TAUZIN BROADENS INVESTIGATION OF FRAUD IN E-RATE PROGRAM
Reports of fraud in the E-rate program may be “just the tip of the iceberg,” said House Commerce Committee Chmn. Tauzin (R-La.), who’s pushing the panel’s investigation of the program. As part of the Universal Service Fund (USF), the E-Rate program funds telecom services to schools and public libraries. In letters to the FCC and the Universal Service Administrative Co. (USAC), which administers USF under the FCC’s direction, Tauzin cited the potential of more than $200 million in fraud and raised questions about the effectiveness of federal oversight of the program, which never has been fully audited. Oversight & Investigations Subcommittee Chmn. Greenwood (R-Pa.) also signed the letter.
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Tauzin said oversight of E-rate may not be adequate to handle the potential size of waste, abuse and fraud in the program. There currently are 30 active federal and state investigations of potential E-rate abuse totaling more than $200 million of questionable funding. E-rate is funded at $2.25 billion annually, he said. “As you know, problems of waste, fraud and abuse have trailed the E-rate throughout its first 5 years of funding,” Tauzin wrote. Audits in the first 2 years found more than $10 million in inappropriate disbursements, he said. E-rate has distributed $8 billion since its inception, Tauzin said, and there were requests for $5 billion in funding in 2002.
While acknowledging the FCC and USAC had made improvements in their oversight, Tauzin said: “We are concerned that such efforts may not address the full extent of any problems. We come to this conclusion because we have learned that, to date, there has not been a systematic audit of the full program since its inception 6 years ago.” The FCC’s Inspector Gen. (IG) and the U.S. General Accounting Office (GAO) are investigating the problem, Tauzin said, and the IG estimates E-rate may have involved $180 million in fraudulent disbursement each year, based on a GAO analysis of similar sized programs.
From the FCC, Tauzin requested: (1) All documents and public commentary relating to the Commission’s review of rules governing E-rate, announced in a Jan. 25, 2002, rulemaking. (2) Records relating to what products and services were eligible for E-rate, including wide area networks, wireless service and voice mail. (3) Records relating to equipment purchased by one school that was transferred to another school eligible for funding. (4) Records relating to the genesis of USAC as the USF administrator. (5) Records of the FCC’s review of USAC and analysis of USAC administrative budgets and funding. (6) The number, and details, of bankruptcy cases involving E-rate funds.
From the USAC, Tauzin requested: (1) Identification of all fraud and abuse uncovered by USAC. (2) All audits relating to the schools and library division of USF. (3) All USAC annual reports. (4) All minutes, including closed executive session minutes, from USAC meetings. (5) Records of administrative expenses. (6) Records relating to outsourcing of administrative functions, including contracts with the National Exchange Carrier Assn. (NECA) and Pricewaterhouse Coopers. Tauzin also asked for details about potential fraud and service providers potentially associated with fraud.
Commerce Committee spokesman Ken Johnson stressed that Tauzin wasn’t out to kill the E-rate program. “We're out to reform the program,” he said: “We're not talking about a couple of isolated incidents, this program is riddled with allegations of fraud and abuse.” While Johnson said Tauzin had no intention of ending E-rate, Rep. Tancredo (R-Colo.) introduced a bill Wed. (HR-1252) that would do just that. His bill was referred to the Commerce Committee, of which Tancredo isn’t a member.
Almost $590 million worth of E-rate applications were denied this week because of competitive bidding violations. The Universal Service Administrative Co.’s Schools & Libraries Div., which runs the communications-technology discount program for the FCC, rejected the applications in its latest wave of decision letters, eSchool News reported. The firm had warned applicants in Dec. not to list vendors it had identified with repeated competitive-bidding violations.