Summary: The Telecommunications Act of 1996 expanded the concept of universal telephone service to include telecommunication support services for eligible schools and libraries. Under this program, called the "e-rate program," schools and libraries can apply for discounts on telecommunications services, Internet access, and internal connections. GAO found that the Universal Service Administrative Company's (USAC) Schools and Libraries Division (SLD) committed more than $3.7 billion to applicants during the 1998 and 1999 program years. However, a significant amount of this money has not yet been paid out, even though the deadlines for applicants and vendors to use the funds has been extended more than once. In addition, more funding would be available for eligible requests if SLD's review procedures were more effective at identifying and denying ineligible requests. Despite procedures requiring reviewers to deny funding for ineligible items and to confirm that conditionally eligible services are being used according to program rules, GAO identified millions of dollars in funds incorrectly committed to ineligible products and services. Finally, SLD's practice of approving most vendors' invoices without reviewing how and where the committed funds are actually being spent leaves the program vulnerable to further funding errors and potential abuse.
