Table of Contents INTRODUCTION 1 INVESTIGATIONS 2 LEGISLATION 5 AUDITS 6 TECHNICAL ADVICE AND ASSISTANCE 12 SPECIFIC REPORTING REQUIRMENTS OF SECTION 5(a) OF THE INSPECTOR GENERAL ACT 14 ATTACHMENTS TABLE I: OIG AUDIT REPORTS WITH QUESTIONED COSTS TABLE II: OIG AUDIT REPORTS WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE Introduction The Federal Communications Commission (FCC) is an independent regulatory agency exercising authority delegated to it by Congress under the Communications Act of 1934 as amended by the Telecommunications Act of 1996. The FCC is charged with regulating interstate and international communications by radio, television, wire, satellite and cable. The FCC's jurisdiction covers the fifty states, the District of Columbia, and U.S. possessions. The mandate of the FCC under the Communications Act is to make available to all people of the United States a rapid, efficient, nationwide, and worldwide wire and radio communication service. The FCC performs four major functions to fulfill this charge: · spectrum allocation; · creating rules to promote fair competition and protect consumers where required by market conditions; · authorization of service; and · enforcement. The Chairman and four Commissioners are appointed by the President and confirmed by the Senate. William E. Kennard was confirmed as Chairman on October 29, 1997. Harold W. Furchtgott-Roth, Michael Powell, Gloria Tristani and Susan P. Ness serve as Commissioners. The majority of FCC employees are located in Washington, DC. FCC field offices and resident agents are located throughout the United States. FCC headquarters staff are now housed in entirety in the Portals II building located at 445 12th Street, SW, Washington D.C. 20554. Office of Inspector General (OIG) personnel continue to work with the FCC Security Officer to evaluate overall building security and develop recommendations as appropriate to best ensure the safety and integrity of FCC staff and operational systems. The OIG has dedicated itself to assisting the Commission as it continues to improve its efficiency and effectiveness. The Inspector General (IG), H. Walker Feaster III, reports directly to the Chairman. The staff consists of nine professionals with Assistant IG's serving in the areas of Audits, Investigations, and Policy & Planning. Charles J. Willoughby also serves as counsel. This report includes the major accomplishments and general activities of the OIG during the period April 1, 2000 through September 30, 2000. INVESTIGATIONS Investigative matters pursued by this office are generally initiated as a result of allegations received through the OIG hotline or from FCC managers and employees who contact the OIG directly. Investigations may involve possible violations of regulations regarding employee responsibilities and conduct, federal criminal law, and other regulations and statutes pertaining to the activities of the Commission. Investigative findings may lead to criminal or civil prosecution, or administrative action. The OIG also receives complaints from the general public, both private citizens and commercial enterprises, about the manner in which the FCC executes its programs and oversight responsibilities. Matters may be referred to this office for investigative action from other governmental entities, such as the Office of Special Counsel or congressional offices. ACTIVITY Seven cases were pending from the prior period. An additional fourteen complaints were received during the reporting period. Over the last six months twelve cases have been closed. Of those cases two were referred to management for action. Nine complaints are still pending. SIGNIFICANT CASES · The OIG received a complaint concerning allegations of possible improper conduct by a Commission employee with respect to the Commission's awarding of a contract for the purchase of specific absorption rate devices. It was alleged or inferred, among other things, that an employee involved in the evaluation process may have improperly released information regarding the bids to one of the prospective bidders. The OIG was unable to find any evidence of employee misconduct with regard to the awarding of the contract in question. Through investigation, it was determined that the employees alleged to have released the information in question did not have access to that information. Further, the OIG was unable to find any evidence of collusion by employees in the evaluation process. The matter has been closed. · The OIG initiated a preliminary inquiry into allegations that a former employee may have made or had an improper contact with the Commission in violation of 18 U.S.C. Section 207, which prohibits certain post-employment activities by former employees. The alleged conduct consisted of the making of an affidavit by the former employee, which appears to have been filed with the Commission concerning an issue upon which the former employee had rendered a judgment. The OIG, through investigation, determined that the issue in question was never under consideration by the employee. Accordingly, because of the determination of no violation by the employee, the matter was closed. · The OIG initiated an investigation based on allegations that a supervisory FCC employee routinely utilized his computer workstation to access pornographic sites on the Internet in violation of FCC regulations and provisions of the Code of Federal Regulations concerning use of Government