E-rate Update: Funding Clarifications, SLC Merger, GAO Report
Message Posted July 21, 1998
Many of you have been calling and writing about the latest word on E-rate. Although there hasn't been much new news to report, I've listed below a few items to keep you informed.
* Apparently there is still quite a bit of confusion about who will and will not receive discounts. Again, ALL VALID, COMPLETED APPLICATIONS SUBMITTED WITHIN THE 75-DAY WINDOW WILL RECEIVE DISCOUNTS ON ALL REQUESTED TELECOMMUNICATIONS SERVICES AND INTERNET ACCESS, REGARDLESS OF THE WEALTH OF YOUR INSTITUTION. If there are any funds remaining after all applicants receive discounts on these two categories, it will then be committed to requests for discounts on internal connections, beginning with the applicants having the largest discount percentage (90%) and working backwards until there is no money remaining.
* The SLC is continuing to review E-rate applications received during the 75-day window for problem resolution and program integrity. At last count, they were resolving an average of 250 applications per day, with only 14,000 remaining.
* In a recent statement, see below, the SLC indicated that funding commitment letters would not be issued before early Fall. This is consistent with the September target date that we have been hearing.
* Julie Tritt will be presenting workshops on E-rate at both the PDE Curriculum Conference being held at Shippensburg University (workshop scheduled for Friday, July 24 from 10:30 - noon), and at the Link-to-Learn/TLCF Technology Institute being held at the Penn State Conference Center from July 26-28.
* In order to address concerns of overlapping responsibilities and inefficiencies, the SLC will merge with the Universal Service
Administrative Company (USAC) and the Rural Health Care Corporation (RHCC) to create a single non-profit corporation. I don't expect that you will see any impact of this change on the program. See official SLC statement below.
* On July 16, Arizona Sen. John McCain convened a hearing of the Senate Commerce Committee to hear from Ira Fishman, chief executive officer of the SLC and to receive a report from the Government Accounting Office on administrative procedures and controls of the e-rate telecommunications discount program by the SLC. Below are three statements regarding a Congressional hearing on E-rate held last week. The first was issued by the SLC, the second is a excerpt of a summary posted by the American Library Association, and the third is a summary of the GAO's recommendations.
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SLC TO MERGE WITH OTHER UNIVERSAL SERVICE NON-PROFITS
-- by the SLC
The Schools and Libraries Corporation will merge with the Universal Service Administrative Company (USAC) and the Rural Health Care Corporation (RHCC) to create a single non-profit corporation, if a plan submitted by the three organizations is approved by the Federal Communications Commission (FCC).
The three independent non-profits were established to implement the Universal Service provisions of the Telecommunications Act of 1996. In its May 8, 1998, Report to Congress, the FCC recommended restructuring the Universal Service support organizations to address concerns about overlapping responsibilities and inefficiencies.
The reorganization plan, submitted to the FCC on July 1, 1998, would create a single corporate entity, USAC, with three divisions: the High Cost & Low Income Division, the Schools & Libraries Division, and the Rural Health Care Division. Each division would be headed by a corporate officer reporting to the USAC CEO and be overseen by a committee of the USAC Board of Directors. The FCC will soon call for public comments on the plan, which is now available on the FCC web
site, www.fcc.gov.
The merged organizations expect to gain cost savings and efficiencies through consolidation and streamlining of common functions, such as payment of service providers, management, and office administration and accounting. Each division will be responsible for conducting unique programmatic operations, including client service support and application processing.
The merger is expected to have little immediate impact on 1998 school and library applicants to the E-rate program.
If accepted by the FCC, the merger plan would take effect no later than the end of 1998.
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SLC MOVING FORWARD ON PROCESSING APPLICATIONS *
FUNDING COMMITMENT LETTERS EXPECTED EARLY THIS FALL
-- by the SLC
On July 16, 1998, the E-rate cleared another hurdle when the General Accounting Office reported to the U.S. Senate Commerce Committee that the SLC had "made substantial progress in establishing an operational framework for the program that is consistent with relevant Federal Communications Commission orders."
In its report, the GAO recommended four adjustments to the SLC application review process, designed primarily to detect any compliance problems earlier in the process. SLC has agreed to the GAO recommendations and has already taken steps toward implementing them.
SLC Chief Executive Officer Ira Fishman indicated in his testimony before the Committee that applicants can expect to see funding commitments letters from the SLC early in the fall.
A summary of Mr. Fishman's testimony is available on the SLC web site, www.slcfund.org , in the What's New area.
