FCC Inspector General: Reimbursement Programs Need More Fraud Protections
The FCC should more closely scrutinize and apply tougher controls to current and future programs that reimburse telecom providers for the costs of equipment and services in schools and libraries, the agency's Office of Inspector General (OIG) said Wednesday in a report on lessons learned from the Emergency Connectivity Fund (ECF). The FCC will take the report’s recommendations “under consideration” when it modifies its universal service programs or implements appropriated funding programs, said Managing Director Mark Stephens and Wireline Bureau Chief Joseph Calascione in a response letter included with the report.
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In its review, which included 98 site visits to ECF-funded schools and libraries, OIG “found significant indicators of fraud, waste and abuse” in the program, the report said. Those indicators included stacks of unused, unopened computers and hot spots piling up in institutions, insufficient or fraudulent documentation, incomplete inventories and overbilling, it said. The OIG review led to four referrals to DOJ for potential civil and criminal violations and 30 referrals to the FCC and the Universal Service Administrative Co. -- which administers ECF -- “for further review of approximately $4 million in ECF expenditures” and potential recovery of some of those funds.
To prevent similar issues in current and future reimbursement programs, the FCC should collect line-by-line billing information to monitor institutions’ use of program-funded Wi-Fi, require providers to unenroll unused broadband lines, and use the competitive bidding processes and co-pay requirements from the E-rate program, the report said. “These important E-Rate controls incentivize participants to drive down costs, and decrease risks of conflicts of interest, self-dealing, procurement fraud, and collusion.” The agency should in turn apply the ECF rules that require written substitution requests to E-rate and add penalties for undisclosed substitutions, the report said. The OIG also recommended establishing a clear strategy for keeping participants informed and telling potential whistleblowers how to reach OIG. In addition, the report included recommendations for Congress in creating future emergency legislation, saying it should incorporate anti-fraud controls, limit the duration of emergency funding and create clear eligibility requirements.