Representatives of BearingPoint told the Schools and Libraries Committee of the Universal Service Administrative Company April 18 that while half of its initial 90 site visits to E-rate applicants had turned up "no recognizable problems," about half had turned up "potential problems" or potential violations of the E-rate rules.

USAC engaged the consulting firm to conduct 1,000 site visits this year, tracking back an invoice through all stages of the E-rate application process. The report to the Schools and Libraries Committee marked the first time that BearingPoint had formally reported on its early findings. As part of the initiative, BearingPoint is also identifying "best practices" for making use of E-rate-funded technology, as well as making recommendations for improving applicant outreach and addressing other program issues.

Representatives of the consulting firm reported that 89 percent of the applicants they had visited said that the E-rate program was of "great benefit" to them, while 11 percent said it was of "some benefit." Those applicants, the representatives said, would have given it a higher rating except for the administrative burden that the program imposed on them.

The staff outlined specific rule violations that had been identified during the reviews and forwarded to USAC for disposition. Among the "potential problems" that the review identified were that 19 percent of applicants visited had disposed of E-rate-supported equipment through a sale or transfer; in 19 percent of cases the invoices did not match up with what had been sought from the SLD; in 19 percent of the cases, there was no record that a technology plan had been approved; in 14 percent of cases, the applicant was judged to have inadequate air conditioning for the equipment; and in 18 percent of cases, applicants were not judged to have tracked their equipment adequately.

The consultants reported that 57 percent of the applicants they interviewed reported that they struggled with the process and with the deadlines and 52 percent report problems with the Client Service Bureau, including getting different answers to the same question.

John Klaffky, project manager for BearingPoint, said, "It was commonly reported that E-rate coordinators fear the administrative burden and the penalties are severe. They risk losing funding for their school districts. And they said they don't have this same level of fear with other grant programs."

Klaffky said that "the typical E-rate person has 10 other jobs. Doing E-rate is a part-time responsibility" and it is hard for them to keep up on the rules. He added, "The E-rate is not as complex as the Internal Revenue Code," a statement that was greeted by laughter. "But, he went on, "it is a close second."

USAC Board Chair Brian Talbott, one of the school representatives to the USAC board, noted that there is "a gap in the communications between USAC and the field. A lot of the fear comes out of a lack of communications and misunderstanding."

Klaffky further reported that 24 percent of applicants said they didn't know how to apply when their applications for the previous year had not yet been approved; and that 20 percent of them had encountered invoicing issues that were forcing their service providers to back out of the program. Another 12 percent complained about their inability to update their contact information with the SLD and 4 percent complained that the program's reliance on participation in the school lunch program as the standard for poverty meant that older students were deprived of technology to which they had gained access in elementary schools that had easier access to E-rate discounts.

BearingPoint reported that the company has reviewed about $6 million worth of funding requests." McDonald reported that "with one exception, the potential funding recovery is only $300 to $400."