Testimony of H. Walker Feaster III Acting Inspector General Federal Communications Commission before the Subcommittee on Commerce, Justice, State, and Judiciary House Committee on Appropriations March 1, 1995 Introduction Good Afternoon! I am Walker Feaster, the Acting Inspector General of the Federal Communications Commission. I appreciate the opportunity to appear before you today and provide you with information about the FCC's Office of Inspector General. The Federal Communications Commission The Federal Communications Commission is an independent federal regulatory agency responsible directly to Congress. It was established by the Communications Act of 1934 and is charged with regulating interstate and international communications by radio, television, wire, satellite, and cable. Its jurisdiction covers the 50 states and territories, the District of Columbia and U.S. possessions. The Agency is directed by five Commissioners appointed by the President and confirmed by the Senate for five year terms. The President designates one Commissioner to serve as Chairman. Although the Commission is small by Washington standards, its activities affect the daily lives of virtually every American, perhaps more than any other Federal agency. People tend to be vitally interested in issues affecting their telephone and cable service, and their radio and television programming. As a result, the regulatory activity of the Commission attracts a good deal of attention from the Congress, the media, and the public. At no time in its history has this been more true than now, when the technologies that the Commission regulates are changing at such a rapid pace and in such a dramatic fashion. In order to facilitate, and not impede, the resulting economic growth and consumer benefit, the Commission has spent the past year "reinventing" itself through the restructuring of organizations; reassigning staff to higher priority functions; and developing legislative proposals and administrative actions that would streamline processes, reduce regulation and eliminate non- essential tasks. The Commission is also in the process of developing customer service standards for major operating organizations of the Commission. Details of these actions are contained in the report "Creating an FCC for the Information Age," which has been made available to subcommittee staff. These efforts are important steps in the transformation of the Federal Communications Commission. As Inspector General, it is my intention to assist the agency as it continues to improve its efficiency and effectiveness. The Office of Inspector General The Office of Inspector General at the Federal Communications Commission was created by the Inspector General Act Amendments of 1988 and was established in 1989. Its first Inspector General, James Warwick, served in the position until he retired in November of 1994. I have served in the capacity of Acting Inspector General since that time. The Inspector General, reporting directly to the Chairman of the FCC, conducts and supervises audits and investigations relating to the programs and operations of the agency. The Office is staffed by the Inspector General and five employees: three auditors; an attorney-advisor who is also responsible for investigations; and an administrative officer. The Office has requested and received $100,000 for contract audits and $24,000 in travel funds. During its five years of existence, the Office of Inspector General has, for the most part, concentrated on conducting audits of financial systems and related activities. This was a conscious decision, because of limited resources, to focus most of its audit efforts towards insuring that the FCC was operating in accordance with acceptable financial and accounting principles. Audits and Special Reports During fiscal year 1994, the Office released five audit reports ("Compliance with Provisions of the Prompt Payment Act"; "Physical Security of the FCC Local Area Network"; "Followup Audit of the Seized Property Program"; "Report on Internal Controls and Compliance Related to the General Ledger and Treasury Financial Reports for the Fiscal Year Ending September 30, 1993"; and "Report on Internal Controls and Compliance Related to the Budget Operations for the Fiscal Year Ending September 30, 1993"); and one special review ("Special Review of the Narrowband PCS and IVDS Auctions"). Details of the findings of these audits and special review are contained in the semi- annual reports provided to the Congress and to the staff of this subcommittee. I would be happy to provide full copies of any of the audits or special review upon request. Investigations During fiscal 1994 we received 34 complaints. Six resulted in formal investigations, 13 were resolved through preliminary inquiries, eight were referred to other FCC organizations, and seven did not warrant any further action. Summaries of both formal investigations and types of complaints processed are contained in the investigations portion of our semi-annual reports provided to the subcommittee staff. Planning In order to improve the audit coverage of the FCC's programs and operations we are in the process of developing a strategic plan for fiscal years 1995 to 1999. I have asked the Commissioners and Bureau and Office Chiefs for their input on priorities and in the identification of activities to be reviewed. This plan will be updated at a minimum of every three years or when major changes occur at the Commission. We are also in the process of updating our audit universe to assist us in determining audit priorities. These two documents -- the strategic plan and audit universe -- will be used