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Table of Contents


										

I. INTRODUCTION								2

II. AUDITS									6

III. INVESTIGATIONS								15

IV. LEGISLATION								19

V. TECHNICAL ADVICE AND ASSISTANCE					20

VI. SPECIFIC REPORTING REQUIREMENTS OF SECTION 5(a)
OF THE INSPECTOR GENERAL ACT					23

ATTACHMENTS

A. TABLE I: OIG AUDIT REPORTS WITH QUESTIONED COST

B. 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 OIG is now located in the West wing of the Portals II in 
the FCC headquarters building at 445 12th Street, SW, Washington, D.C.  20554.  With 
the departure of Paul Brachfeld to the National Archives and Records Administration as 
Inspector General, Thomas D. Bennett was appointed as the Assistant Inspector General 
for Audits (AIGA).  Charles J. Willoughby serves as the Counsel and Assistant Inspector 
General for Investigations (AIGI). 

This report includes the major accomplishments and general activities of the OIG during 
the period October 1, 1999, through March 31, 2000, in accordance with Section 5 of the 
Inspector General Act of 1978, as amended 5 U.S.C. App. 3, 5.

Highlighted OIG Activity

Year 2000

As part of our program of monitoring and supporting Commission efforts to address the Year 
2000 problem, the OIG performed a series of reviews to determine Commission readiness.  For 
example, we performed a special review of Business Continuity & Contingency Planning 
(BCCP).  The objective of this review was to evaluate the status of continuity planning.   As a 
result of this review, we reported that the Commission did not have a sufficiently detailed and 
tested BCCP in place to prepare for an outage of one or more mission critical systems (with one 
exception).  We recommended that the Commission work aggressively to institute and test 
BCCP's for all mission critical systems.  

In addition to reviewing BCCP activities, we performed a special review to assess the feasibility 
of the Commission's plan to ensure the continuity and operation of core business processes 
during the midnight transition from December 31, 1999 continuing through the first day of 
business January 3, 2000 (i.e., the "Day One Plan").  As a result of this review, we reported that 
the Day One Plan needs to accurately reflect the current status of Y2K readiness and that the 
plan did not adequately address Day One rehearsal and reporting activities.  The Commission 
successfully completed the transition to Year 2000 without any major problems.

Spectrum Auctions

As part of the Omnibus Budget Reconciliation Act of 1993, the Federal Communications 
Commission (FCC) was authorized by Congress to auction electromagnetic spectrum.  Since 
the inception of the "auctions program", the OIG has performed numerous reviews of 
various aspects of the program, ranging from application processing and bid management 
through detailed technical reviews of Information Technology (IT) management. During this 
semiannual reporting period, we participated in a multi-agency OIG review entitled 
"PCIE/ECIE Review of Non-Tax Delinquent Debt" as part of our ongoing review of this 
critical program.  The objective of this review was to assess the collectibility of delinquent 
debts that have arisen out of the spectrum auctioning process and evaluating the portfolio 
management activities of the FCC to ensure that these practices minimize losses to the 
Government.  As a result of this review, we reported that the FCC is experiencing significant 
collection issues with its Spectrum Auction installment loan portfolio.  Based on discussions 
with FCC management and other information obtained, the high level of FCC's delinquent 
debt is due to a number of contributing factors including, but not limited to, balancing 
program social goals with the need for front-end loan underwriting, changes in market 
conditions, and inability of licensees to raise additional capital.  The CFO has reported 
implementation of three of the seventeen accepted recommendations thus far and partial 
implementation of three others.

In addition to our review of Non-Tax Delinquent Debt, we performed a special review of IT 
security for the critical Commission sub-network supporting auction operations.  This review 
was initiated in response to a referral from the Commission's Computer Security Officer.  
Based upon initial reports of potential system compromise, the OIG established a task order 
under our contract with a computer security firm and created a review team comprised of 
representatives from the contractor and OIG.  During the review, we determined that the 
system had not been compromised and that the incident actually resulted from a feature of 
the database management system.  However, as part of the review process we examined 
aspects of security and technology management and identified areas where improvements 
could be made..

Financial Management

During the semiannual reporting period, the OIG, with the support of an independent CPA 
firm, substantially completed audit work relating to the FY 1999 audit of FCC's financial 
statement.  Draft versions of the independent auditor's report and related reports on internal 
control and compliance were submitted for agency management's review and outstanding 
issue resolution.  Additionally, FCC management is resolving issues precluding general 
release of its FY 1999 financial statement.

Field Inspection Program

The OIG conducts inspections of Commission field offices as part of the Field Inspection 
Program (FIP).  We conduct field inspections in order to independently assess and report 
upon the effectiveness and efficiency of field operations.  The FIP also serves as a means to 
evaluate and test internal controls, address employee concerns, identify best practices and, 
conversely, impediments to operations.  During the semiannual reporting period, we 
prepared a report summarizing the results of field inspection visits during FY 1999.  A 
recurrent concern raised by the field employees during FY 1999 field office visits was over 
personal safety when responding to interference complaints or unauthorized transmissions, 
particularly in areas with significant "local militia" activities.  On January 27, the Chief of 
the Enforcement Bureau reminded all of its employees to follow all existing Field safety 
policies while  a study was conducted  to see what, if any, additional steps should be taken to 
maximize employee safety.

