An Indiana state agency violated federal eRate rules by not seeking competitive bids on internet services and then fixing prices at high rates, a recent report claims.

The Intelenet Commission, a public-private agency that administered the Indiana project, already has set aside $5 million in anticipation of federal penalties, although it was unclear how much the government would demand, the Indianapolis Star has reported.

The U.S. Attorney's Office is investigating Indiana's compliance with the eRate, which has provided about $23 million in federal grants to Indiana since 1998 for telecommunications

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