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Sunday, February 10, 2013

GAO shovels so I don't have to

The recent secret reform letter from the FCC mentions a GAO report, which has also triggered an audit at USAC, so I thought maybe I'd give it a look while taking a break from shoveling snow.  (It's 60 pages long, so I guess the rest of the snow will be there until Spring.)  I guess I should have read it when it came out in 2010, but I find I have to be in just the right mood to slog through a GAO report.

OK, first problem.  The title: FCC Should Assess the Design of the E-rate Program's Internal Control Structure.  The problem?  "E-rate."  It's the first time I can remember seeing the "r" not capitalized in a title.  Which is the consistent way to go, if you are operating under the mistaken belief that the "r" should not be always capitalized.  Alas, I think I am becoming numb to the small "r," which leaves no one to defend the proud capital "R."

The executive summary looks promising: "GAO found no controls in place to periodically check the accuracy of USAC’s automated invoice review process, again making it unclear whether resources are appropriately aligned with risks."  Can I get an amen?  Like the PIA practice of cost-allocating a portion of the maintenance on a router which has SRST capability (the ability to act as a lame PBX if the real PBX goes down).  It lowers the Funding "Commitment" by a few dollars, but who cares?  It's not like it's a real commitment.  And how about if a phone bill says "other charges, see p. 54: $2.00" and you have to dig up page 54 so the review can see if the charge is eligible.  For $24 a year?  Not worth the time it takes the reviewer to type up the email.

Oops,the first error is in paragraph 3: "the same rule violations have been repeated each year for which beneficiary audits have been completed. For example,of 64 beneficiaries that had been audited more than once over a 3-year period, GAO found that 36 had repeat audit findings of the same rule violation."  The GAO doesn't understand the timing.  If I had made a mistake (that has to be in the subjunctive, because I never actually make mistakes) in, say, an application for Funding Year 2004, that error would have been made in January 2004.  If I'm doing a BEAR, that payment won't be made until October 2005, so it is unlikely to be audited until January 2006.  The GAO pointed out in footnote 1 to Appendix VI that the audit process took an average of 334 days.  So half the applicants wouldn't get the results of the audit until after December 2006.  That might not give me time to make adjustments before filing for FY 2007.  If I were audited in January 2009 (three years after the original audit), that would be for FY 2007 at the latest.  So it's not surprising that it would take 3 years to implement change based on audit findings.  In addition, audits can be launched up to 5 years later, so it is conceivable that the second audit that an applicant got was actually for an earlier funding year, so they would not have been able to correct the error.  USAC tried to point this out in their response, but the GAO still didn't get it.

First snicker: Footnote 13 says, "USAC is a wholly owned, independent subsidiary of the [National Exchange Carrier Association (NECA)]."  Which is it, independent or a wholly owned subsidiary?  Why is no one else troubled that the program is administered by a company owned by the phone companies' lobbying group?

Interesting factoid: in 2006, PIA's secret procedures manual was 700 pages.  The GAO said it was still 700 pages in 2009.  Given the accretion of rules over that time, it's surprising the procedures didn't also grow.

Hmmm, on page 13, the GAO says that only "high-risk applications" are subjected to Selective Reviews.  I had always heard that some Selective Reviews were a response to perceived risk, but some were randomly assigned.

Page 18: "The overall design of the E-rate program is complex, and FCC’s changes to the program over time through orders and guidance have made it more so."  You got that right.  Every time the FCC tries to simplify the program, they just make it more confusing.  But since the complexity (and secrecy) of this program pays my kids' tuition, I won't complain too loudly.

From footnote 50: "USAC has goals for its senior managers to maintain E-rate improper payment rates attributable to errors by USAC and its contractors at less than 1 percent per year."  That creates a couple of unfortunate incentives:
  1. Since only invoices are reviewed by the audits, if USAC denies a funding request, that denial is never audited, so USAC has a monetary incentive to deny as many funding requests as they can.  
  2. In the event an audit identifies an improper payment, USAC (who finalizes all audits) has a financial incentive to find that errors were attributable to applicants, not USAC.
Appendix IV has the kind of factoid that only an E-Rate geek could love: the number of FTEs assigned to application review and invoice review.  In 2009, 150 people worked on application review.  There are something like 23,000 applications filed each year, so that's 150 applications per reviewer.  The work year is about 2,000 hours, so that's about 13 hours per application.  That seems like a lot for the median application, but I suppose the big applications really drag the average up.

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