Millions of dollars from a federal school technology program could be lost to the Baltimore City Public Schools, because the district has not fixed problems from an audit of the money it received in 2002.

Last year’s audit found the school system could not prove that computer equipment funded by the eRate, the $2.5 billion-a-year federal program that offers telecommunications discounts to needy schools, had been delivered or installed.

As a result of that and other findings, the Universal Service Administrative Co. (USAC), the third-party contractor that administers the program for the Federal Communications Commission, says it wants back $2.5 million of the $4.1 million it gave the city during the 2002-03 school year. The story was first reported by the Baltimore Sun Nov. 26. The school system is eligible for millions of dollars because it serves a high-poverty population, but it has not received any money from the program since 2002.

Despite the problems, Baltimore reportedly applied for nearly $20 million this school year–money program administrators won’t disburse until new procedures are in place to ensure the funds are properly spent.

“Until we know there are procedures in place so the findings we noted will not happen again, we’re not going to make any disbursements,” said USAC spokesman James Mardis.

On Dec. 12, the school board approved a new three-year, $267,000 contract with national eRate consulting firm Funds for Learning. School district spokeswoman Vanessa Pyatt said the district would look to the firm for guidance in addressing the concerns raised by program administrators. Officials say the move should help correct any administrative failings and, hopefully, eliminate cause for future concern.

In an interview with eSchool News, Funds for Learning CEO John Harrington said although his firm made no promises with regard to how much of the money might be recovered, his consultants will work with the district to help achieve compliance under the program.

“We’re a little bit like accountants,” he said. “We want to help the district assess its situation and decide what can be done to shore up its processes.”

The board approved the contract with Funds for Learning despite protests from at least one competing eRate consultant who argued publicly that hiring the company would amount to a conflict of interest for the district.

Garnet E. Person, chief executive officer of eRate Elite Services in Owings Mill, Md., said in the Sun that Funds for Learning also consults with technology vendor Cisco Systems. Cisco happens to be one of the firms vying for the district’s eRate business, he said.

Person, whose firm lost out in a competitive-bidding process with Funds for Learning to serve as the district’s primary eRate consultant, told the paper that consultants often have influence over what companies their clients do business with. The deal would look suspicious if Baltimore eventually decided to hire Cisco, he said.

“There’s something not right about this,” Person told the Sun.

Despite his misgivings, however, board members voted to approve the contract. “We addressed all of those concerns” during the board meeting, said Baltimore’s Pyatt. “It is understood by all parties involved that the school system reserves the right to choose what service providers it works with.”

Despite his firm’s ties to Cisco, Harrington said his consultants have no preference as to what service providers the district eventually signs on with.

“Because of the rules of the [eRate] competitive-bidding process, we don’t recommend services or help [districts] procure those services,” he said. “There are a lot of situations where districts want consultants to hold their hands through the entire process … That’s not always in the best interest of the district. We’re compliance specialists. That’s what we do.”

The $2.5 million in question reportedly is being held by a local telecommunications agency and will be forwarded to the district once USAC is satisfied of its compliance with program rules.

Baltimore isn’t the only school system to have had eRate funds withheld. Across the country, a number of districts have come under fire for their handling of the program. A 2005 report from the House Commerce Committee highlighted several examples of districts that ran afoul of eRate rules. The report challenged USAC to shore up the program’s policies and curb future abuses.