Recent publicity over fraud and waste in the federal E-Rate program -- which allows schools and libraries to purchase telecommunications and Internet access at discounted rates -- is causing officials to take another look. The FCC ordered a number of changes to program rules, and more could be on the way.

Created by the Telecommunications Act of 1996, the Schools and Libraries Universal Service Support Mechanism, better known as E-Rate, is aimed at ensuring schools and libraries across the country -- especially those in rural or poor areas -- have access to advanced telecommunications technologies. Using the Universal Service Fund -- a pot of money fed by mandatory contributions from telecommunications providers -- the program provides 20 percent to 90 percent discounts to schools for eligible technologies by reimbursing providers for the discounted amount.

Many say E-Rate, which is overseen by the FCC, has been vital to bringing classrooms into the 21st century. In 2002, 99 percent of public schools had Internet access, and 92 percent of public school classrooms had Internet access, according to Internet Access in U.S. Public Schools and Classrooms: 1994--2002, a survey conducted by the U.S. Department of Education's National Center for Education Statistics.

Todd Russ, director of technology for the Public Schools of Robeson County (PSRC), N.C., said when E-Rate began, his district still used dial-up access. "Now we have a 90 meg connection to our school district. It's made a world of difference in our abilities to connect to the Internet and do different types of Web page access, as well as subscribing to different programs that have video streaming and things like that," he said. "There's no way we could have put in that kind of technology without E-Rate funding."

But some contend the E-Rate program is an invitation for waste, fraud and abuse. In one of several high-profile cases, NEC Business Network Solutions pled guilty in May 2004 to bid-rigging and wire fraud in E-Rate projects at five different school districts. The company was ordered to pay a total of $20.6 million in restitution and criminal fines.

In March 2003, Rep. Tom Tancredo of Colorado introduced the E-Rate Termination Act in the House of Representatives, and the House Energy and Commerce Subcommittee on Oversight and Investigations has investigated the program for more than a year and a half. Although the FCC this year issued a slew of new program rules aimed at tightening loopholes, the FCC said fraud incidents being reported in the media are minimal, and overall, the program has served schools and libraries as intended.

PSRC's Russ said the intent of E-Rate is clear.

"If you stick with not only what it says, but knowing what they mean, I think you're pretty safe," he said. "I think the ones getting in trouble were trying to make the gray areas, and trying to find the gray areas, to get as much as they could."

Russ, whose school district was found compliant in a 2002 audit, said more audits would deter program misuse. "They look at every single bid you received. They verify you have your matching funds, where it's coming out of, etc. -- all of that up front. I think it takes a lot of the opportunity away for any type of fraud, waste or abuse."

The Universal Service Administrative Company (USAC), the nonprofit that administers the E-Rate program for the FCC, so far has conducted approximately 100 audits per year. Additionally the FCC Inspector General's Office conducts some audits and has made agreements with several other federal entities to do the same.

When funds are disbursed contrary to program rules, the USAC seeks to recoup the funds, and those convicted of crimes in relation to E-Rate can be debarred from the program. But in most cases where fund recovery is sought, said an FCC spokesperson, honest

Emily Montandon  |  Staff Writer/Copy Editor