For the current fiscal year, we are assessing the FIP to determine whether the program should 
be modified in its scope and conduct.  The review procedures utilized in the FIP have not been 
materially revised since the program's inception.  We are currently identifying areas where the 
program can be enhanced and developing a risk-based approach to selecting sites for field 
visits. This effort is being performed through internal review of procedures used in prior FIPs, 
discussions with Commission representatives to obtain their suggestions, and review of similar 
programs in other federal agencies.  Due to budget constraints, funding for travel expenses is 
currently under severe limitations.  As a result, we may forgo the conduct of the FIP in fiscal 
year 2000, and concentrate our effort on revamping the program for future fiscal years.
 
Technical Advice and Assistance

OIG continued to broaden its role as a provider of technical advice and assistance to Agency 
officials in developing sound management information and financial reporting systems and 
in streamlining programs and organizations.  In addition to concentrating in the areas of 
financial management and procurement, we worked closely with Commission representatives 
to develop a Systems Development Life Cycle and participated with the Licensing Work 
Group.

OIG continued to further FCC employees' understanding of the role of the Inspector General 
by publishing the first edition of the OIG Policies and Procedures in pamphlet form.  Copies 
have been widely distributed throughout the Commission


 Audits


OVERVIEW

During the semiannual reporting period, the Office of Inspector General (OIG) issued the 
following reports:

1. October 21, 1999 - Special Review Report of the Commission's Draft Business 
Continuity and Contingency Plan (BCCP)
2. November 2, 1999 - Status Report on the Commission's Year 2000 Activities
3. December 23, 1999 - Reports Related to Non-Tax Delinquent Debt
4. March 28, 2000 - Report on Special Review of Auctions Security

OIG reports can generally be obtained via the Internet from the OIG webpage located on the 
FCC website [http://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.

OIG REPORTS ISSUED

Special Review Report of the Commission's Draft Business Continuity and Contingency 
Plan (BCCP) issued on October 21, 1999, Report No. 00-AUD-01-02 

As part of the OIG's monitoring and support of the FCC's internal efforts to address the Year 
2000 problem, the OIG performed a special review of the critical area of Business Continuity & 
Contingency Plans (BCCPs).  OIG auditors reported that the Commission had made progress 
addressing BCCP issues for the Year 2000 problem.  However, the FCC did not have a 
sufficiently detailed and tested BCCP in place to prepare for an outage of one or more mission 
critical systems (with one exception).  As of October 6, 1999, the Commission had not completed 
thirteen of its fourteen local BCCPs for its Bureaus and Offices.  No documented plan had been 
tested.
   
OIG auditors recommended that the Commission continue to aggressively work to institute and 
test BCCP's for all mission critical systems.  Further, we recommended that, if timing is 
insufficient to fully simulation test all systems, only those systems of the highest criticality and 
risk should be simulation tested.  All systems should, at a minimum, be subject to an independent 
desktop test.  We noted that a desktop test is not optimal, as it does not replicate the conditions 
related to an actual system outage.  Nonetheless, a desktop test provides some measure of 
familiarity to program operators and users of contingency measures, which may require 
implementation. 

Status Report on the Commission's Year 2000 Activities issued on November 2, 1999, Report 
No. 00-AUD-01-02

As part of the OIG's monitoring and support of the FCC's internal efforts to address the Year 
2000 problem, we performed a special review to assess the feasibility of the FCC's Year 2000 
Day One Plan.  A Day One Plan is a document designed to ensure the continuity and operation 
of the FCC's core business processes during the midnight transition from December 31, 1999 to 
January 1, 2000, continuing through the first day of business January 3, 2000.  As a result of 
our review, we reported that:

? The Day One Plan needs to accurately reflect the current status of Y2K readiness 
? The Plan does not adequately address Day One rehearsal and reporting activities.

The Commission agreed with the findings and stated that these conditions were caused by the 
short time frame in which the FCC had to comply with the development of this plan for the 
Office of Management and Budget (OMB).  The Commission also stated that they would carry 
out rehearsal activities in December 1999.  The transition to Year 2000  was successfully 
completed without any major problems.