equipment and use of official time. Through investigation the employee was found to have accessed the sites in question in violation of the applicable standards. Disciplinary action has been taken against the employee and the matter has been closed. · The Computer Security Officer of the Commission's Information Technology Center (ITC) notified the OIG that due to an apparent misuse of the Commission's electronic mail system by an employee, the Commission's outbound electronic mail system shut down on two recent occasions. It was determined that the employee did use his Commission computer to conduct a music business. Disciplinary action has been taken against the employee and the matter has been closed. · The OIG initiated a preliminary inquiry into allegations by a licensee that a Commission field office employee had abused his official position and harassed the licensee by, among other things, citing the licensee for non-existent telecommunications related violations. The OIG found no evidence of abuse by the field office employee and the matter has been closed. · The OIG received a request that it look into the circumstances of the untimely mailing by a bureau of letters of revocation. Since the OIG found no evidence of misconduct by Commission employees, the matter has been closed. · Pursuant to a request from two Members of Congress, the OIG initiated an inquiry to determine whether Commission employees acted improperly with respect to congressional consideration of legislation. Specifically, it was requested that the OIG determine whether the employees had violated the Anti- Lobbying Act by attempting to influence trade associations and others to lobby Congress with respect to a particular piece of legislation. The OIG was unable to find any evidence that Commission employees had solicited anyone to lobby Members of Congress with regard to the pending legislation. Through investigation, it was determined that the Commission employees had forwarded correspondence that they had received in their official capacities to Members of Congress. Accordingly, the Members were notified of the OIG's findings and the matter has been closed. · The OIG initiated a preliminary inquiry into allegations that a former employee may have made or had an improper contact with the Commission in violation of 18 U.S.C. Section 207 which prohibits certain post-employment activities by former employees. It was determined that the employee had participated briefly in the discussion and more importantly, the subject matter of the discussion did not pertain to a matter on which the employee had directly and substantially worked while an employee with the Commission. Accordingly, the matter has been closed. · The OIG initiated four inquiries into the release of non-public information to members of the media with respect to matters pending before the Commission. The inquiries are currently pending. · The OIG initiated an inquiry into allegations of possible fraud involving payments made from the Universal Service Fund. The inquiry is currently pending. · The OIG initiated an inquiry into allegations of employees conspiring to falsify records in the performance of their official duties. The inquiry is currently pending HOTLINE CALLS During this reporting period, the OIG Hotline Technician received ninety-five (95) hotline calls to the published hotline numbers of (202) 418-0473 and 1-888- 863-2244(toll free). The OIG Hotline continues to be a vehicle by which Commission employees and parties external to the FCC can contact the OIG to speak with a trained Hotline Technician. LEGISLATION Pursuant to section 4(a)(2) of the Inspector General Act of 1978(IG Act), as amended, our office monitors and reviews existing and proposed legislative and regulatory items for their impact on the Office of the Inspector General and the Federal Communications Commission programs and operations. Specifically, we perform this activity to evaluate their potential for encouraging economy and efficiency and preventing fraud, waste, and mismanagement. ACTIVITY During this period, this office monitored those legislative proposals, which directly or indirectly impact on the ability of Designated Federal Entity (DFE) IGs to function independently and objectively. Those specific proposals concerned proposals to consolidate OIGs and to draw, directly and/or indirectly, distinctions between presidential - appointed IGs and DFE IGs, which may have the effect of undermining the role of the latter. AUDITS The office has responsibility for conducting a wide range of audit activity covering FCC programs and operations. This activity includes such diverse areas as financial statement audits required by the Chief Financial Officers Act of 1990 (CFO Act); President's Council on Integrity and Efficiency government-wide audits; audits of agency compliance with laws and regulations; and performance audits of FCC programs. REPORTS ISSUED Report on Audit of Computer Controls at the Federal Communications Commission National Call Center issued on June 21, 2000, Report No. 00-AUD-01-12 As part of our ongoing program to ensure the security of the Commission's Information Technology (IT) infrastructure, we completed an audit of computer controls at the Commission's National Call Center (NCC). The objective of this audit was to examine the Call Center's automated computer system and the environment in which it operates to ensure that adequate security safeguards