Looking to stem the reported waste, fraud, and abuse that has plagued the eRate–the $2.25 billion-a-year federal program that provides telecommunications discounts to eligible schools and libraries–the Federal Communications Commission (FCC) on June 14 said it would seek public feedback regarding its management, administration, and oversight of the Universal Service Fund (USF), the federal coffer from which the eRate draws its money.
The announcement, which could lead to the most significant changes yet made to the eRate in its eight-year history, comes in the wake of a congressional report that openly criticized the FCC for its lax oversight of the program and called on the commission to reevaluate its approach to approving and administering eRate funds.
“Managing the USF in an efficient, effective manner is one of the commission’s core functions,” said FCC Chairman Kevin J. Martin, a Republican, in a statement following the announcement. “It is incumbent upon us to take the steps necessary to improve the operational efficiency of the program while providing greater certainty to the recipients.”
State eRate coordinators and school officials who spoke with eSchool News said the inquiry is an important first step in restoring credibility to a program that some insiders have dubbed “honeycombed” with fraud.
“It’s clear that the FCC is opening the program up to anything and everything,” said Virginia State eRate Coordinator Greg Weisiger, who added that his state “looks forward to working with the FCC to chart a new course and sustainable direction for the eRate program.”
In the Notice of Proposed Rulemaking (NPRM) on its web site, the FCC welcomes comments across the full scope of the program, with an emphasis on four specific areas: program management; improved oversight; administrative structure; and performance measures to help assess the effectiveness of the eRate going forward.
FCC officials are exploring ways to simplify the process by which schools apply for and receive eRate funds. Among the potential changes the commission, which currently consists of two Democrats and two Republican members, is considering: A new management structure that would enable schools to apply for multi-year funding commitments on telecommunications services, rather than reapplying for the same services year after year, as is now the case.
Several eRate insiders who spoke with eSchool News said the application process is so tedious that many eligible schools have opted to forgo eRate funds in favor of sparing staff members the hassle of applying.
This is especially true for schools seeking funding for non-essential Priority Two services, said one program insider who spoke on the condition of anonymity. “I’ve got applicants dropping out of the program left and right,” he said. “It’s just not worth the hassle.”
The commission also seeks comment on ways to reduce or consolidate application forms and whether it should adopt deadlines and other criteria to provide certainty to program applicants.
Acting on the advice of Congress to improve program oversight and clamp down on reported misuses of eRate funds, officials also are taking suggestions for ways to protect against potential abuses. Specifically, the commission is looking to reevaluate its existing policy for debarment of program offenders and develop new, “more aggressive” rules meant to insulate the eRate from further fraud and abuse.
Primarily, the FCC wants to establish an audit system for ensuring that eRate funds are being spent legally and is inviting comment on what rules would make the process effective and fair. Other potential safeguards include a recovery process for recouping program dollars not used in accordance with eRate rules.
“We must … always be mindful of protecting the program from those few who would abuse it,” said Michael Copps, a Democratic member of the FCC, following the agency’s announcement. “While instances of intentional fraud are infrequent, our goal must be to eliminate them altogether. I therefore support the NPRM’s conclusion that we will strengthen our debarment rules and take new steps to identify and punish predatory contractors.”
One suggestion noted in the NPRM is to reduce oversight over Priority One funding applications, where very little abuse has been found to occur, and shift the focus to monitoring funds for less essential Priority Two applications.
“This [NPRM] recognizes that there have been fewer problems with Priority One services, in our experience,” wrote fellow FCC member Jonathan Adelstein, also a Democrat, in a statement. “It’s axiomatic that if we can target our efforts to prevent waste, fraud, and abuse more closely to high-risk applications, we should be able to simplify our processes for those low-risk areas.”
The commission also said it will look internally, vowing to reconfigure its own administrative functions in efforts to rebuild the troubled program. It seeks comment on whether any rule changes are needed “to ensure the USF is administered in an effective, competitively neutral way.”
One suggestion, which Martin has raised in the past, is to replace the current application process with a funding formula that would dole out money to eligible schools based on the size of enrollment.
“By using a formulaic approach to distribute support directly to schools, libraries, and rural health-care providers, the commission may be able to address the concerns raised by beneficiaries about the growing complexity of the application process while still ensuring that the programs’ funds are used appropriately,” said Martin.
But the suggestion has met with less enthusiasm from the Democratic half of the commission.
For his part, Copps has questioned whether such a change would limit the potential for one form of abuse while propagating another.
“So many questions about this approach remain unaddressed,” wrote Copps in his statement. “Tying funds to school size could conceivably result in our rural and insular schools being denied the funds they need for the extraordinary cost of services in these areas, just because they have fewer students. And if schools are given a sum of money to be used for unspecified purposes rather than for specified and verifiable services and equipment, it could be much more difficult to identify fraud.”
He added: “Such a change could also allow funds to be used for unspecified communications-related services and equipment, rather than requiring applications that specify services and equipment.”
Adelstein shared similar concerns.
“Allocating support based on formulas, like school size, may ignore critical differences in the cost to obtain services in rural parts of the country and may work against smaller or private schools that cannot achieve economies of scale,” he wrote in his statement. “I’m particularly concerned that such approaches, or proposals to adopt multiple bid requirements or per-application caps for funding, would not provide sufficient support, as required by the Act, for schools, libraries, and consumers in rural areas.”
The other Republican commissioner, Kathleen Abernathy, did not issue a statement regarding the proposal.
Lastly, the commission is seeking comment on establishing performance measures to assess the effectiveness of the eRate and the USF. No suggestions were provided by the FCC for how it intends to approach its assessment of the program.
Since 1997, the Universal Service Administrative Co. (USAC), which administers the fund under the direction of the FCC, has disbursed more than $30 billion to needy schools, libraries, and rural health-care providers.
It’s still unclear what changes will be made, but eRate watchers say the FCC is doing the right thing by considering reforms.
“It’s a positive that the FCC has opened the entire program up” to public scrutiny, Weisiger said.
The official NPRM has yet to be posted in the Federal Register, a process that sometimes takes up to three weeks. Once posted, educators will have up to 150 days to respond with their comments, FCC officials said.
Federal Communications Commission