Reports on Non-Tax Delinquent Debt issued on December 23, 1999, Report No. 00-AUD-01-
03

We participated in a Government-wide review of Non-Tax Delinquent Debt sponsored by the 
President's Council on Integrity and Efficiency (PCIE).  This review was initiated by the PCIE 
in response to concerns raised by the Subcommittee on Government Management, Information 
and Technology, Committee on Government Oversight and Reform.  The primary objectives of 
the Government-wide PCIE Review were to (1) determine whether previously reported amounts 
of Federal government-wide non-tax delinquent debt accurately represent the universe of non-
tax delinquent debt, and (2) to attempt to assess the collectibility of the delinquent debt.  To 
accomplish the objectives of the review, we established a task order with the Public Accounting 
firm of Ernst & Young LLP (hereinafter referred to as "Ernst & Young").  Ernst & Young used a 
performance review guide prepared by the Department of the Treasury to conduct the review.  In 
addition, at our direction, the scope of the review was limited to FCC's Spectrum Auction 
installment loan program.

 Ernst & Young concluded that the FCC is experiencing significant collection issues with its 
Spectrum Auction installment loan portfolio.  Based on discussions with FCC management and 
other information obtained, the high level of FCC's delinquent debt is due to a number of 
contributing factors including, but not limited to, balancing program social goals with the need 
for front-end loan underwriting, changes in market conditions, and inability of licensees to raise 
additional capital.  The FCC's collection efforts have also been hampered by various internal 
and external accounting and organizational problems, such as:
 
? unclear and undefined internal FCC debt collection policies, procedures and 
responsibilities;
? non-performance of certain debt collection activities;
? insufficient reporting and monitoring of installment loan portfolio performance; and
? difficulties and problems with the outsourced Nortridge Loan Tracking System.
 
To address the current situation, the FCC is taking steps to improve debt management practices, 
including defining the bureaus and offices responsible for collection actions as well as 
formalizing and documenting debt management policies and procedures.  This project resulted 
in eighteen formal recommendations of which management concurred with seventeen.  We 
believe that this commitment on the part of the FCC to address deficiencies in the auction loan 
program will result in more accurate computation and reporting of loan balances.  This effort, 
when taken in conjunction with improved loan servicing and debt collection practices, as 
recommended by this office, will result in overall program improvements.  These improvement in 
internal controls, consistency in processing standards, and compliance with Federal laws and 
regulations will result in better protection of the financial assets of the Federal government. The 
CFO has reported implementation of three of the seventeen recommendations thus far and 
partial implementation of three others.


Fiscal Year 1999 Field Inspection Program - Summary Inspection Report issued on 
January 21,  2000,  Report No. 00-AUD-01-15 

The OIG conducts an annual review known as the Field Inspection Program, or FIP.  This 
program has been in place since 1996 and has proven to be a useful management tool for the 
Commission.  The FIP consists of OIG visits to selected field offices to perform a detailed review 
of office procedures for controls over program functions and administrative activities.  
Additionally, field office employees are given the opportunity to discuss their concerns with OIG 
auditors and provide feedback to Commission management.

During the semiannual reporting period, we prepared and issued our Summary Inspection 
Report for field inspections conducted at the following offices during FY 1999:

? Office of Regional Director, Northeast Region
? Chicago Field Office
? New York Field Office
? Detroit Field Office
? Philadelphia Field Office

Our inspection included the evaluation of internal controls over payroll, imprest funds, credit 
cards and other government assets.  Additionally, the status and serviceability of facilities and 
equipment were assessed.  Our inspection disclosed minor payroll and equipment inventory 
discrepancies that were subsequently resolved.  The inspection team also sought out best 
practices at each office that could be adopted on a Bureau-wide basis, and obtained feedback 
from the field employees on topics of concern or interest.  A recurrent concern raised by the field 
employees was over personal safety when responding to interference complaints or unauthorized 
transmissions, particularly in areas with significant "local militia" activities.  

We issued a summary report and individual reports on each field visit to Commission 
management.  The reports did not contain findings and recommendation as in a formal audit 
report, but are designed to be observations for management's information and use.  On January 
27, the Chief of the Enforcement Bureau reminded all of its employees to follow all existing 
Field safety policies while a study was conducted to see what, if any, additional steps should be 
taken to maximize employee safety.

Report on Special Review of Auctions Security issued on March 28, 2000, Report No. 00-
AUD-01-21

In response to a referral from the Commission's Computer Security Officer, the OIG performed 
a special review of Information Technology (IT) security on a critical sub-network within 
Commission's IT infrastructure.  The affected sub-network is used to support the Commission's 
spectrum auction activities.  Based upon the initial reports of potential system compromise, the 
OIG responded by establishing a task order under our contract with the computer security firm 
of TWM Associates, Inc. (hereinafter referred to as "TWM") and creating a review team 
comprised of representatives from TWM and OIG.  The special review was conducted in two 
phases. The objective of the initial phase of the review was to investigate the incident and, to the 
extent that this information could be developed, determine who was inappropriately using a 
privileged account on the sub-network.  The objective of the second phase of the review was to 
evaluate the security of IT components within the sub-network. 