exist to protect NCC data. The audit team noted that significant technical control and internal control improvements could be made to improve the overall security posture of the NCC. Based on the audit procedures performed and the findings identified by the audit, NCC systems' general computer controls as implemented are not sufficient to meet minimum security requirements. Specifically, this audit identified one hundred three (103) findings, thirteen (13) of which were classified with a high level of risk, fifty-two (52) with a medium level of risk, and thirty-eight (38) with a low level of risk. Several of these findings are associated with key control areas. The Bureau concurred with all of the reported findings and is currently developing corrective action plans to address the findings. Report on the Federal Communications Commission Fiscal Year 1999 Financial Statement issued on July 7, 2000, Report No. 00-AUD-01-01 In coordination with the FCC's Chief Financial Officer (CFO), the OIG contracted with an independent public accounting firm (IPA) to assist the OIG in conducting the first- ever financial statement audit of the FCC. The IPA, with concurrence by the OIG, issued a qualified opinion on FCC's fiscal year (FY) 1999 consolidating financial statement. The IPA opined, except for the effects of such adjustments, if any, as might have been determined to be necessary had it been able to examine evidence regarding property, plant, and equipment and unfunded liabilities, the Consolidating Balance Sheet, presented fairly in all material respects, the financial position of FCC at September 30, 1999 in conformity with generally accepted accounting principles. Additional reporting identified areas where FCC management needs to concentrate to ensure adherence with Federal accounting standards, policies, and processes. The audit report identified six material weaknesses, seven reportable conditions, and six instances of noncompliance with laws and regulations required to be reported under Government Auditing Standards and the Office of Management and Budget (OMB) Bulletin No. 98- 08, Audit Requirements for Federal Financial Statements, amended. The OIG determined that the IPA planned, executed, and reported the results of its audit of FCC's FY 1999 financial statement in accordance with applicable auditing standards. Therefore, in the OIG's opinion, the IPA's work provided a reliable basis for the firm's opinion on FCC's FY 1999 financial statement. FACTS Agreed-Upon Procedures Report issued on July 7, 2000 In support of the FY 1999 Audit of the Consolidated Financial Statements of the United States Government, the Department of the Treasury, Financial Management Service requested "non-CFO Act" designated agencies to verify Federal Agencies' Centralized Trial Balance System (FACTS) data submissions. The OIG transmitted the agreed-upon procedures report upon the finalization of FCC's FY 1999 financials statement and audit thereof. The report, dated July 7, 2000, corresponds to the OIG report date of the audit due to the aforementioned impact to audit scope. Report on Audit of the Federal Communications Commission Civil Monetary Penalty Program issued on August 1, 2000, Report No. 00-AUD-01-05 As part of our strategic objective to strengthen the Commission's Financial Management Program, we completed an audit of the Commission's Civil Monetary Penalty Program. The objective of this review was to determine if the Commission has established an effective program for managing civil monetary penalties. Based on the results of the audit, we concluded that the Commission has not established an effective program for managing civil monetary penalty actions. Specifically, we determined that the information system used to track civil monetary penalty cases, the Fines and Forfeitures Tracking System (FFTS), does not accurately track and report the status of civil monetary penalty actions. In May 2000, the Commission re-convened a Civil Monetary Penalty Task Force comprised of representatives from the Office of General Counsel, Office of Managing Director, Common Carrier Bureau, Enforcement Bureau, International Bureau, Mass Media Bureau, and Wireless Telecommunications Bureau. On July 28, 2000, the Civil Monetary Penalty Task Force provided a response to our Draft Audit Report. In their response, the Task Force indicated that they concurred with each of our recommendations and that they were in the process of implementing a plan of corrective action. Special Review of Management of Nonpublic Information issued on August 16, 2000, Report No. 00-AUD-09-53 In response to a series of the unauthorized disclosures of nonpublic information, the Chairman of the FCC requested that the OIG examine the Commission's procedures for managing nonpublic information and make recommendations for improving these procedures. In response to the Chairman's request, the OIG conducted a special review of the Commission's management of nonpublic information. The focus of our special review was Commission management of programmatic information versus other types of nonpublic information in the Commission's possession. However, although the focus of our review was nonpublic information of a programmatic nature, we developed recommendations for improving the management of all nonpublic information processed by the Commission Based upon the results of the Special Review, we concluded that the Commission has not established an effective