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July 16, 1998
Ira Fishman
Chief Executive Officer
Schools and Libraries Corporation
1023 - 15th Street, N.W.
Suite 200
Washington, D.C. 20005

Dear Mr. Fishman:

Consistent with the recommendations of the General Accounting Office, I request the Schools and Libraries Corporation (SLC) complete the following actions before issuing any funding commitment letters to applicants for the schools and libraries universal service support mechanism:

1. Conduct detailed reviews of a random sample of applications to assess not only the soundness of these applications but also the overall effectiveness of SLC's program integrity procedures for detecting ineligible applicants, ineligible services, and inappropriate discount levels as defined by Commission orders. Should these reviews reveal systemic weaknesses in program integrity procedures or their implementation, SLC should take corrective actions before committing any funds;

2. Finalize procedures, automated systems, and internal controls for the post-commitment phase of the program's funding cycle, including funds disbursement; and

3. Obtain a report from its independent auditor that finds that SLC has developed an appropriate set of internal controls to mitigate against waste, fraud, and abuse.

In addition, I request SLC, before issuing funding commitment letters to those applications identified as "high risk," conduct detailed reviews of the technology plans and related documents to determine whether the applicants have the resources to use effectively the services requested and whether the applications are in compliance with Commission rules regarding eligibility.

I am pleased, as reflected in your testimony to the Senate Commerce Committee, that SLC has agreed that it can and will undertake these steps. Thanks to you and the staff of SLC.

Sincerely,



William E. Kennard
Chairmann