Law & Disorder / Civilization & Discontents

GAO: FCC school/library computer fund a pit of mystery

Does the FCC's E-rate program help enough schools and libraries buy telecom …

A new study issued by the Government and Accountability Office this week concludes that a Federal Communications Commission program that subsidizes school and library Internet, telephone, and computer costs has no real system for assessing its progress. The FCC "does not have specific, outcome-oriented performance goals or longterm goals" for its Universal Service Fund's "E-rate," plan the GAO says. That means the agency can't determine how far it has come in providing Internet and wireless connectivity for the nation's schools.

Ah, you're probably already thinking, another big USF mess story. But between the lines of the report, there could be some good news here. A noticeable decline in demand for some of the program's services may indicate that E-rate has helped a critical mass of schools wire themselves up. "Given the increase in schools’ and libraries’ level of Internet connectivity," GAO notes, "it is no longer clear that the program serves an existing need."

On the other hand, many schools don't apply for the money because they find the process too complex, the report notes. And others don't spend all the money they get. In the end, E-rate just doesn't know how its doing, the GAO says, because it sets no benchmarks for success.

Priorities 1 and 2

The Telecommunications Act of 1996 expanded the idea of "universal service" to include places of learning, and a year later the Schools and Libraries Universal Service Support Mechanism, generally called E-rate, was born. From 1998 through 2007 the program made "funding commitments" to libraries and schools to the tune of $22 billion, with a $2.25 billion annual cap on the fund's largesse.

E-rate will underwrite between 20 and 90 percent of the costs of a school's connectivity requirements, depending on its financial situation. Many schools use the percentage of their students eligible for the National School Lunch Program as a measurement of need. The program puts a premium on funding landline, wireless, and Internet connectivity, which it calls "Priority 1" services, and secondarily on servers, routers, cabling, repairs, and funds for technical support—labeled "Priority 2" equipment.

But what's got the GAO scratching its head is that while requests for priority 1 telecom and Internet access services have kept more or less steady, the demand for priority 2 services and equipment has dropped. This may be because the FCC created various rules that made items in the second category more expensive. And the investigations' poll of E-rate applicants indicates that telephone and Internet connectivity is their top goal. But it troubles the GAO that nobody really knows why demand for funds to keep up a school's network infrastructure seems to be less important.

"FCC does not have specific, outcome-oriented performance goals or longterm goals for the program, and therefore the agency does not have a basis on which to determine whether the growing emphasis on Priority 1 services is appropriate," GAO warns.

Money on hold

Another mystery is that many schools don't use all the E-rate funding that they get. In fact, on average, one quarter of the cash is not disbursed, and gets carried forward to the school's budget for a subsequent year. That's puzzling, because it isn't easy to get E-rate support. School administrators have to draw up a technology plan, then E-rate puts whatever equipment and services they ask for up for competitive bidding. About a month later they can pick one or more vendors who file a bid.

You'd think that at this point the government would send these schools their money. But it arrives only after the school or library has sent to E-rate a calculation of their percentage discount, a detailed description of the equipment and services they want to buy, and evidence that they can afford to cough up the rest of the bill.

Why then, after taking all this trouble to apply for these grants, do schools take less E-rate money than they requested? Some hedge their bets by requesting more E-rate support than they actually need. But GAO found that many schools just can't figure out how to access the support even after it has already been approved for them.

"According to state E-rate officials we spoke with," the audit explained, "bills and invoices from service providers are complicated, and participants do not always identify all items eligible for reimbursement in part because it can be unclear which items are eligible and which are not, particularly for Priority 1 services."

And with staff turnover being what it is at public schools, many administrators have little experience with the E-rate program and are initially stymied by the application process. And sometimes E-rate auditors reject reimbursement requests as poorly documented or inconsistent with the school's original application.

Filter problems

About 63 percent of all E-rate eligible entities participate in the program. Public schools represent the lion's share of participants, but even experienced E-rate applicants find the agency's procedures daunting. It is "too complex, takes too much time, or requires too many resources," one administrator complained, another calling it a "very exhausting process." And the complexity of that process has sometimes opened up opportunities for crooks.

In addition, many librarians don't like the fact that E-rate Internet access money comes with a big string attached: the content filtering requirements contained in the Children’s Internet Protection Act. If a library takes E-rate money, it has to install content filters. Thirty-four percent of libraries won't take E-rate support because of this stipulation.

"One library official we spoke with said that Internet filters inhibit access to free and open communication," the GAO report disclosed. "Additionally, according to this official, if adult users want to access blocked information, library workers have to take the time to manually turn filters off and then back on, which creates an administrative burden."

In the end, GAO says that the FCC can't make any meaningful sense of what E-rate has accomplished if it doesn't outline some clear goals for the program. In fact, GAO has been on the Commission's case about this for over ten years, but without success, to its mind. In 1999 the FCC set a benchmark for E-rate: 30 percent of eligible entities should have Internet access by 2000, "even though at that time well over 30 percent of the schools and libraries were already connected to the Internet[!]" GAO noted.

Obviously there's a lot of room for improvement here. But compared to other components of the Universal Service Fund, the E-rate program is doing pretty well. In December we reported that an FCC audit of the USF's High Cost fund, which subsidizes rural telcos, overpaid them to the tune of $970 million from July 2006 through June 2007.

Critics of that audit say the FCC may have greatly exaggerated the level of high cost overpayment. But whatever the exact figure, if E-rate's biggest sins are that it needs to set goals and its recipients don't always use all the money they're authorized to spend, those represent fairly benign shortcomings that a little consensus at the FCC could repair.

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