program for managing nonpublic information, and we developed a series of recommendations for strengthening the Commission's program. In response to our report, the Commission established a task force to improve the program for managing nonpublic information. Management Letter Resulting from the Audit of the Federal Communications Commission's Fiscal Year 1999 Financial Statement issued on August 31, 2000 In accordance with OMB Bulletin No. 98-08, Audit Requirements for Federal Financial Statements, as amended, and Government Auditing Standards, the OIG and its contracted IPA detected conditions in FCC's internal controls during the FY 1999 financial statement audit that are not required to be included in the audit report(s), but were considered necessary to communicate to management. The letter identified five general comments, including but not limited to, outdated control procedures, supporting payroll records, and reconciliation of net position accounts. Additionally, the letter communicated seven subject areas relating to information technology practices at FCC. These comments were provided solely for the use of FCC management and the OIG. Report Availability OIG reports can generally be obtained via the internet from the OIG webpage located on the FCC website www.fcc.gov/oig/. However, OIG reports containing sensitive or proprietary information will be restricted to specific individuals and organizations with a need to know the detailed information. ONGOING ACTIVITY Audit of the Commission's FY 2000 Financial Statement In coordination with the CFO's continuing commitment to improve financial management, the OIG contracted with the returning IPA to assist the OIG conduct the FY 2000 financial statements audit of the FCC. The FY 2000 audit scope was expanded to include all principal statements as required by OMB Bulletin No. 97-01, "Form and Content of Agency Financial Statements," as amended. At the close of the current semi-annual period, the OIG and its contractor have completed the first key audit task, development and refinement of the comprehensive planning documentation. Additionally, limited interim testing has commenced utilizing draft interim financial statements dated June 30, 2000. Audit of the Commission's Implementation of the Government Performance Results Act OIG audit staff continue to monitor the FCC's activity related to the Government Performance and Results Act (GPRA) of 1993. During the reporting period, the OIG drafted its understanding of the GPRA process applied at FCC for FY 1999. Recently, the OIG is in the process of selecting a sample of additional FY 1999 reported performance measures to perform verification and validation of reported results. Audit of Web Presence The objective of this review is to assess the security posture of the FCC's Web Presence and its associated components. Audit fieldwork is complete. Draft report is under preparation. Audit of the Operational Efficiency of Commission Consumer Centers The overall objective of this audit is to evaluate the efficiency and effectiveness of Consumer Center operations. Fieldwork on this audit continues. Audit of NeuStar Equitable Adjustment Proposal The OIG's primary audit objective is to evaluate the monetary adjustment aspect of NeuStar's proposal and provide information provide information regarding the acceptability of the proposed costs and the reliability of the data NeuStar furnishes in support of its proposal. Fieldwork on this audit continues. Audit of Labor Charging and Timekeeping Practices at Frye-Williams Inc. The purpose of the review was to determine that employees were actually at work, performing in their assigned job classifications, charging their time to the appropriate jobs, and consistently complying with established timekeeping policies and procedures for recording labor charges. Several instances of Frye, Williams & Co., PC employee deficiencies with timekeeping requirements have been identified. A draft report was issued summarizing the results of this audit on September 25, 2000. Audit of Labor Charging and Timekeeping Practices at Stanley Associates, Inc. The purpose of the review was the same as the Frye-Williams audit discussed prior. Instances of GCI Information Services employees preparing their timesheets and/or signing them in advance, not keeping their timesheets current, and failing to have written company timekeeping policies and procedures in their possession have been cited. A final report is in preparation. Audit of Computech Delay Claim At the request of the Commission's Contracts and Purchasing Center, the OIG initiated an audit of a contractor's (Computech, Inc.) claim for additional incurred costs resulting from Government caused delays in work while performing services on the Commission's Universal Licensing System (ULS). The OIG's primary audit objective is to evaluate the monetary adjustment aspect of Computech's claim and provide information regarding the acceptability of the claimed costs and the reliability of the data Computech furnishes in support of its claim. Special Review of Web Accessibility The purpose of this Special Review on Web Accessibility is to determine how effective the FCC has been in providing access by the disabled to its Internet web sites. A draft report is under review. Special Review of Common Carrier Bureau Oversight of USAC A review has been initiated to evaluate the Common Carrier Bureau's (CCB's) oversight of the Universal