The review team completed the first phase of the review and reported the results of that portion 
of the review in an OIG flash report that was issued on October 12, 1999.  In that report, the 
OIG review team concluded that the specific incident triggering this investigation appears to 
have been the result of a database system security feature and not a malicious attack.  Working 
with IT staff from the Auctions group, the review team was able to re-create the system behavior 
displayed during the incident to support the hypothesis that the incident was the result of a 
database management system feature.  Based on these event re-creations and our examination of 
the security boundary surrounding the Auctions technology, the review team concluded that the 
incident actually resulted from a feature of the Sybase database management system and that the 
security boundary is configured correctly.  
 
During the second phase of the review, the review team identified findings covering two general 
areas: 1) the administration of the Auctions systems and 2) the technology assets employed by 
the Auctions site.  The administrative findings focus on the plans, policies and procedures in 
place to ensure that the systems in question are administered in a secure manner. Our review 
determined that, in general, the plans, policies and procedures in place over the Auctions system 
need improvement.  In addition, our review indicates that adherence to the existing plans, 
policies and procedures was not sufficient to ensure adequate security for the Auctions system.  
The review team made several recommendations to strengthen existing plans, policies, and 
procedures.  The technology-based findings focus on the secure implementation and deployment 
of technology within the system. The review team made several recommendations to strengthen 
controls over specific components of the IT infrastructure.

Because of the sensitive nature of the specific conditions identified during this review, specific 
information about findings was included in the appendices to the report and distributed only to 
those personnel with a need for the information.  

ONGOING OIG AUDIT ACTIVITY

Audit of Civil Monetary Penalties

We are in the process of completing an audit of the Commission's Civil Monetary Penalty 
Program.  The Communications Act of 1934 authorizes the Federal Communications 
Commission (FCC) to use civil monetary penalties as a means of enforcing Commission rules 
and regulations.  For the period from Fiscal Year (FY) 1995 through the second quarter of FY 
1999, Commission records indicate that 375 civil monetary penalty actions with a total dollar 
value of $27,342,500 were initiated.  For those transactions initiated during this period, the 
Commission reports collections totaling $6,364,650 and some level of monetary collection on 
213 of the 375 actions.  The objective of this review was to determine if the Commission has 
established an effective program for managing civil monetary penalties.  To conduct this review, 
we examined all aspects of the process by which the Commission manages civil monetary penalty 
actions.  On March 24, 2000, we issued a draft report summarizing the results of our review.  
The Commission is expected to provide a response to the draft report by April 28, 2000. 

Audit of Computer Controls at the Federal Communication Commission (FCC) National Call 
Center (NCC)

We are in the process of completing an audit of computer controls at the Commission's National 
Call Center (NCC).  The FCC opened the NCC in 1996 at the Commission's facility located in 
Gettysburg, Pennsylvania.  Since its introduction in 1996, the NCC has seen a tremendous 
increase in the volume of activity and is heavily reliant upon automated tools to respond to 
customer inquiries.  The objective of this audit was to examine the automated computer system 
and the control environment in which the call center operates to ensure that adequate security 
safeguards exist to protect NCC data.  To accomplish the objectives of this review, the OIG 
established a task order with the computer security firm of TWM Associates, Inc.  To conduct the 
review, TWM used the guidelines contained in the Federal Information System Controls Audit 
Manual (FISCAM) developed by the United States General Accounting Office (GAO).   On 
March 31, 2000, we issued a draft report summarizing the results of our review of the computer 
controls at NCC.  The Commission is expected to provide a response to the draft report during 
the third quarter.

Because of the sensitive nature of the specific conditions identified during this review, specific 
information about findings will be included in the appendices to the report and distributed only 
to those personnel with a need for the information.  

FY 1999 Financial Statement Audit

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.  While presently the FCC is not a designated agency per the CFO 
Act, amended, the OIG with the concurrence of the Department of the Treasury, Financial 
Management Service (FMS), incorporated within the scope of its work that the audit meet the 
requirements of a CFO scope audit.

Significant changes to audit scope impacted the OIG and its contractor's ability to complete the 
audit by the March 1, 2000 expected date.  FCC management, with the concurrence of the OIG 
and its contractor, limited its financial statements prepared per Office of Management and 
Budget (OMB) Bulletin No. 97-01, Form and Content of Agency Financial Statements, amended, 
to an overview of the reporting entity, a consolidating balance sheet and related notes (financial 
statement), and required supplementary information relating to intra-governmental amounts and 
the related Federal trading partners for assets and liabilities.  Additionally, FCC identified a 
significant component of its reporting entity that had a material impact on the financial 
statements and greatly expanded the scope of the work performed.

At the close of the current semi-annual period, the OIG and its contractor have substantially 
completed key audit tasks including: the development and refinement of the comprehensive audit 
plan, an internal control and compliance review, and substantive testing of the FY 1999 line 
items.  Draft versions of the independent auditor's report and related reports on internal control 
and compliance were submitted for agency management's review and outstanding issue 
resolution.  Additionally, FCC management is resolving issues precluding general release of its 
FY 1999 financial statement.

