One of the more challenging aspects of working within the E-rate program is trying to translate some of the bureaucratic double-talk that comes out of the agencies responsible for E-rate oversight. The latest Federal Communications Commission Office of Inspector General (FCC OIG) report just muddies the waters of understanding for the logic behind the auditing process from the 2007-2008 audit period.
The preliminary report by the FCC OIG outlining the statistical results for the 2007-2008 audits is just that, preliminary. Many of the overpayments discovered in the sample were based on “insufficient documentation.” Which begs the question of why the FCC would even release such a preliminary report? This is particularly important considering that in the last wave of appeals released on October 31, 2008 quite a few appeals were granted on grounds that allowed appellants an opportunity to provide further documentation.
With one correction already issued by the OIG on December 24, 2008 citing that some of the data included in the report was incorrect and with the final report due to be issued no later than December (noting that the OIG's website hasn't released the final statistal analysis as of this writing), one hopes that the OIG will have conducted further due diligence and precisely defined the causes of erroneous payments to E-rate beneficiaries.
According to the preliminary report, the OIG identifies twenty-one causes of erroneous payments. The report also concludes that 13.8% of beneficiaries received erroneous payments. According to the methodology used, if the auditors discovered more than one cause of erroneous payment to a beneficiary then each cause was assigned a percentage dollar value according to the prioritization of causes. This methodology would in effect increase the overall percentage of error-related payments to beneficiaries since the percentages were not based on sample size (number of beneficiaries) but rather on individual erroneous payment causes.
The most common cause, affecting 29.7% of the sample group, was “inadequate auditee processes and/or policies or procedures.” Not only is this vague and overly broad, but it is misleading. While the sample beneficiaries may have followed adequate and compliant internal procedures, those procedures may not have met the expectations of the auditors, thereby emphasizing the lack of statistical integrity reflective of the numbers in this report. This is analogous to a group of people tying their shoelaces; everyone might use a different method to tie their shoelaces but unless there is a standard method applied by all the persons tying their shoes, one cannot claim that the shoelaces were not tied. If beneficiaries are to be "penalized" for "inadequate auditee processes and/or policies or procedures", then USAC should outline standardized internal procedures for issues such as document retention and inventory control, etc.
In addition to "inadequate auditee processes and/or policies or procedures" and "insufficient documentation" given as the top two causes for erroneous payments, "applicant/auditee weak control issues”, was given as the third most common cause. Again, the OIG has failed to define what "applicant/auditee weak control issues” are, much less how that differs from "inadequate auditee processes and/or policies or procedures." Both of these causes deal with internal applicant policies and procedures, which fall outside of E-rate regulations.
