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FCC Orders SLD to Proceed With Puerto Rico Applications

In the first decision of its kind, the Federal Communications Commission November 25 instructed the Schools and Libraries Division to review and process the Puerto Rico Department of Education's E-rate applications for the 2001 and 2002 funding years by engaging an independent auditor to determine whether the PRDOE was in compliance with program rules.

In 2000, an audit of the department's 1998 E-rate applications was completed with a finding that there were no desktop computers in the classrooms visited by the auditors. As a result, in December 2001, USAC suspended payments to the department for failure to secure the "necessary resources" to use E-rate discounts effectively. The department had been approved for $158 million in E-rate commitments for 1998-2000, of which $101 million had been disbursed.

In fall 2000, soon after the audit, a new governor took office in the commonwealth, and a number of investigations were launched into the activities of the previous administration. Victor Fajardo-Velez, the commonwealth's secretary of education from 1994 to 2000, was eventually sentenced to three years in prison and fined $4 million for irregularities associated with the use of U.S. Department of Education funds. (In a series of lawsuits concerning contracts and bid awards during that period, Data Research Communication Corporation filed a third-party complaint, seeking $77 million in damages against USAC, contending that funding commitments issued by USAC constituted binding contracts with the Puerto Rico Department of Education.)

In January 2003, the department petitioned the FCC, asking it to direct USAC to resume processing the department's applications for the 2001 and 2002 funding year. The department argued that it had instituted changes to address the auditors' concerns and that as a result of the election, the department's leadership was new and unaffiliated with the previous administration. The department said that with funding from non-E-rate sources, it had made $80 million worth of school electrical repairs, installed 3,300 school computers and trained 65 percent of the commonwealth's teachers, with more training planned.

But the department contended that it has "insufficient funds to keep its technology department program underway without reentry into the E-rate program." It noted that its vendors had provided E-rate-eligible services for the 2001-02 funding years and had still not been paid.

The FCC concluded that USAC had proceeded in a "probing and cautious fashion" in the case. However, it said it recognized that "indefinitely deferring action on applications could inadvertently harm individuals that ultimately will be cleared of any wrongdoing, particular in those instances when an investigation takes years." Thus, it concluded that there are "circumstances where deferring action on an application in whole or in part is unnecessary to prevent waste, fraud and abuse."

The FCC said, however, that when law enforcement investigations are pending, it is appropriate for USAC to subject funding requests to a more intensive review. It instructed USAC to select an independent auditor to review the department's compliance with the FCC's E-rate rules for 2001 and 2002. It also directed USAC to separately review the circumstances surrounding the department's applications for the program's first three years. The FCC said it would not hold the department "to a standard above and beyond that required by our rules, but neither will we accept anything less."

The decision is available at:

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