mistakes are to blame.

Soon the USAC will visit 1,000 recipients per year to educate applicants on program rule compliance and check for indicators that may lead to a full-scale audit, said Mel Blackwell, the USAC's vice president of external communications. "We have embarked on this other program of site visits -- that they're going to do 1,000," he said, "because we think 100 audits just isn't enough."

He said the site visits would not be full audits, but would give the USAC an opportunity to check for things that warrant further inquiry.

E-Rate Matures

In a series of orders released December 2003 through August 2004, the FCC took steps to protect the Universal Service Fund from abuse and waste. These steps include limiting funding for internal network connections to twice every five years, defining eligible maintenance for internal connections that can still be funded annually and disallowing equipment transfers among schools in most circumstances.

The rules could prevent districts from using schools that are eligible for higher discounts to purchase equipment for other schools with lower discount rates, PSRC's Russ observed. "In our case, almost all of our schools are eligible at high rates," he said, "so it's never been too much of an issue for us. But I think that's just one of the ways they are trying to eliminate fraud, waste or abuse."

New rules released in July and August 2004 hold schools more accountable for spending and record-keeping.

In its Order on Reconsideration and Fourth Report and Order, released in July 2004, the FCC implemented a policy to recover funds from parties responsible for infractions, rather than from the provider, as was done previously. The argument in doing so is that applicants often are in the best position to avoid infractions. Further, the FCC implemented a "red light rule" halting additional funding to parties that owe money to the commission.

The new rules also require providers to make several certifications, which should aid in prosecuting those who hinder the competitive bidding process.

It's been difficult for auditors to ensure E-Rate applicants follow program rules because bookkeeping practices vary from applicant to applicant. E-Rate recipients previously were required to keep related paperwork only as long as their own record retention plans required, according to FCC Inspector General H. Walker Feaster III's report before the congressional subcommittee. "In effect," he stated in the report, "Commission staff have taken the position that if no record retention plan exists, there is no requirement for the applicant to maintain records."

The new rules require recipients to maintain all related paperwork for five years and mandate that audits be carried out within five years of service completion.

The FCC also outlined expected content for technology plans that applicants must submit.

More to Come

Even as schools and libraries settle in with the new regulations, more changes are anticipated.

The House Energy and Commerce Subcommittee on Oversight and Investigations has been examining the E-Rate program for more than a year, and began a series of hearings in June 2004.

"Once that exploration is finished, an assessment will be made by members of the subcommittee and then the full committee as to whether some legislation is required," said Larry Neal, deputy staff director for communications for the House Energy and Commerce Committee. "Certainly the regulatory agencies who administer the program and oversee it have long since been on notice, and they have been actively looking into it."

Neal said the hearings would continue despite many changes already made to the program.

And the FCC says it will continue to take steps to abate fraud, waste and abuse.

One proposed change is adjusting the discount matrix and requiring schools to pay

Emily Montandon  |  Staff Writer/Copy Editor