The aforementioned reports identify areas where FCC management needs to concentrate to 
ensure adherence to Federal accounting standards and processes.  To date, draft reports identify 
six material weaknesses, seven reportable conditions, and seven instances of noncompliance with 
laws and regulations required to be reported under Government Auditing Standards and OMB 
Bulletin No. 98-08, Audit Requirements for Federal Financial Statements, amended.  


FACTS Agreed-Upon Procedures Attestation

In support of the FY 1999 Audit of the Consolidated Financial Statements of the United States 
Government, the Department or the Treasury, Financial Management Service requested "non-
CFO Act" designated agencies to verify Federal Agencies' Centralized Trial Balance System 
(FACTS) data submissions.  As part of the verification process, the OIG and its contractor 
performed procedures detailed in FMS' Treasury Financial Manual and prepared a report 
describing such procedures and the results of performing those procedures.  These agreed-upon 
procedures were performed in accordance with American Institute of Certified Public 
Accountants' Standards.  At the close of the current semi-annual period, the OIG and its 
contractor have substantially completed the required procedures and drafted the accompanying 
report.  Per OMB and FMS guidance, agreed-upon procedures reports were to be delivered to 
the General Accounting Office, OMB, and FMS by March 3, 2000 or within one week of issuing 
the audit report on the agency financial statements.  To date, FCC has not finalized it FY 1999 
financial statement due to the fact management is resolving issues precluding its general release. 
The OIG intends to transmit the agreed-upon procedures report once FCC finalizes the FY 1999 
financial statement. 

Government Performance Results Act Audit

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 conducted initial 
meetings and completed work relating to the preliminary planning stage of the audit.   Recently, 
the FCC published its first annual performance report as required by GPRA.  The scope of our 
audit is to assess FCC's GPRA management and reporting systems as follows:

? update our understanding of and review FCC's methodology for developing GPRA 
requirements;
? assess compliance with the Act;
? review annual performance plan(s) and report per guidance; and
? perform verification and validation of sampled performance measures and  review status 
of prior audit recommendations (OIG 98-01; dated 3/3/99).

Contract Audits

OIG auditors continue to provide technical input and assistance to the Manager of the Contracts 
and Purchasing Center in addressing a contract dispute between a prime contractor and the 
FCC.  In a prior reporting period, the OIG questioned approximately $236,000 of subcontract 
labor costs billed to the FCC by the prime contractor.  The prime contractor disputed the OIG 
findings and submitted an approximate $288,000 counter claim for the same subcontract labor 
costs.  During this reporting period, the FCC's Manager, Contracts and Purchasing Center, 
issued a final determination denying the prime contractor's claimed costs.  

Universal Licensing System (ULS) Survey

On March 17, 1999, the Chairman of the Federal Communications Commission submitted a 
report titled "A New Federal Commissions Commission for the 21st Century."  In this paper, the 
Chairman outlined his views on how the FCC should function.  One of major goals stated in this 
document is "streamlining and automating the FCC licensing process."  A cornerstone of this 
goal is Universal Licensing System (ULS).  The ULS is one of the FCC's largest systems 
development efforts ever undertaken.  A Wireless Bureau project, ULS has several goals, 
including: The development of an on-line and web based licensing system, the consolidation of 
eleven Wireless legacy systems into one, the reduction of manual handling by automation of the 
license processing function, and simplification of the licensing process.

OIG auditors have initiated a survey review of the ULS project.  The purpose of this survey is to 
examine the progress of the ULS project and report the results to the Inspector General.  To 
meet this goal, this survey has a series of milestones.  The first milestone is to provide an 
overview of the Universal Licensing System (ULS).  The next goal is to analyze and report any 
identified problems in the ULS development process.  The final milestone is to determine if any 
aspects of ULS need further OIG involvement and review.  The survey report will recommend 
what, if any, additional action the OIG should take on ULS.  We anticipate completing this 
review and issuing a report in the third quarter, FY 2000.

Disbursements and Accounts Payable Analysis
	
Disbursements traditionally represent a high risk factor to a business entity.  To assist in 
identifying and minimizing this risk, audit activity has been initiated using advanced software 
tools to identify payments that meet identified exception criteria.  After identification, audit work 
will validate that disbursements are legitimate and accurate and supported by appropriate 
documentation.
	
The initial objective will be to search for indicators of questionable or unusual disbursement 
attributes using advanced audit software.  This information resides in the Federal Financial 
System (FFS) other accounts payable databases.  Any disbursement meeting this definition will 
be subject to detailed audit scrutiny. 

The review will benefit the Commission by determining if the disbursement process is functioning 
in a manner that minimizes the potential for waste, fraud, abuse, and mismanagement.  This 
system will also act as a check that can identify indicators of possible abuse.  We anticipate 
completing this review and issuing a report in the fourth quarter, FY 2000.



