Two recent reports suggesting the eRate is laden with fraud and abuse have triggered renewed scrutiny of the $2.25 billion–a–year program, which provides telecommunications discounts to schools and libraries.

Denounced by conservatives in Congress when it was launched in 1997, the eRate weathered several early storms to become a vital source of funding for schools’ technology infrastructure. Now, the House Energy and Commerce Committee is conducting a preliminary investigation of the eRate to get to the bottom of the reports of fraud and the resulting media attention they’ve generated.

“The [reports] brought to light this financial oversight. Whenever something like that happens, we perk up and pay attention,” a committee aide said.

Rep. Billy Tauzin, R–La., who is chairman of the committee and an early critic of the eRate, has started arranging interviews and reviewing documents, but the committee aide would not comment further on the ongoing investigation.

Last fall, the Federal Communications Commission’s Office of Inspector General (OIG) released its semiannual report highlighting its investigations for FCC commissioners and members of Congress. The report indicated that OIG currently is tracking 26 investigations of suspected eRate abuse, 16 of which were initiated in 2002.

In January, these suspected abuses received further attention when the Center for Public Integrity (CPI) released a report based on the FCC’s investigations.

The CPI report called the eRate “honeycombed with fraud and financial shenanigans.”

Mainstream media outlets gave the CPI report and the eRate program unprecedented coverage. Even Fox News ran a story on the report Jan. 13.

More oversight needed?

Based on what it perceives to be an increase in the number of suspected abuses of the eRate, the OIG report asks Congress for an extra $2 million to help auditors keep a closer eye on the program.

“Our preliminary review has raised some concerns, and because we are a small office, we are exploring avenues for expanding our resources,” said Charles Willoughby, the FCC’s assistant inspector general for investigation. Currently, the OIG has only two auditors to monitor the multi-billion dollar program.

Mel Blackwell, a spokesman for the Schools and Libraries Division (SLD) of the Universal Service Administrative Co., the agency that administers the eRate, pointed out that the SLD already has seven auditors of its own that do a heavy amount of screening. But if critics want to appropriate more funding to hire additional auditors, that would be fine, Blackwell said.

“We’ve recovered over $1 million that was dispersed [inappropriately],” he said. “We believe we have a very strong set of procedures and people in place to take a look at [suspected abuses].”

Still, the SLD on Jan. 22 announced that it plans to more than double the size of the staff that performs its “selective reviews” of applications in the coming months. The agency said it was taking this step “to better address issues that are turning up in both internal and external audits of program participants.”

Supporters of the program agree oversight should be tightened, but they say the CPI report overstates the problem.

“I support having $2 million more to audit the eRate. We do need more audits,” said Gary Rawson, infrastructure planning and eRate coordinator for Mississippi’s Information Technology Services department. Rawson is also chairman of the State eRate Coordinator Group, which is sponsored by the Council of Chief State School Officers.

“It’s a self-certifying program. I have to self-certify that I don’t ask for more services than I need,” Rawson said.

The eRate has a whistle-blower hotline (1-888-203-8100) people can call to report suspicious practices, but with only two outside auditors, the response rate is slow.

“If I should happen to call 911, they send someone out right away. If a Code-9 is called into the SLD, they can’t send a policeman out right away. It could take months before they send someone,” Rawson said.

But like other educators and eRate supporters, Rawson says these instances of abuse represent a small percentage of the thousands of applications, all told.

“We’re only hearing about 2 percent of the applicants and service providers—what about the other 98 percent that are good?” he said. “When something bad happens, we focus on the bad, and that’s what the press is giving their time to—but we shouldn’t overlook the good.”

Sen. Jay Rockefeller, D-W.Va., dismissed the CPI report, saying it overstates the problem because only a handful of grants appear questionable. “I’m sorry, but that does not a story make,” Rockefeller told the Charleston Daily Mail Jan. 21.

Rockefeller, who helped create the eRate, is more concerned about keeping the program going and maintaining President Bush’s commitment to it.

The Bush administration originally proposed merging the eRate with the educational technology block-grant program administered by the federal Department of Education, though it soon backed off those plans.

Renewed criticism

To some observers, the recent spike in media attention is reminiscent of the criticism the eRate received in its first few years, when telecommunications carriers added surcharges to consumers’ phone bills to offset the cost of the program.

Carriers contribute to the Universal Service Fund, which subsidizes the eRate, based on a sliding scale. Money from the fund is then redistributed to companies that service schools and libraries to pay for the discounts.

Early critics of the eRate—mostly conservative members of Congresss—dubbed the program the “Gore tax” in recognition of the role then-Vice President Al Gore played in championing the program. In 1998, Tauzin and Sen. Conrad Burns, R-Mont., led an effort to transfer control of the program to the Commerce Department, where it would be funded through an existing 3-percent telephone excise tax and awarded to the states as block grants for them to distribute to schools, libraries, and health-care providers.

Tauzin and Burns called their legislation a “win-win” for the program’s critics and supporters.

“In a nutshell, what we’re doing is cutting taxes for nearly everyone in America and saving the eRate program in the process,” Tauzin said at the time.

Education groups were wary of Tauzin’s proposal, however. They feared it would expose the program to the whims of Congress during its annual budget negotiations. As it exists now, the eRate is written into the Telecommunications Act of 1996 and is not subject to the appropriations process. (See “Lawmakers propose eRate overhaul,” news/showStory.cfm?ArticleID=1229.)

Other members of Congress called for the outright elimination of the eRate. But these criticisms died down once the money began flowing—and schools began publicizing the results. Despite renewed scrutiny of the eRate, Rawson believes the program is still secure.

“It’s not going to affect the eRate, because it’s too important of a program,” he said. “It benefits too many people.”

Greg Weisiger, state eRate coordinator for the Virginia Department of Education, agreed. “I welcome all this scrutiny,” he said. “I’m concerned about the allegations. I’m concerned about the waste, fraud, and abuse we all know is happening. But that doesn’t diminish the need for internet subsidies—and I think Congress knows this.”

Norris Dickard, director of public policy at the Benton Foundation, said criticism is never good—but if a federal program has problems, then Congress should do what is necessary to correct them.


House Energy and Commerce Committee

Office of Inspector General’s semiannual report

Center for Public Integrity

Schools and Libraries Division

Whistle-blower Hotline

Benton Foundation