Service Administrative Company (USAC). USAC administers the universal service support mechanisms established by the Commission under the Telecommunications Act of 1996. Planning for this special review was initiated in April 2000; fieldwork is scheduled to start in October 2000. Follow-up Special Review of the FCC Collections System The objectives of the follow-up review were to examine the status of the FCC's resolution of the findings detailed in the original Special Review of the Collection System; evaluate the level of expenditure required to maintain the existing Collection System; and evaluate the FCC's selection of the product RAMIS and the detailed implementation plan. On September 29, 2000, a draft report was issued summarizing the results of our follow-up review. Survey of Regulatory and Application Fee Collection The survey will assess randomly selected application fee payments to determine whether or not the proper fee was paid and whether or not any licensing actions were acted upon without all regulatory fees being paid in full. The survey work has begun and the initial set of sample transactions is being analyzed. Survey work will continue throughout the next year. Survey of Accounts Payable Disbursements Disbursements traditionally represent a high risk factor to a business entity. To assist in minimizing the inherent risk of the disbursement of money, audit activity has been initiated to identify payments that meet identified exception criteria. Audit work will then validate that disbursements are legitimate and accurate and supported by appropriate documentation. Fieldwork is underway. Survey of Universal Licensing System (ULS) A survey review on the Universal Licensing System has been initiated to examine the progress of the ULS project. The survey report will recommend what, if any, additional action the OIG should take on ULS. The survey fieldwork has been completed. A draft report is being prepared. Survey of Mass Media Bureau (MMB) Fixed Services System (MDS/ITFS) The objective of the survey was to assess whether MMB developed and implemented the system in an economic and efficient manner. The OIG's survey is complete. A draft report is being prepared. TECHNICAL ADVICE AND ASSISTANCE During the six-month reporting period covered by this report, OIG management and staff have continued to dedicate resources towards assisting the agency in areas in which our expertise can provide benefit. For example, OIG personnel have participated in the following projects: Systems Development Life Cycle Auditors from the OIG are working closely with Commission representatives to develop a Systems Development Life Cycle (SDLC). Auditors participated with representatives from the Commission's Information Technology Center (ITC) to prepare the final version of the SDLC, prepare a user guide, develop a training program and a web page for the project. As part of the SDL process, the OIG was invited to participate in the development of the new information system for the Consumer Information Bureau (CIB). Financial Management Advisory Services The OIG provided advisory and assistance service to the Commission as it continues the task of realigning its financial management functions to implement CFO Act financial reporting. Specifically, OIG staff attended working sessions, shared best practices from other Federal agencies, and provided subject matter consulting on Federal financial management initiatives. OIG staff provided extensive assistance to the CFO working group as FCC responded to its first-ever financial statement audit reports and prepared to expand financial reporting to include all principal statements for FY 2000. Continued assistance was also provided to expose CFO staff to the requirements of an audit per OMB Bulletin No. 98-08, amended. The OIG and FCC management continue to foster a relationship that will facilitate CFO Act financial reporting at the Commission. Procurement Advisory Services The OIG also advises the Commission's contracting officers (COs) on contract and contractor financial and performance matters that do not require contract audits. The OIG staff advised the CO on a contractor breach of contract issue. The CO sought advice about a contractor who failed to make approximately $138,000 in contractually required lease payments to the Government for office space it rents in order to provide copy services to FCC customers. The OIG staff discovered a contractor employee who was supposed to be counting equipment as part of the inventory process sleeping in the OIG's computer lab and reported the misconduct to the Deputy Associate Managing Director - Administrative Operations. Reporting the misconduct and OIG advice resulted in the contractor terminating the subject's employment, removing the employee's labor charges for that day from their billing to the FCC, and the contractor sending a new team to verify the accuracy of the terminated employee's inventory count. OIG Auditors continue to provide technical input and assistance to the Deputy Associate Managing Director - Administrative Operations and Office of General Counsel in addressing a contract dispute between a contractor and the FCC that is currently being litigated before the GSA Board of Contract Appeals (GSBCA). The contractor disputed the FCC's determination denying the contractor's approximate $288,000 cost claim and filed an appeal with the GSBCA for recovery. This issue has not been resolved