Web Presence

The Internet and the World Wide Web (WWW) have become essential components in conducting 
business with the FCC.  Users can file licenses and applications electronically and access 
Commission information via the Internet.  A key Commission goal is the "paperless FCC," 
where filing would occur electronically using services such as the Internet.  However, security 
problems, such as the recent hacker attacks, constitute a significant risk to the fulfillment of 
these goals.  To ensure that the Commission's "web presence" is secure, the OIG initiated an 
audit of the FCC's Web Presence.  The objective of this review is to assess the security posture 
of the FCC's Web Presence and its associated components.  The scope of this review 
encompasses a review of the primary servers providing web resources, components that provide 
and secure communication pathways to and from the Internet and between web resources, and 
hosts providing back-end data sources to web resources.  We anticipate completing the Web 
Presence review in the fourth quarter, FY 2000.  




Investigations


OVERVIEW

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 also be predicated upon audit or inspection findings of fraud, 
waste, abuse, corruption, or mismanagement by FCC employees, contractors, and/or 
subcontractors.  Upon receipt of an allegation of an administrative or criminal violation, the 
OIG usually conducts a preliminary inquiry to determine if an investigation is warranted.  
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.  All complaints are examined to determine whether there is any basis for OIG 
audit or investigative action.  If nothing within the jurisdiction of the OIG is alleged, the 
complaint is usually referred to the appropriate FCC bureau or office for response directly to 
the complainant.  A copy of the response is also provided to the OIG.  Finally, matters may be 
referred to this office for investigative action from other governmental entities, such as the 
Office of Special Counsel.

ACTIVITY DURING THIS PERIOD

During this reporting period, fourteen complaints were received in the OIG.  All of the 
complaints have resulted in the initiation of investigations or preliminary inquiries, and eight of 
the matters were closed.  Three complaints were closed because of determinations of no 
violations of standards of conduct by FCC employees.  Five complaints were closed because they 
were found not to merit further action.  Seven complaints are still pending.

The one case pending at the beginning of the period was closed.  It was closed because the 
allegations were found not to warrant further action by the OIG. 





STATISTICS


Cases pending as of September 30, 1999
1
New cases
14
Cases closed
8
Cases pending as of March 31, 2000
7


SIGNIFICANT INVESTIGATIVE CASE SUMMARIES

?  The OIG continues to monitor the matter concerning an employee at the FCC's Laurel 
laboratory facility who was videotaped allegedly stealing government supplies from the facility 
on multiple occasions.  An investigative report was issued on April 9, 1998.  The matter was also 
referred to the Federal Protective Service for consideration of criminal charges.  Federal law 
enforcement authorities have declined to prosecute.  Disciplinary action has been taken against 
the employee.  The employee has appealed the disciplinary action and the appeal is currently 
pending. 

 ? On May 2, 1999, the OIG received a complaint that an employee was spending a significant 
amount of time during normal working hours accessing the E-bay auction program on his 
Commission computer workstation.  Based on the information received, an investigation was 
initiated.  As a result of the investigation, it was determined that during the period in question 
the employee did in fact expend a significant amount of time during normal working hours 
accessing the auction program on a Commission workstation.  Disciplinary action was taken by 
management and the matter has been closed.

? On September 27, 1999, the OIG commenced an investigation into allegations of employee 
misconduct with respect to the presentation of a matter before the Administrative Law Judges of 
the Commission.  The OIG determined that the allegations related to the merits of the matter 
pending before the Commission, and the issues which were the subject of the allegations were in 
fact formally before the Commission for resolution.  Accordingly, the OIG determined that the 
matter did not warrant action by this office and the matter was closed. 
   
?  On November 3, 1999, the OIG initiated an investigation into allegations of misconduct and 
abuse of authority by senior level employees at the Commission.  The Office of the Special 
Counsel had referred the matter to the OIG.  The complaint alleged that the employees' conduct 
in allowing the temporary broadcasting of events at a racetrack and/or involvement with respect 
to the issuance of an experimental license for the broadcasting at the track constituted 
misconduct and an abuse of authority.  It was alleged that the conduct violated, among other 
things, the Communications Act and the Code of Federal Regulations pertaining to Commission 
regulations and standards of conduct for federal employees.  The OIG was unable to find any 
evidence of misconduct by the employees or that they had exceeded their authority in allowing 
broadcasting at the track.

?  On November 12, 1999, 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.  An investigation was initiated and is currently pending. 

?  On November 24, 1999, 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.  

?  On November 26, 1999, the OIG initiated a preliminary inquiry into the circumstances of the 
public release of an internal memorandum of the Commission.  Through investigation it was 
determined that the memorandum was released erroneously and that there was no evidence of 
employee misconduct.                                                                                                                    
                                                                                                                                                      
          
?  On December 22, 1999, the OIG initiated an investigation based on allegations of a 
supervisory FCC employee routinely utilizing 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.  The investigation 
is currently pending.

