Summary of Report 03-005

October 2002

Report Number 03-005

The Telecommunications Infrastructure Fund Board (Agency) cannot sufficiently demonstrate that it has awarded grants as the Legislature intended because (1) it has not developed quantifiable criteria to evaluate the grant awards program and (2) its grant management system lacks the detail necessary to analyze whether priority constituents are adequately served.

Weaknesses in the Agency's grant payment process also increase the risk that grant funds will not be used as intended. We project that the Agency has paid approximately $4.4 million to grantees for items that were not approved in the grantees' budgets during fiscal years 2000, 2001, and part of 2002.

The Agency's grant monitoring process is inadequate for determining whether grantees are complying with grant requirements. From fiscal year 1999 through May 2002, the Agency paid a contractor $5.8 million to perform the grant monitoring function. However, the contractor conducted on-site monitoring visits at only 1 percent of all grantees. In addition, the Agency did not follow up on the contractor's findings and did not include certain grants in the monitoring process.

Starting at the beginning of fiscal year 2003, the Agency will be solely responsible for performing the monitoring function. With the Agency's statutory expiration date set for September 1, 2005, however, there may be insufficient time left to improve the Agency's oversight of approximately $500 million in grant funds that the Agency has not yet awarded. The Agency has already awarded approximately $1 billion in grants from the Telecommunications Infrastructure Fund.

In addition, the Agency does not hold grantees accountable since its grant agreements generally lack key provisions such as performance measures and sanctions. The Agency also is inconsistent in its enforcement of grant agreement provisions requiring grantees to submit requests for funds within 90 days of the expiration of the grant period.

We identified some of the weaknesses included in this report in a previous audit report (An Audit Report on the Telecommunications Infrastructure Fund Board, SAO Report No. 00-010, February 2000).

• The Agency cannot sufficiently demonstrate that it has awarded grants as the Legislature intended.
• Inadequate review of grantees' requests for funds allows reimbursement of expenditures not included in approved budgets.
• The Agency has not consistently closed out expired grants or verified matching fund payments.
• The Agency inappropriately pays grantees based on the purchase orders they submit.
• Internal controls within the grant management system are inadequate to prevent erroneous or unauthorized changes to grant award amounts.
• The Agency has not ensured that an adequate number of on-site grant monitoring visits have been performed.
• The Agency has not monitored grantees associated with $60.9 million in special grant projects.
• The Agency has not followed up on outstanding issues identified in on-site monitoring visits and reviews.
• The Agency's plans to move grant monitoring in-house require additional analysis.
• The Agency's grant agreements generally lack key provisions such as performance measures and financial sanctions.
• The Agency is inconsistent in its enforcement of grant agreement provisions requiring grantees to submit requests for funds within 90 days of the expiration of the grant period.
  

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