, R-Ariz. A vocal critic of how the eRate is being implemented, McCain has blasted what he calls the program’s “bloated bureaucracy” and questioned whether effective safeguards are in place to prevent fraud and abuse.

During a Senate Commerce Committee hearing July 16, the GAO presented the findings of its audit. While noting that the SLC has made “substantial progress” in establishing the program, the GAO also voiced several concerns:

• The SLC has taken longer than expected to implement the eRate. As of July 7, just 62 percent of the 30,000 applications had been processed;

• Not all applications were treated consistently. Rules regarding the eligibility of services were changed after 9,000 applications had been processed, and the SLC had failed to go back and reexamine those 9,000 applications; and

• The SLC planned to send out funding- commitment letters before addressing key issues. For example, the corporation had yet to set up procedures for auditing applications, evaluating the high-risk ones, or disbursing funds.

“Reviews of high-risk applications are not scheduled to occur until sometime after funding commitment letters are sent to applicants,” Judy England-Joseph, director of the GAO’s housing and community development issues, told the committee.

“Should the [SLC] find major problems at this time with the applications reviewed, it may have to reduce or withdraw funding commitments from those applicants,” she continued.

The GAO also found that the SLC had not yet worked out a procedure for processing vendor invoices.

“We are particularly concerned about this, because the [SLC] estimates that invoice payment could begin to arrive as soon as 15 days after commitment letters are sent out,” England-Joseph said. “If disbursement procedures and internal controls are not in place when commitment letters are issued, the [SLC] may find itself unable to process vendor invoices in a timely manner.”

Based on its findings, the GAO submitted a list of recommendations to Congress. Before the SLC commits or disburses any money to schools, England-Joseph said, the corporation should:

• Conduct a detailed review of randomly sampled applications to assess the soundness of applications and the effectiveness of program safeguards;

• Establish procedures, automated systems, and internal controls for the post-commitment phase of the program, including the disbursement of funds;

• Thoroughly review high-risk applications and all supporting documents to ensure they meet program rules; and

• Obtain a report from its independent auditor stating that the SLC has developed appropriate safeguards against waste, fraud, and abuse.

Ira Fishman, SLC’s chief executive officer, agreed with the GAO’s findings. Fishman promised to implement the group’s recommendations before committing any funds to applicants.

When pressed by McCain to reveal how long this would take, Fishman said the SLC probably could make funding commitments “in early fall.”

Although the GAO’s audit showed room for improvement, Fishman noted that the controls already in place are working.

For example, McCain had raised concerns that some schools applied for discounts on carpeting, paint, and asbestos removal—none of which are covered by the program. Of 7,000 applications sampled, the SLC found only one instance in which a subsidy for paint had been requested and none for carpeting or asbestos removal, Fishman said.

Said McCain: “I give everybody an ‘A’ for effort but cannot give you very high grades for what you have accomplished, since the bottom line is that not one school or library has yet received this service. The expectations were that this program would be on the road long ago.”