Please ensure Javascript is enabled for purposes of website accessibility

House Subcommittee Scrutinizes E-rate Program

The House Energy and Commerce Subcommittee on Oversight and Investigations opened a long-planned series of hearings on the E-rate program June 17, focusing on weaknesses in program administration and specific abuses uncovered in Puerto Rico.

Subcommittee Chairman James Greenwood, R-PA, said at the outset, "If one were to design a program to throw money out the window, this would be the way to do it."

"The buck," he added, "has to stop at the agency" that runs the program.

Members of Congress expressed concern that the nation's children were the ultimate victims of waste, fraud and abuse in the E-rate program. Rep. Edward Markey, D-Mass., one of the early supporters of the program, said the abuses "make my blood boil" and "we can't allow this to continue."

Over the course of the day-long hearing, members at various times blamed vendors, the agencies that administer the program, school leaders and state departments of education, all of whom, they contended, were not accountable enough for the large sums of money that had been disbursed.

In morning testimony, the Inspector General of the FCC and Comptroller of Puerto Rico reviewed their agencies' efforts to monitor the program. During the hearing, photos and videos showing approximately $23 million worth of networking equipment sitting in warehouses in Puerto Rico were displayed. Testimony focused on the fact that the Puerto Rico Department of Education had never followed up with the purchase of the 100,000 computers planned for the network, and that the uninstalled networking equipment was now considered obsolete. Puerto Rico Telecom was challenged for receiving $30 million worth of discount payments for T-1 service to a non-functioning network.

In the afternoon session, Carol Mattey, deputy chief of the FCC's Wireline Competition Bureau, Jane Mago, chief of the FCC's Office of Strategic Planning and Policy Analysis, and George McDonald, vice president of the Universal Service Administrative Company for schools and libraries, responded to members' questions about their agencies' administration of the program.

The three outlined the steps they were taking to address concerns about waste and fraud and also responded to concerns raised about how long it has taken to get E-rate discounts flowing to Puerto Rico again. The Commonwealth's Department of Education has received no funding since 2000 because of ongoing investigations.

Mattey was also asked how many appeals were currently pending at the FCC. When she said she wasn't sure, Greenwood said he understood it to be about 453, and pressed her as to how many people were working on them. She replied that there were seven people "working on E-rate" and "we do several hundred [appeals] every year and have since the start of the program."

Rep. Diana DeGette, D-Colo., endorsed an idea floated by Greenwood of requiring school districts to pay for audits out of the E-rate funds they receive. Mattey cautioned that many applicants receive discount payments that are comparatively small.

Greenwood also asked kind of standards the FCC had "to make sure we don't have gold-plated, over-engineered" networks. Mattey said the FCC now prohibits duplicative services and McDonald said that if the request seemed unreasonable, USAC looks to see what the school district's tech plan specifies. Greenwood responded that he doubted state departments of education reject many tech plans "because they have no stake in this."

H. Walker Feaster, the FCC's Inspector General, told the committee his office would need an additional $12 million more to adequately audit the E-rate program. Feaster said he was barred from using the Universal Service Fund for that purpose without legislation from Congress.

Feaster agreed with Energy and Commerce Chairman Joe Barton, R-TX, that school districts would have acted differently if they had considered E-rate funds to be "their own money." He supported increased audits, better certification processes and prospective penalties for violators.

Barton said the committee was not trying to pick on Puerto Rico and that the problems identified were "systemic and endemic."

At the end of the afternoon, Greenwood invited Mattey, Mago and McDonald to say whether they felt that incremental improvements were enough to address the issues that had been raised. After Mattey said, "There's always room for improvement," and Mago replied, "We're taking steps and moving forward," Greenwood responded: "I think the program needs more than incremental changes."

It is expected that the committee will hold additional hearings, but they have not been scheduled yet.

question icon

We’re here to help!

Our mission is to provide high-quality consulting and support services for the needs of E-rate program participants. We consult with applicants to help them understand, effectively utilize, and maintain compliance with E-rate rules and regulations. We help prepare and submit paperwork, and interact with program administrators on our clients’ behalf.

Request a Consultation