of Puerto Rico
Office of the Comptroller
United States House of Representatives
Committee on Energy and Commerce
Subcommittee on Oversight and Investigations
The Honorable James C. Greenwood
Statement for the Record
June 17, 2004
SUBJECT: Audit on the E-rate program
in the Department of Education of the Commonwealth
of Puerto Rico
Mr. Chairman and members of this Subcommittee
on Oversight and Investigations of the United
States House of Representatives, Good Morning.
My name is Manuel Díaz Saldaña.
I come before this Subcommittee in my official
capacity as Comptroller of the Commonwealth of
Puerto Rico, in response to your invitation of
June 1, 2004. Accompanying me today are: Attorney
Alfonso M. Christian, Assistant Comptroller, and
Mrs. Olga Ortiz, Senior Auditor.
I am pleased to be able to participate in this
hearing and share with you the information obtained
during the audit conducted on the E-rate program
implemented in the Puerto Rico Department of Education
(PRDOE), regarding the acquisition of equipment
and services for the EDUNET network. A more detailed
statement on this subject has been submitted to
The role of the Comptroller is to “…audit
all the revenues, accounts and expenditures of
the Commonwealth, of its agencies and instrumentalities
and of its municipalities, in order to determine
if they have been made in accordance with the
law…” The findings with recommendations
to the audited government entities are published
by means of audit reports.
Federal funds assigned to subsidize government
programs are treated as if they were, for all
intent and purposes, revenues, accounts and expenditures
of the Commonwealth of Puerto Rico. Violations
of law are referred to the appropriate state or
Compliance with the recommendations is monitored
by means of a program called Corrective Action
AUDIT REPORT TI-03-09 OF APRIL 14, 2003
This report covers the period of March 24, 2000
to April 27, 2001, and focuses on five findings.
Finding 1 addresses the acquisition of equipment
and services for PRDOE’s EDUNET network
without using the formal bidding process and other
The first phase of EDUNET consisted of establishing
the infrastructures for the communications network,
including internal connections and telecommunications,
and Internet access for 760 schools. This phase
was to be completed by September 30, 1999. In
October 1998, PRDOE awarded three contracts to
two companies, Puerto Rico Telephone Company (PRTC)
and DRC Corporation, at a cost of $51,353,490,
for the acquisition of telecommunication equipment
and contracting the Internet access services.
The second phase of the EDUNET project consisted
of establishing the infrastructure for the communications
network, including internal connections and telecommunications,
with wireless technology and providing Internet
access for 780 additional schools. This phase
was to be completed by September 30, 2000. On
April 5, 1999, PRDOE awarded a contract to DRC
in the amount of $51,478,221 for work on the second
phase of the EDUNET network.
Finding 2 addresses deficiencies detected in
the implementation and use of the telecommunications
infrastructure installed for the EDUNET network
in 30 schools. These were detected during a physical
inspection of the schools:
1. The telecommunications infrastructure network
installed in the schools was not being used.
2. PRDOE had not acquired computers for the
3. The teachers had limited knowledge on computer
4. Physical and electrical conditions in the
schools did not have the capacity required for
using the communication and computer equipment.
5. Fifteen schools (50%) lacked adequate electrical
installations to connect the computers that
were to be acquired for the students.
We believe these deficiencies resulted from poor
planning and inadequate supervision of the contractors
Finding 3 addresses the improper use of federal
funds from another federal program for expenses
incurred by the PRDOE on the EDUNET network.
Finding 4 addresses the absence of important
clauses in the contracts that would have protected
the best interests of PRDOE.
Two of these contracts did not contain clauses
requiring the contractors to supply certain documents
required by Commonwealth regulations regarding
compliance with local tax responsibilities and
filing tax returns.
Finding 5 addresses the fact that two contracts
related to the EDUNET network were not registered
in the Office of the Comptroller and others were
STATUS OF FINDINGS
All findings were referred to the Secretary of
Justice of the Commonwealth. To this date the
findings are still under advisement.
The findings were also referred to PRDOE, which
has notified us that steps are being taken to
remedy the situations.
Mr. Chairman, the proper use of Commonwealth
and federal funds, especially in the PRDOE programs
that are directly related to the proper education
of children, is of serious and vital concern to
our Office. I thank you for your interest in this
important issue. I would be happy to answer any
questions the members of the Subcommittee may
Manuel Díaz Saldaña
Commonwealth of Puerto Rico
Para ver detalles de la Ponencia escrita; oprima
PO Box 366069, San Juan, Puerto Rico 00936-6069
Avenida Ponce de León 105 Esquina Pepe Díaz
Hato Rey, Puerto Rico 00919
Tel. (787)754-3030/Fax (787)751-6768