Critical Audit of FCC May Come Up In Hill Hearing, Rep. Emerson Says
A recent audit that criticized the FCC for not following federal guidelines on tracking public spending (CD March 28 p11) “may come up” when Chairman Julius Genachowski testifies before a House appropriations subcommittee, said a spokesman for Rep. Jo Ann Emerson, R-Mo. The chairman of the subcommittee on Financial Services and General Government “is aware of the situation,” her spokesman said. Managers at both the FCC and the Universal Service Administrative Co. were recently ordered to “update and reinforce” rules for entering expenses into the federal accounting system, after outside auditors labeled the commission’s accounting system “a significant deficiency."
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FCC “financial systems and processes were not capable of achieving the financial system integration standards” set by the GAO in fiscal 2010, auditors at KPMG concluded. The finding involved millions of dollars in spectrum auctions, Universal Service Fund transactions, deferred revenue and loans, they wrote.
Agency officials downplayed the importance of the KPMG audit, saying it was a routine finding that came amid a laborious transition to a new accounting system. Until fiscal 2011, the FCC had relied for several years on a system called Federal Financial Systems, which was the accounting system of choice for 60 percent of government agencies. When Federal Financial’s parent company went out of business, the commission could no longer obtain software updates to keep up with changing government accounting standards, an FCC official said.
The agency has since switched to a new system called Genesis, under a $25 million contract with CGI, a spokesman said. “The FCC has implemented new accounting requirements put in place by the Office of Management and Budget,” he said. “The agency installed a new, fully compliant system last fall. We are proud of the fact that our audits for the past five years have found that our financial statements fairly present the agency’s financial position and conform with accepted accounting principles.” Had the earlier spreadsheet entries on Microsoft’s Excel program been a serious problem, auditors would have marked it as a “material” weakness, not a “significant” one, an FCC official said.
Fiscal conservatives weren’t impressed with the FCC’s explanation, they said. “I do not speak Bureaucrat,” said Less Government President Seton Motley Tuesday. “But in English, ’significant’ means … significant. And should therefore not be so casually dismissed by this FCC insider so used to speaking Bureaucrat.” Free State Foundation President Randolph May said the audit spells trouble for the pending USF reforms. “The ongoing well-documented problems with improper payments in the various USF funds are of sufficient magnitude that they add weight to the argument that the USF program should not be transformed willy-nilly into a broadband subsidy program,” he said. “Regardless whether the FCC characterizes the errors as ’significant’ rather than ‘material,’ or whatever, the accounting errors were numerous enough to call into question the administration of the fund. I suggest the size of the subsidy fund should be considerably smaller and capped. At least then, it might be easier for the FCC to get control over the abuses in the program that have led to so much waste of consumers’ money.”