8/24/04 -- The Federal Communications Commission (FCC) issued new rules Aug. 14 giving school districts more responsibility in overseeing their e-rate programs and allowing the FCC to recover e-rate funds when violations have occurred.
"To deter bad actors, e-rate applicants will be held accountable for the contents of their applications and other filings," says FCC Chair Michael K. Powell in a statement accompanying the rules, known as the "Fifth Report and Order."
He indicates there will be further measures aimed at "strengthening oversight of the universal service program and combating waste, fraud, and abuse."
The e-rate program provides $2.5 billion a year to schools and libraries to help them purchase telecommunications services at discounted prices.
The rules are directed at closing loopholes that have led to several recent highly publicized incidents in which private telecommunications companies took advantage of lax federal oversight to bilk the federal government and school districts out of millions of dollars in e-rate funds.
The new rules require school districts to prepare more paperwork and keep meticulous records to ensure the bidding process is done properly and that e-rate funds are used only for items specified in their application. Whenever school districts decide to spend e-rate funds on something not in their original grant, they will have to amend their application. Districts must retain all e-rate records for five years.
"This means school districts will have to allocate more money and staff resources to planning, assessment, and program compliance," says Deborah Rigsby, director of federal legislation at NSBA.
For the first time, the FCC is requiring school districts to return e-rate funds they've received if they're found to be in violation of program rules.
The rules call for the FCC to recover funds from districts that fail to comply with competitive bidding procedures, lack the necessary resources to support e-rate-supported services, make a substitution in the services approved, fail to pay their non-discounted share, fail to accurately calculate their discount rate, or fail to complete the service within the funding year.
However, if a procedural violation is "inadvertently overlooked during the application process," the rules say, the FCC won't recover the funds unless there is "a possibility of waste, fraud, or abuse." But the rules also allow the FCC to recover funds if there are "rule violations [that] undermine statutory requirements or substantive policy goals of the program, even if there is no evidence of waste, fraud, or abuse."
The rules require school districts to develop a master technology plan consistent with U.S. Education Department requirements. The plan must be approved before the start of e-rate funded services.
The rules do not mention the e-rate "discount matrix," but Powell indicates that additional rules might address that issue. Under the current rules, the poorest school districts are eligible for the deepest discount -- 90 percent of their e-rate-funded services.
During congressional hearings on the e-rate this spring, concerns were raised that, when districts contribute only 10 percent of the cost, service providers overcharge for their services and products.
Despite the most recent rule changes to improve oversight of the e-rate, some members of Congress are still likely to push for more reforms, Rigsby says.
Meanwhile, the FCC is planning to hold a symposium Oct. 6 to showcase ways in which broadband can facilitate learning in schools, libraries, and homes. The event will provide an opportunity for school leaders to explore how to maximize the benefits of e-rate funding by combining it with technology funding from other sources. NSBA plans to participate in the symposium.