1. Audits Ed Falkowitz Train-the-Trainer Workshop September 27-29, 2004 Schools & Libraries Division

2. Slide #2Schools and Libraries Division Why Me? uRandom Audits uSelected Audits uWhy the auditor is your friend

3. Slide #3Schools and Libraries Division Who does audits? uUSAC Internal Audit uUSAC External Auditors uFCC/OIG uOther Federal OIGs

4. Slide #4Schools and Libraries Division Compliance Classification uCompliant n No program rule violations uGenerally Compliant n Limited violations uNot Compliant n Significant violations

5. Slide #5Schools and Libraries Division Types of Issues uFinding n An internal control or other observation that is not a program rule violation. uException n A program rule violation.

6. Slide #6Schools and Libraries Division Round 3 Overview u79 audits n Representing a total of over $379.4 million committed and over $312.4 million disbursed u20 auditees classified as Not Compliant (25%) uAuditor observations n Rule violations – 55 n Finding only – 173 n Issues cleared – 49 uAmount requiring recovery - $9.0 million (One beneficiary accounts for $6.5 million.)

7. Slide #7Schools and Libraries Division 5 th Order Documentation Requirements uThe order requires program participants to retain all documents necessary to demonstrate compliance with the statute and Commission rules regarding the application for, receipt, and delivery of services receiving schools and libraries discounts. The descriptive list in the order is a guideline, but cannot be considered exhaustive. uDocumentation must be retained for 5 years after the last date services are delivered.

8. Slide #8Schools and Libraries Division How To Prepare For An Audit What To Have Available - Bidding uOverview of the selection process including criteria and weighting of the criteria uRFPs issued uCopies of all bids received (winning and losing) uContracts for supported services uCopy of procurement policy and procedure uBid evaluation documentation including evaluation worksheets uList of all vendors supplying E-rate services including contact information uIf applicable, copies of state and local procurement regulations and procedures uAny available documentation that indicates that all bids were considered

9. Slide #9Schools and Libraries Division How To Prepare For An Audit What To Have Available - Invoicing uDetailed procedure for validating and processing vendor bills and submitting invoices to SLD (if applicable) uDocumentation verifying date of receipt of equipment uCopies of invoices (BEAR Forms) for supported services uReconciliation by FRN of vendor bills to invoices submitted to SLD uDocumentation of any SPIN change request including copy of notice to original service provider uDocumentation of payment (canceled checks) of payment for E-rate services to vendors uDocumentation or receipt and deposit of any amounts received for BEAR invoices

10. Slide #10Schools and Libraries Division How To Prepare For An Audit What To Have Available - CIPA uCopy of the Internet safety policy uDocumentation of the adoption of the Internet safety policy uThe date and a copy of the minutes of the public hearing regarding the Internet safety policy uCopies of Forms 479 and/or Forms 486, if applicable

11. Slide #11Schools and Libraries Division How To Prepare For An Audit What To Have Available - Services uCopy of the technology plan(s) and approval letter(s) covering the complete year under review uSummary of the technology environment and a high- level network diagram uAny other documentation on the services (such as training and workstations) necessary to make effective use of E-rate discounts uList of E-rate equipment including references to vendor invoice, SLD invoice, serial number, and current physical location

12. Slide #12Schools and Libraries Division How To Prepare For An Audit What To Have Available - Other uOMB A-133 audit, if applicable uReports of any other audits conducted that relate to either E-rate program or the NSLP. uCopies of financial statements and annual budgets uDocumentation and supporting worksheets for the discount calculation uCopy of the records retention policy uDescription of the E-rate team including, staff, vendors, and consultants. This should contain their roles and responsibilities. uAny correspondence from or to USAC, the FCC, potential E-rate vendors, or any E-rate team member uFor consortia, letters of agency

13. Slide #13Schools and Libraries Division How To Prepare For An Audit – Who Should Be Available uPerson who managed the bidding and award process uPerson who reviews and approves invoices uPerson who prepares E-rate invoices uPerson who writes checks, makes deposits, and reconciles the bank account uPerson knowledgeable about the network and the location of equipment.

14. Slide #14Schools and Libraries Division Round 3 Exceptions - Bidding uCopies of contract not available u28 day waiting period not observed uNo evidence of competitive bidding or compliance

15. Slide #15Schools and Libraries Division How to Avoid Audit Issues - Bidding uRetain copies of RFPs, all bids received (both winning and losing), and all contracts. uMaintain documentation of compliance with state and local procurement regulations, including advertising and bonding. uMaintain documentation of the process and any related analyses leading to the selection of the winning bid. uSign contracts ONLY after the 28-day posting requirement. uA service provider is permitted to supply general advice to an applicant in preparing Form 470, BUT CANNOT SIGN OR PREPARE THE FORM 470. Maintain documentation indicating the details of the advice supplied in order to protect both the applicant and service provider from any appearance of impropriety.

