Beneficiary Audits – Auditors’ Observations

In order to fulfill its responsibility to prevent waste, fraud, and abuse, the Universal Service Administrative Company (USAC) engaged national accounting firms to conduct audits of beneficiaries (the recipients of discounted services). The audits were conducted to determine if the beneficiary under audit complied with FCC rules and reasonable business practices. The auditors have completed their work for Funding Years 1998 through 2000.

Following is a list of the most common auditors’ observations from the audits of 79 beneficiaries conducted for Funding Year 2000:

Competitive Bidding

1. Copies of contracts could not be provided upon request.
2. Evidence could not be provided of compliance with competitive bidding requirements.
3. Contracts were signed before the allowable contract date.
4. There were violations of state and/or local bidding requirements.

Entity Eligibility

1. Entities receiving services were not listed on the Form 471.
2. Entities receiving services were not eligible under program rules.
3. Discount calculation used an unapproved alternative mechanism or applicant could not provide documentation to support calculation.

Services Provided Within Funding Year

1. Services were provided before or after the applicable funding year.

Incomplete Invoice Documentation

1. Customer bills contained insufficient detail to determine service eligibility.
2. Customer bills did not support the requested reimbursement amount.
3. Customer bills could not be provided upon request.

Payments

1. Service providers had not remitted BEAR payments.
2. Applicant had not paid the service provider in full before BEAR invoices were submitted.
3. Duplicate invoices were submitted to USAC.
4. Invoice payments made to the service provider were not refunded to USAC after equipment was returned to the service provider.
5. The non-discount portion of the cost of services provided was not paid.
6. The applicant paid its bill late.

Equipment and Services

1. E-rate equipment could not be identified because fixed asset details were insufficient to identify specific equipment.
2. Duplicative services were provided.
3. The capability and cost of equipment was far in excess of what would be considered appropriate for the facility.
4. Services were ineligible.
5. Services were not functioning.
6. Services were not being used for eligible purposes.
7. The applicant was unable to make effective use of the discounted services.
8. Services were not delivered.

 Technology Plans

1. The approval letter could not be provided.
2. Implementation of the technology plan was not being monitored.
3. No budget could be provided to support the plan.

Compliance With All Applicable State and Local Laws Regarding Procurement

1. Contracts did not have the performance bonds required by state law.

Other issues which are not program violations but indicate poor controls

1. A school was closed the year after a substantial amount of internal connections were installed.
2. Equipment was left in an unsecured area.
3. The applicant paid the service provider more than the non-discount amount.
4. The invoice submitted to USAC was calculated using a discount percent lower than the authorized discount percent.