The Telecommunications Act of 1996 expanded universal support to eligible schools and libraries. To administer the universal service program for schools and libraries, the Federal Communications Commission (FCC) directed the creation of the Schools and Libraries Corporation (Corporation). As a start-up operation, the Corporation has had to develop operating procedures and internal controls to implement FCC's orders guiding the program. This testimony focuses on issues related to the Corporation's operating procedures and internal controls, including: its progress in reviewing applications; the scope and timing of key compliance tests; and the status of the independent audit to determine whether the Corporation has developed an appropriate set of internal controls to mitigate against fraud, waste, and abuse. The testimony also discusses FCC's efforts to establish strategic goals and performance measures for the schools and libraries program, as required by the Government Performance and Results Act of 1993. Overall, the review of the Corporation's activities to date indicated that it has made substantial progress in establishing an operational framework for the program that is consistent with relevant FCC orders. The several areas of concern that were identified are discussed, results of the audit work are detailed, and recommendations for strengthening the Corporation's internal controls are given. (AEF)