16. Slide #16Schools and Libraries Division Round 3 Exceptions - Invoicing uInsufficient detail on invoice or invoice does not support request. uInvoice not available. uBEAR payments were not remitted to the applicant. uBEAR invoice submitted with no prior payment to the vendor. uThe non-discount portion of services was not paid by the applicant or was paid late. uServices not provided within funding year.

17. Slide #17Schools and Libraries Division How to Avoid Audit Issues - Invoicing uCustomer bills should have been received for any BEAR invoice (Form 472) submitted to SLD. uSubmit invoices to SLD only after services have been delivered and — for BEAR Forms — the applicant’s payment has been remitted to the service provider. uThe submitter of an invoice should maintain an analysis relating the SLD invoice (BEAR Form or SPI Form) to the invoice numbers of the customer bill. uMaintain copies of customer bills and invoices submitted to SLD to facilitate any requested reconciliation. uMaintain documentation of compliance with Copan certifications for SPIN changes.

18. Slide #18Schools and Libraries Division How to Avoid Audit Issues - Invoicing (cont.) uIf 45 days have passed since the receipt of the BEAR Notification Letter without receipt of payment from the service provider, contact the service provider and request payment. If payment is not forthcoming, contact the SLD invoice hotline at 1-973-428-7335 to request assistance. uEstablish controls to track specific payments of the non-discount portion of services provided to invoices submitted to SLD.

19. Slide #19Schools and Libraries Division How to Avoid Audit Issues - Invoicing (cont.) uInclude only services provided within the funding year on invoices submitted to SLD. uSubmit requests for extensions for service delivery or invoicing on a timely basis. Always verify extensions by referring to the status on the “FRN Extension Table” available on the SLD web site. uRefund the appropriate portion of disbursements made by SLD for equipment that is returned.

20. Slide #20Schools and Libraries Division Round 3 Exceptions - Services uInadequate documentation uIneligible services uCould not locate equipment uNot used for eligible or educational purposes uServices not provided uUnable to make effective use of E-rate discounts

21. Slide #21Schools and Libraries Division How to Avoid Audit Issues - Services uMaintain an inventory of E-rate equipment that includes make, model, serial number, physical location, date installed, FRN, customer bill reference number(s), pre-discount cost, non- discount portion, and reference number (e.g., check number) of the payment of the non-discount portion uTest the network on a periodic basis to confirm that it is functioning and maintain documentation of the results.

22. Slide #22Schools and Libraries Division How to Avoid Audit Issues – Services (cont.) uBe sure that services are not requested or ultimately used for ineligible purposes, i.e., other than education purposes. uNOTE: Form 471 requires applicants to certify that they have secured access to the resources necessary to make effective use of E-rate discounts. This means the ability to pay the non-discount share and to acquire any other equipment or services necessary to make use of connectivity, including those services not supported by E-rate discounts, such as workstations and telephone handsets.

23. Slide #23Schools and Libraries Division How to Avoid Audit Issues - Services (cont.) uDocument the delivery and installation of equipment using a completion certificate. Maintain completion certificates in a permanent file. uSubmit service substitution requests on a timely basis and maintain copies of requests and approvals.

24. Slide #24Schools and Libraries Division Round 3 Exceptions – Technology Plan uInsufficient budget uTechnology Plan approval letter not available uThe goals and objectives in the Technology Plan are not monitored uPlan missing some of the five criteria

25. Slide #25Schools and Libraries Division How to Avoid Audit Issues - Technology Plan uRetain a copy of the budget. uRetain a copy of the technology plan approval letter. Make sure the approved plan covers the complete funding year and includes the 5 criteria. uThe technology plan requires an evaluation process to monitor progress toward the specified goals and objectives. Retain documentation that the monitoring process has been implemented as defined in the approved technology plan.

26. Slide #26Schools and Libraries Division Round 3 Exceptions – Entities uIneligible Entities

27. Slide #27Schools and Libraries Division How to Avoid Audit Issues - Entities uThe definition of a school is governed by state law. Juvenile justice, adult education, and/or pre-kindergarten students and/or facilities may or may not be eligible for E- rate support depending on state law. uAll entities receiving services should be listed in the Form 471 Block 3 worksheet(s). After receiving the Receipt Acknowledgment Letter (RAL), verify that all the Block 3 data are correct by reviewing the display copy of Form 471 on the SLD web site. Report any errors within the three-week RAL correction period.

28. Slide #28Schools and Libraries Division Round 3 Exceptions – Discount Percent uInsufficient documentation uUnapproved discount method used

29. Slide #29Schools and Libraries Division How to Avoid Audit Issues - Discount Percent uRetain documentation that supports the discount percent requested on Form 471. This documentation includes, but is not limited to, the free and reduced lunch report or other documentation. If an alternative discount method was used, retain documentation that agrees with the student eligibility information on the Form 471 Block 3 worksheets.

30. Slide #30Schools and Libraries Division QUESTIONS