as the basis for developing the annual audit plan for the Office of Inspector General. Strategic Plan Priorities In the draft strategic plan, I have identified programs and operations that, because of their nature, should be reviewed by the Office of Inspector General. The objectives of this review will be to determine whether the programs/operations are vulnerable to waste, fraud, abuse or mismanagement; whether they are efficient, effective and economical; and whether programmatic goals and objectives are being achieved. My first priority will be programs and operations having a high profile and/or significant economic impact. Included in this category are: o Financial Activities - e.g. assistance to management in the development and implementation of a new financial system; o Spectrum Auctions - e.g. ensure integrity and efficiency of auction process; o Application and Regulatory Fees - e.g. review process for control systems and potential for fraud; o Cable Services Bureau - e.g. review operations of the bureau; o Customer Service Standards - e.g. review established standards and methods of development; o Required Audits - e.g. Anti-Lobbying Act. The second priority includes programs and operations having a substantial impact on the Commission and/or its customers. Included in this category are: o Computer Management and Security - e.g. Internet security; o Application Processing - e.g. timeliness of processing; o Enforcement Activities - e.g. followup to previous audit on fines and forfeitures. The strategic plan also addresses other lesser priorities such as those programs having an impact on operational effectiveness and FCC-wide issues. The programs in the first two categories, in my view, should each be reviewed over the next three years. There may be also other programs, based upon input from the Commissioners, Bureau and Office Chiefs, or other sources, that may be added to this list. Fiscal Year 1995 Activities In the first five months of fiscal year 1995, the Office has been quite active. We have used our draft strategic plan to develop our audit priorities for fiscal year 1995. For example, we have issued a "Report on the Special Review of the Regional Narrowband Personal Communications Services License Auctions." In this review, we found that overall the auction was carried out in an appropriate manner. We did make two suggestions related to the publishing of waiver information during the course of the auction and a clarification of requirements for submitting "long form" applications. Both suggestions were accepted by management and changes implemented. We are in the process of finalizing two other audits -- the computer book audit and a report on FCC's compliance with provisions of the Anti-Lobbying Act. We have started conducting a review of the on-going broadband auction to ensure its integrity and efficiency. We are assisting management in its conversion to an off-the- shelf, widely used financial system -- the Federal Financial System -- as they prepare to go on-line on October 1, 1995. We are working with computer security personnel to test the safeguards in place to protect our computer systems from unauthorized entry. The Office is also working with management and the Department of Labor to determine how the Office of Inspector General can better identify and investigate fraud in our workers' compensation program. We are also planning in the second half of the year to look at selected aspects of the application fee program and do followup work on a previous audit in the fines and forfeiture area. As always, we are ready to respond to specific situations or circumstances that may develop through our audit activities or our investigations program. Investigat ions Under our investigations program this year we have received 27 complaints. To date six have been resolved through preliminary inquiries or other IG action, and nine have been referred to other FCC organizations or other IGs. Three of the complaints resulted in investigations, and nine are still pending. We are considering establishing a dedicated hotline in the OIG but we have not yet found a hotline to be desirable for two reasons: The number of complaints we receive has not justified the expense and the time required to maintain a hotline; and complainants from within the FCC and from the public have, in my opinion, had no trouble reaching us through the number that is published for both the Office and for the Director of Investigations. Whenever we receive a complaint we take immediate steps to determine whether there is a factual basis for the complaint and whether those facts present a violation that warrants action by the Office of Inspector General. We have been conscientious in safeguarding the identity of any complainant who requests such protection. Brief summaries of the kinds of complaints we receive as well as the investigations we conduct are contained in the investigations section of our semi-annual reports. Conclusion As can be seen from a review of the activities of the FCC's Office of Inspector General during the current and previous fiscal years, our audits, because of their focus, have not generated recommendations that would result in specific reductions to the FCC appropriation. However, as the Office broadens its efforts into program/performance audits we expect that specific areas will be identified that could lead to reductions in the budget or to resources being put to alternative uses that would better serve the public. I appreciate the opportunity to discuss the operations of my office and share my priorities with you. I will be happy to answer any questions you might have. Thank you.