? On January 11, 2000, 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.  An initial review of the employee's electronic mail system by the 
ITC revealed that the shut downs appear to have occurred as a result of the employee generating 
electronic mail related to the conducting of a music business on Commission premises during 
working hours.  The OIG initiated an investigation, which is currently pending.

? On February 18, 2000, 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 inquiry is currently pending.

? On March 14, 2000, the OIG received a request that it look into the circumstances of the 
issuance by a bureau of letters of revocation for certain licenses, to determine if there was any 
wrongdoing by Commission employees.  Specifically, the letters, which were dated December 22, 
1999 and revoked licenses granted on November 23, 1999, allegedly were not mailed until 
February 8, 2000.  The OIG initiated a preliminary inquiry, which is currently pending.  

HOTLINE CALLS

During this reporting period, the OIG Hotline Technician received one hundred and sixty-eight 
(168) hotline calls to the published hotline numbers of (202) 418-0473 and 1-888-863-2244 (toll 
free).  One hundred and sixty-five (165)  of the calls were referred either to the National 
Consumer Center or to the appropriate federal agency.  Three were determined not to warrant 
investigation or referral by the OIG. 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.  Callers who have general questions or concerns not specifically 
related to the missions or functions of the OIG office are referred to the FCC National 
Consumer Center at 1-888-225-5322.  Examples of calls referred to the Consumer Center 
include complaints pertaining to customers phone service and local cable providers, long-
distance carrier slamming, interference, or similar matters within the program responsibility of 
other FCC bureaus and offices.


Legislation


OVERVIEW

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

The Counsel to the IG continued to monitor legislative activities affecting the activities of the 
OIG and the FCC.

During this period, this office monitored those legislative proposals, which directly or 
indirectly impact on the ability of Designated Federal Entity IGs to function independently 
and objectively.  Those specific proposals concerned proposals to consolidate OIGs and to 
directly and/or indirectly draw distinctions between presidentially - appointed IGs and 
Designated Federal Entity IGs, which may have the effect of undermining the role of the 
latter.   Also during this period, in accordance with the Federal Activities Reform Act (FAIR 
Act), the OIG  presented  its commercial inventory submission, which was approved by the 
Office of Management and Budget and published in the Federal Register.  The FAIR Act 
directs federal agencies, commencing October, 1999, to submit each year an inventory of all 
their activities that are performed by federal employees but are not inherently governmental 
in nature.  







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 Commission in those areas where 
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).  The purpose of the SDLC project is to provide a 
structured process for managing the development of information systems and for managing 
system modification and operation after systems are deployed in the production environment. 
During this reporting period, auditors co-hosted a series of sessions with representatives 
from Commission Bureaus and Offices as well as representatives from the Commission's 
procurement office and Information Technology Center (ITC).  The purpose of these sessions 
was to finalize the structure of each of the six (6) phases of the SDLC and the SDLC 
glossary.  In addition, OIG auditors are working closely with ITC staff to determine the most 
effective way to pilot test and implement the SDLC.

Because of our work in the development of the SDLC, the OIG was invited to participate in the 
development of the new information system for the Commission's Consumer Information Bureau 
(CIB).  CIB is piloting the Commission's SDLC methodology that the OIG was instrumental in 
developing.  The OIG will participate in the project by assuming the SDLC's auditor role.  Audit 
staff will also observe the process and issue a report on the results of the use of the SDLC on this 
project.

Licensing Working Group

The OIG participated on the Licensing Work Group, which was established by the FCC to 
develop options for streamlining and consolidating the Commission's licensing processes.  This 
effort was performed in support of the Chairman's Draft Strategic Plan, dated August 1999.  
The work group collected and analyzed information on all phases of the Commission's licensing 
and authorization of service activities and identified three main options for streamlining these 
functions.  The options ranged from continuing with process improvements that were currently 
underway within the Bureaus/Offices, through the use of automation to create a virtual 
Licensing Bureau with a single point of entry and a consolidated database within the existing 
Bureau/Office structure, to a complete reorganization of the functions and creation of a 
Licensing Bureau.  These options and the work group's methodology were discussed in a report 
prepared by the Licensing Work Group, "Improving the Commission's Licensing and 
Authorization of Service Functions - Options for Consideration", dated March 24, 2000.

Financial Management Advisory Services

The OIG provided advisory and assistance service to the Commission as it continues the 
challenging 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 prepared its firstr financial statement per OMB Bulletin No. 97-01, amended.  Significant 
assistance was also provided to resolve first year audit issues and expose CFO staff to the 
requirements of an audit per OMB Bulletin No. 98-08, amended.  The OIG and FCC 
management are fostering a relationship that will facilitate CFO Act financial reporting at the 
Commission.

? Provided technical advice to the Office of Financial Operations regarding the design of 
Form 159 - Remittance Advice.  The verification of regulatory fee payments was being 
adversely affected by imprecise instructions to FCC filers.  Four specific 
recommendations to correct the problem were provided to the CFO for his consideration.

