AT&T, feds neglect low-price mandate designed to help schools

FCC spokesman Wigfield said he could not comment because the matter is pending. Others familiar with the New York City matter say there have been discussions between the parties, but no resolution.

The education department’s quandary was explained in an Oct. 17, 2003, letter to the FCC. Three outside billing firms, the letter explained, had documented about $2 million in “overcharges” by Verizon and its predecessors. Verizon provided a refund.

The city then figured out how much of the refund to share with the federal fund. eRate subsidized the New York City schools at a rate of 78 percent. So first, New York deducted the audit fees, about 25 percent, then multiplied the remainder by 78 percent. That’s the amount it wanted to return to the eRate program.

But in August 2003, USAC informed the New York education department that it owed the fund’s share (78 percent) of the audit fee as well, according to New York’s filing with the FCC. In effect, USAC was refusing to pay its share of an audit that saved money for both New York and the eRate program.

This “exceedingly poor public policy,” the city told the FCC, “would penalize NYCDOE for its initiative,” and “discourage” similar audits.

At that time, USAC was auditing only schools in the eRate program, not phone companies.

The FCC says audits are not considered educational services under eRate rules and thus are not eligible for reimbursement.

Verizon, in a statement emailed by spokesman McFadden, declined to comment on any particular dispute, but McFadden said “occasional disagreements are unavoidable” and that the company’s “goal” is to issue refunds “promptly and in the correct amount.”

The last outside audit of New York City’s telephone bills was in 2009. Both Verizon and New York City would not discuss the results, which are still being resolved. Two people familiar with the results of the latest NYCDOE audit, who declined to be identified because of the ongoing negotiations, said the amount of overcharges detected exceeded $10 million.

New York is not alone. The Yonkers school district and the Detroit Public Schools, records show, have encountered the same disincentive.

Detroit hired a private firm to audit the school district’s telecom services, provided by AT&T. That 2010 audit recommended a recovery of almost $3 million for a variety of erroneous charges. Among its findings: “under the eRate program AT&T failed to offer [the Detroit Public Schools] the most favored rate,” according to a summary of the audit.

But Detroit is still reviewing the audit, according to spokesman Steven Wasko, who noted in an email the FCC’s disincentives for audits. “Savings identified can actually amount to additional costs for the district,” he wrote.

Detroit has chosen to “strengthen its own reviews” rather than rely on outside auditors, Wasco added.

AT&T declined to comment on the Detroit audit.

Schools have other complaints about the eRate program. Many say their requests to enroll get mired in a regulatory “black hole,” while others protest applications exceeding 300 pages. And there are hundreds of cases of rule infractions, some technical, that force schools to return money to the program, according to FCC documents.

The FCC spokesman says the agency has “streamlined” the application process.