By Del Stover
5/20/03 -- The e-rate -- a $2.25 billion-a-year program that's helped thousands of local schools connect to the Internet -- has come under the increased scrutiny of federal officials.
In recent months, federal auditors have targeted dozens of school district applications for review as part of an ongoing investigation into fraud and procedural errors in the program. A number of school systems have been denied federal funding for the year.
At the same time, at least 30 state and federal investigations are under way, looking into allegations of everything from sloppy paperwork to overbilling millions in e-rate funds.
The House Energy and Commerce Committee also is conducting an investigation into what it terms "troubling reports of waste, fraud, and abuse" in the program.
Despite ongoing inquiries, a spokesperson for the Universal Service Administrative Co. (USAC), which administers the e-rate program, says USAC has responsibly policed the federal program.
"No one can tell empirically that there's rampant fraud in the program," says USAC spokesperson Mel Blackwell. After targeting a number of e-rate applications for a detailed review, "we've had an initial look at the audits that are coming back. They look very clean, and where there's been any errors, it's been a pure mistake."
Supporters of the e-rate program are speaking out on behalf of the program and suggesting that only minor reforms might be needed to protect schools from disreputable service providers.
The e-rate, which provides schools with discounts of up to 90 percent on telecommunications and Internet services, has been instrumental in bringing technology into the nation's classrooms.
In 1997, only 14 percent of classrooms in poorer schools had access to the Internet. By 2001, that figure was 79 percent.
But the program has always been controversial in some political circles. "Some members of Congress have historically been opposed to the e-rate," says Joan Wodiska, NSBA's director of federal legislation advocacy. "They see it as a tax on telephone service."
Opponents of the program seized upon a report issued last October by the Inspector General's Office of the Federal Communications Commission (FCC) that suggested there was not enough oversight of the program -- and that the program "is subject to unacceptably high risk of malfeasance through noncompliance and program weakness."
The Center for Public Integrity, a Washington, D.C.-based political watchdog group, subsequently claimed the program was "honeycombed with fraud and financial shenanigans."
To date, it's still unclear whether such claims can be substantiated. But, Wodiska says, concerns about the program's integrity could encourage some lawmakers to attempt to revamp -- and potentially undermine -- the program. One bill already has been introduced to eliminate the program.
Wodiska urges school board members across the nation to contact their members of Congress and emphasize the value of the e-rate to schools.
"Because of some of the negative perceptions that now surround the program," she says, "it's important for Congress to hear the good news about the program."
At USAC, Blackwell says that oversight of the program is better than some give credit. "We've got a robust group of people, many layers of review, for these applications," he says. "We're confident in our procedures."
That said, officials are using the audits to find ways to improve the program. Last month, the FCC adopted rules to streamline the application process, improve program oversight, and deal with applicants or service providers who abuse the program.
NSBA Executive Director Anne L. Bryant, a member of the USAC board and vice chair of the Schools and Libraries Division, says USAC auditors originally targeted applications from some of the nation's larger school systems because their complex, multimillion-dollar technology programs were the most likely to reveal procedural errors.
And problems were found. In fact, several huge e-rate applications were denied this year because of questions surrounding price competitiveness and bidding procedures. The Dallas schools, for example, lost out on $116.2 million in technology funds.
Ruben Bohuchot, assistant superintendent and chief technology officer in Dallas, says federal officials apparently had a problem with the procedures used by the school district's technology partner, IBM Corp., which helped prepare this year's filing. He says he's disappointed with the rejection -- but will reapply for funds in the coming months.
"I've had almost four years experience working with the Schools and Libraries Division," Bohuchot says.
"Those people have a monumental job in front of them -- getting billions of dollars in requests and making sure all the t's are crossed and the i's dotted," he says. "I don't blame them at all for the attentiveness to detail they need to have so funds don't go out erroneously."
Dallas isn't the only school system to run into application problems because of its close ties to IBM. Last year, the Schools and Libraries Division issued a warning about problems it found in applications involving IBM.
IBM officials deny that any wrongdoing occurred. According to IBM spokesperson Andy Kendzie, the company is working with several school systems to appeal the rejection of e-rate applications.
Other, more serious cases also have come to light in recent months. In New York, federal investigators last December accused officials at Connect2 Internet Networks Inc. of fraud involving e-rate funds -- the first time criminal charges were filed in connection with the program.
Also under investigation is the Nashville-based Education Networks of America, which provides Internet access to schools across Tennessee. According to the Chattanooga Times Free Press, the federal government froze 70 percent of payments owed to the company because of a criminal probe over alleged contract irregularities.
These cases still remain the exception, says Blackwell, who notes that federal auditors mostly have uncovered procedural errors. Such errors have been found in the past, as well, but recent cases have come to the public's attention because of increased scrutiny of the program.
A more reassuring picture of the e-rate program can be found in a recent audit of smaller, more typically sized e-rate applications, Bryant says. These audits "have proven to be far cleaner, with fewer problems, and are probably more representative of the program."