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SLC AND GAO TESTIFY AT JULY 16 HEARING ON E-RATE PROGRAM INTEGRITY
-- by the American Library Association
On July 16, Arizona Sen. John McCain convened a hearing of the Senate Commerce Committee to hear from Ira Fishman, chief executive officer of the Schools and Libraries Corp. and to receive a report from the Government Accounting Office on
administrative procedures and controls of the e-rate telecommunications discount program by the SLC. Judy A. England-Joseph, director of housing and community development issues and primary author of the GAO report, testified for GAO
(see below).
In his opening statement, Sen. McCain said that the purpose of the hearing was not to kill the program but rather "...it's about giving benefits to schools and libraries." McCain indicated his concerns about whether taxpayers are forced" to pay for the discount program. He stated that while he is in favor of the e-rate concept, he did not like the program "concocted" by the Federal Communications Commission and implemented by the SLC.
The GAO testimony noted that the SLC had progressed in implementing the program, although the process was taking longer than expected. Of the over 32,000 applications, 62 percent had been processed by July 7, the final date of the audit. The GAO expressed concern about whether or not all applications were treated consistently.
Fishman believes it will be early fall before discount funds are committed or dispensed in order to ensure program integrity and effective responses to all of the over 32,000 applications received thus far at the SLC.
Fishman said that the SLC has agreed to all of the GAO recommendations. It also was noted that Federal Communications Commission Chairman William Kennard sent a July 16 letter instructing the SLC to take appropriate steps before committing discount funds in line with all of the GAO recommendations.
"We will aggressively implement the procedures we have in place to ensure the integrity of the program," Fishman testified. He is sometimes called a policeman" among applicants, "a badge I wear proudly," he added. He noted that 35 percent of the SLC budget is allocated for program integrity assurance, and there are criminal and civil penalties for applicants to further protect against waste, fraud and abuse.
Fishman testified that in one review by the SLC of 7,000 applications, only 1 was actually found to have an ineligible item requested (paint). This seems to contradict allegations made by some e-rate critics that schools and libraries are asking for many ineligible services on their applications.
In response to a question about the $18.8 million SLC budget, Fishman noted the necessary intensive startup costs to establish a new program and ensure program integrity requires a front end commitment to costly systems. Having received over 32,000 applications, 90,000 phone calls, and 10,000 e-mails also required an extensive commitment to customer services in the first year by the SLC.
The Commerce Committee will continue to have close oversight over the E-rate program while the SLC will be working to get it fully operational in early fall.
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GAO RELEASES REPORT ON E-RATE MANAGEMENT TO SENATE COMMERCE
COMMITTEE
Testifying at the July 16 hearing of the Senate Commerce Committee was Judy A. England-Joseph, director of housing and community development issues and chief author of the GAO report. The GAO report stated that: "Overall, we found that the Corporation has made substantial progress in establishing an operational framework that is consistent with relevant FCC
orders."
GAO made four recommendations related to actions the SLC is taking or should take related to program integrity. These recommendations deal primarily with some of the methods for assuring program integrity and the timing of program integrity checks relative to the issuance of funding commitments and disbursements.
Specifically, GAO recommended the following steps SLC should take or complete before funds are committed:
(1) Conduct detailed reviews of a random sample of applications to assess not only the soundness of these applications but also the overall effectiveness of the Corporations's program integrity procedures for detecting ineligible applicants, ineligible services, and inappropriate discount levels as defined by FCC orders.
(2) Finalize procedures, automated systems, and internal controls for the post-commitment phase of the program's funding cycle including fund disbursement.
(3) Obtain a report from its independent auditor that finds that the Corporation has developed an appropriate set of internal controls to mitigate against waste, fraud, and abuse.
(4) For applications identified as "high risk" the Corporation should conduct detailed reviews of the technology plans and related documents to determine whether applicants are eligible and have the resources to effectively use the services requested.
The GAO also recommended that FCC develop goals, measures, and performance targets for the e-rate program by the end of the current Federal fiscal year and noted that the SLC "is currently faced with the task of implementing procedural changes in response to changes in the program made recently by the FCC. In addition, Corporation officials are currently considering changes to procedures and internal controls aimed at addressing concerns that we raised with them during our review."
The audit report also indicates that of the total 32,600 applications, 20,400 have been entered into SLC's database as of July 7, 1998. Of those 20,400 applications, nearly 14,000 will require some additional verification.
A copy of the written testimony (Schools and Libraries Program: Actions Needed to Strengthen Program Integrity Operations Before Committing Funds, by Judy A. England-Joseph, director of housing and community development issues, before the Senate Committee on Commerce, Science, and Transportation. GAO/T-RCED-98-243, July 16) is expected to be posted at
http://www.gao.gov/reports.htm .
Julie L. Tritt
Executive Policy Specialist
Office of Educational Technology
Pennsylvania Department of Education
333 Market Street
10th Floor
Harrisburg, PA 17126
Tel: (717) 787-5820
Fax: (717) 787-7222
www.state.pa.us
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