Powell Defends Handling of E-Rate ‘Snafu’

Powell told reporters Wed. the FCC likely will issue an instruction letter on how USAC should proceed rather than an order that would need Commission approval. He said he had spent many hours in recent weeks on the issue. “This is really just a very, very concerted effort to ensure that the program is complying with all the kinds of extensive and strictly adhered to federal accounting and GAAP [generally accepted accounting principles] guidelines, Powell said. “Much of that can be done without formalized proceedings and rulemakings.”

Powell said FCC would provide certainty, something USAC officials asked for in testimony Tues to the Senate. “USAC, understandably, wants to know specifically what the Commission says they have to do,” he said. “I respect that and we will give them all of what they need.” Approximately $1.5 billion, or 2/3 of funds, hadn’t been distributed when the funding was cut off.

Powell conceded the accounting changes may force FCC to raise the USF contribution factor in Dec. But he said on other levels the accounting change was of little significance. “This is not a redo of the whole program. This is not rethinking, necessarily, of the fundamental principles of the program.” He said while outlook on the contribution factor is still “tentative,” “there is pressure on the contribution factor if you now have higher cash obligations in the program.”

Powell also reacted to Senate criticism that some members were surprised at the suddenness of the decision. “With all due respect, that’s not particularly accurate,” he said. “These issues have been going on for a very long time. We have been working to bring that USAC program into compliance with govt. accounting standards for over a year. USAC has been steadily working on that process since last year.” Powell added: “There is nothing nefarious here” and how the issue is spun to the public must be “secondary to getting it right.”

Powell said the FCC didn’t receive an instruction letter from OMB ordering it to tell USAC it needed to switch from GAAP to govt. accounting procedures (CD Sept 6 p1). “We independently believed that the only faithful interpretation of the appropriations statute is this one… We also know that we're not the world’s best experts. We consulted OMB extensively. We consulted the General Accounting Office.”

The FCC’s 2 Democrats sharply criticized how the E- rate issues had been handled by Commission leadership.

Comr. Adelstein said much coverage of the E-rate problems had been “alarming and concerning.” He said he heard about the Aug. 3 suspension of E-rate commitments while on a trip to Alaska, weeks after the decision was made. “I should have learned about it here, but I didn’t. I didn’t know this was going to happen,” he said. “Was this decision necessary? I don’t even know because I wasn’t in on it and I frankly should have been.”

Adelstein questioned the legal framework for the FCC decision that led to the E-rate suspension. “The Antideficiency Act has been on the books for a long, long time. This program has been on the books for a long time and they've coexisted peacefully and all of a sudden I find that there’s sudden change of policy… Why? I still don’t understand why. I still feel that I need more information to understand why.”

Comr. Copps said supporters of E-rate should “speak up” on the termination. “With schools and libraries around the country struggling under the weight of often draconian budget cuts, the need to deliver timely E-Rate support has never been more important than it is right now,” he said. “This is about the worst time one could imagine for the kind of snafu that has come to light.”

Copps also questioned the decision-making process. “Of course we all want clarity about where the programs funds should be located and how they are carried on the books and we want these decisions to be made transparently and in a timely fashion,” he said. “Transparency and timeliness are not the words that come to mind here, based on that facts as we know them so far. What we know so far is this: OMB has not put a thing on paper, but accounting changes have been ordered. Funds are not available. And the Chairman of USAC said yesterday that these accounting changes would not make it easier to perform audits or root out fraud and abuse. So why do some associated with this keep saying they would?” Sources noted Wed. that USAC Chmn. Frank Gumper told the Senate Tues. there was no connection between the freeze in the program and fraud and abuse in the E-rate program.

Also Wed., Powell wrote Sens. Snowe (R-Maine) and Rockefeller (D-W.Va.) to answer technical questions they had posed about the E-rate suspension and related issues. Powell said one option Congress could consider is legislation exempting USF from the Antideficiency Act. - Howard Buskirk