as of this reporting period. Specific Reporting Requirements of Section 5(a) of the Inspector General Act The following summarizes the Office of Inspector General response to the twelve specific reporting requirements set forth in Section 5(a) of the Inspector General Act of 1978, as amended. A description of significant problems, abuses, and deficiencies relating to the administration of programs and operations of such establishment disclosed by such activities during the reporting period. No such problems, abuses or deficiencies were disclosed during the reporting period. A description of the recommendations for corrective action made by the Office during the reporting period with respect to significant problems, abuses, or deficiencies identified pursuant to paragraph (1). No recommendations were made. See the response to paragraph (1). An identification of each significant recommendation described in previous semiannual reports on which corrective action has not been completed. No significant recommendations remain outstanding. A summary of matters referred to prosecutive authorities and the prosecutions and convictions which have resulted No matters were referred to prosecutive authorities during this reporting period. A summary of each report made to the head of the establishment under section (6)(b)(2) during the reporting period. No report was made to the Chairman of the FCC under section (6)(b)(2) during the reporting period. A listing, subdivided according to subject matter, of each audit report issued by the Office during the reporting period, and for each audit report, where applicable, the total dollar value of questioned costs (including a separate category for the dollar value of unsupported costs) and the dollar value of recommendations that funds be put to better use. Each audit report issued during the reporting period is listed according to subject matter and described in part II, above. A summary of each particularly significant report. Each significant audit and investigative report issued during the reporting period is summarized within the body of this report. 8. Statistical tables showing the total number of audit reports with questioned costs and the total dollar value of questioned costs. The required statistical table can be found at Attachment A to this report. Statistical tables showing the total number of audit reports with recommendations that funds be put to better use and the dollar value of such recommendations. The required statistical table can be found at Attachment B to this report. A summary of each audit report issued before the commencement of the reporting period for which no management decision has been made by the end of the reporting period (including the date and title of each such report), an explanation of the reasons such management decision has not been made, and a statement concerning the desired timetable for achieving a management decision on each such report. One audit report meets these criteria. The Report on Incurred Costs for Fiscal Years 1995, 1996 and Short Year 1997 (OIG 97-18) was issued in September 1997. This incurred cost audit identified questioned costs of $265,180. The contractor has formally contested the OIG finding and submitted a counterclaim to the Chief, Contracts and Purchasing Center. A description and explanation of the reasons for any significant revised management decision made during the reporting period. No management decisions fall within this category. Information concerning any significant management decision with which the Inspector General is in disagreement. No management decisions fall within this category. Attachment ATable I: OIG Audit Reports With Questioned Costs INSPECTOR GENERAL REPORTS WITH QUESTIONED COSTSNumber of ReportsDollar ValueQuestioned CostsUnsupported CostsA. For which no management decision has been made by the commencement of the reporting period.1265,180265,180B. Which were issued during the reporting period.000Subtotals (A + B)1265,180265,180C. For which a management decision was made during the reporting period.(i)Dollar value of disallowed costs.000(ii)Dollar value of costs allowed.000D. For which no management decision has been made by the end of the reporting period.1265,180265,180Reports for which no management decision was made within six months of issuance.1265,180265,180 Attachment B Table II: OIG Audit Reports With Recommendations that Funds Be Put To Better Use INSPECTOR GENERAL REPORTS WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USENumber of ReportsDollar ValueA. For which no management decision has been made by the commencement of the reporting period.00B.Which were issued during the reporting period.00Subtotals (A + B)00C. For which a management decision was made during the reporting period.(i) Dollar value of recommendations that were agreed to by management.00- Based on proposed management action.00- Based on proposed legislative action.00(ii) Dollar value of recommendations that were not agreed to by management.00D. For which no management decision has been made by the end of the reporting period.00For which no management decision was made within six months of issuance. 00 Report Fraud, Waste or Abuse to: The Federal Communications Commission Office Of The Inspector General HOTLINE: 202/418-0473 You may also visit or write: ·http://www.fcc.gov/oig/ ·Office of the Inspector General Federal Communications Commission 445 12th Street, SW Washington, DC 20554