Procurement Advisory Services

In the OIG's efforts to provide comprehensive contract audit services to the FCC's Contracts 
and Purchasing Center, the OIG also advises the Commission's contracting officers (COs) on 
contract and contractor financial and performance matters that do not require contract audits.  
OIG contract auditors performed the following contract advisory services during this reporting 
period:

? Advised the CO on a government caused work disruption issue.  The CO sought advice 
about whether a time and materials service contractor, who was not notified in advance, 
should be reimbursed or be required to take unreimbursed leave for time lost when the 
FCC moved the contractor to a new location within the FCC headquarters building.  OIG 
advice resulted in the CO notifying the contracting officer's technical representative 
(COTR), because the contractor did not receive adequate notification of the disruption, 
the contractor would have to be compensated. 

? Advised a contracting officer's technical representative (COTR) on a contractor time 
verification oversight issue.  The COTR sought advice about verifying hours claimed by 
contractor employees performing services under his/her task order in order to improve 
the audit trail for approving monthly invoices for payment.  OIG advice resulted in the 
COTR instituting new daily sign in/out procedures by requiring his/her contractor 
employees to e-mail the COTR when they arrive and depart each day.

? Accompanied and provided support to the Contracts and Purchasing Center Manager 
and CO when they met with contractor representatives who were disputing prior contract 
constructive change order proposal audit findings.  The contractor represented that they 
had new information that would prove the audit findings wrong and convince the CO to 
concur with the contractor's position.  The meeting concluded with the contractor not 
even trying to dispute the audit findings.  Instead, the contractor representative took a 
different tact by proposing that certain of its employees should be moved into higher 
labor categories and be billed out at a higher labor rate under the contract.  As a result, 
the OIG strongly recommended that the Contracts and Purchasing Center should initiate 
and require formal contract modification request procedures that require contractors to 
submit cost proposals and certify to the accuracy or their cost or pricing data.  The 
Contracts and Purchasing Center Manager concurred with our recommendation.

? Met with and advised Contracts and Purchasing Center and Office of General Council 
(OGC) representatives about possible contract audit requirements for the North 
American Numbering Council (NANC) and Universal Service Administrative Company 
(USAC) support service contract proposals.   Numerous issues were discussed, including 
Federal Acquisition Regulation (FAR) applicability and requirements and potential 
"federal fund" implications.  As a result, the OIG will not be auditing the NANC 
proposal, because it changed from a negotiated sole-source to a competitive bid 
procurement once two or more qualified competitors were allowed to submit proposals. 

? Provided advisory services to the FCC Automated Time Accountability System Task 
Force.  The Contracts and Purchasing Center sponsored this task force in order to 
research and investigate different off-the-shelf automated time reporting systems to assist 
COTRs with verifying contract employee hours for services performed under cost 
reimbursable contracts at FCC facilities.  OIG advisory services on this project continue 
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.

1. 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.
	
2.	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).

3.	An identification of each significant recommendation described in previous semiannual 
reports on which corrective action has not been completed.

	No significant recommendations remain outstanding.

4. 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.

5.	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.

6.	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.

7.	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.

9.	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.

10.	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 this 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.

11.	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.

12.	Information concerning any significant management decision with which the Inspector 
General is in disagreement.

	No management decisions fall within this category.

	Attachment A

Table I: OIG Audit Reports With Questioned Costs

INSPECTOR GENERAL REPORTS WITH 
QUESTIONED COSTS
Number of 
Reports
Dollar Value


Questioned 
Costs
Unsupported 
Costs
A.


For which no management decision has been made 
by the commencement of the reporting period.
1
265,180
265,180
B.

Which were issued during the reporting period.
0
0
0

Subtotals (A + B)
1
265,180
265,180
C.

For which a management decision was made during 
the reporting period.




(i)
Dollar value of disallowed costs.
0
0
0

(ii)
Dollar value of costs allowed.
0
0
0
D.

For which no management decision has been made 
by the end of the reporting period.
1
265,180
265,180

Reports for which no management decision was made 
within six months of issuance.
1
265,180
265,180


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 USE
Number of 
Reports
Dollar Value
A.

For which no management decision has been made by the 
commencement of the reporting period.
0
0
B.
Which were issued during the reporting period.
0
0

Subtotals (A + B)
0
0
C.

For which a management decision was made during the 
reporting period.



(i)

Dollar value of recommendations that were agreed to by 
management.
0
0


- Based on proposed management action.
0
0


- Based on proposed legislative action.
0
0

(ii)

Dollar value of recommendations that were not agreed to 
by management.
0
0
D.

For which no management decision has been made by the end of 
the reporting period.
0
0

For which no management decision was made within six months 
of issuance.
0
0

 

 
 
Office of Inspector General		Page 4
Semiannual Report to the Congress		Page 5