A Disconnect on School Internet Funds

Congressional Report Finds Waste in 9-Year-Old E-Rate Program

A federal program that has doled out more than $10 billion to help schools and libraries link to the Internet has wasted millions of dollars over its nine-year history, according to a congressional report.

The E-Rate program, managed by the Federal Communications Commission, is poorly run and "extremely vulnerable to waste, fraud and abuse," said the report, approved last week by an 11 to 0 vote of the House Energy and Commerce Committee's oversight subcommittee.

The program, created by the Telecommunications Act of 1996, makes available as much as $2.25 billion a year to help schools and libraries purchase discounted Internet access and telecommunications equipment. Discounts range from 20 to 90 percent.

The effort is funded by the "universal service fee" charged to telephone companies, which usually pass the fee on to consumers. The money is administered by the Universal Service Administrative Company, a nonprofit corporation regulated by the FCC.

On the upside, congressional investigators said the program is ambitious and well-intentioned and has benefited the nation's children. But it suffers from inadequate oversight by the FCC, vulnerability to mismanagement at the local level, and insufficient federal safeguards against waste, fraud and abuse.

For instance, FCC standards for excluding unscrupulous vendors are too low, requiring a civil judgment or criminal conviction before the vendor can be suspended, the report said. Also, ineffective oversight has given rise to forged documents and program applications as some local officials and vendors have attempted to defraud the program.

FCC Chairman Kevin J. Martin is aware of the concerns and in June began an internal effort to consider "fundamental structural reform" of the program, agency spokesman Mark Wigfield said.

The congressional report cited problems found in Atlanta, Chicago, San Francisco and Puerto Rico. In Puerto Rico, more than $100 million in program money has been spent to provide broadband Internet access for 1,540 schools, but few of the school system's 610,000 students were able to use it. The committee staff found about $23.5 million worth of computer equipment, including 73,000 wireless cards, still shrink-wrapped and sitting in a warehouse.

The report recommends that Congress consider whether the FCC should continue to manage the program, whether the money should continue to be disbursed by a nonprofit, nongovernmental entity, and whether the program is spending too much money. Rep. Edward Whitfield (R-Ky.), the subcommittee chairman, agreed, saying that these "weaknesses must be addressed legislatively."