Magazine article Information Today

E-Rate Program on Hold: New E-Rate Accounting Rules

Magazine article Information Today

E-Rate Program on Hold: New E-Rate Accounting Rules

Article excerpt

The federal E-rate program was established in 1996 as part of a broad effort to bring high-speed Internet access to schools and libraries around the country, particularly in rural areas. Under the program, schools and libraries can receive grants that cover up to 90 percent of their Internet service and telecommunications costs. Funding for the program comes from Universal Service Fees assessed on telecommunications services. The program is regulated by the Federal Communications Commission (FCC), but it is administered by the Universal Service Administrative Company (USAC), a federally chartered, nonprofit corporation.

The $2.5 billion program is considered a success. USAC processes more than 35,000 applications per year for new and continuing E-rate support. Statistics from 2002 (the most recent year available) show that 99 percent of public schools and 92 percent of public school classrooms have Internet access, with much of that access being provided through broadband connections funded in part by the E-rate program. Until recently, the only significant glitch in the program was the Children's Internet Protection Act (see Living in a Post-CIPA World, Information Today, September 2003), which requires all public school and library E-rate recipients to install and use filtering software on their Internet-accessible computers.

Recently, however, a more significant series of glitches has ground the program to a halt. In August 2004, the FCC ordered a number of changes in the accounting, disbursement, and audit practices of both the FCC and the USAC. Among those changes are new policies and procedures for recovering funds disbursed in violation of E-rate rules and the addition of a 5-year document retention rule. New rules covering the content and timing of the technology plans required of E-rate recipients were mandated, as were the certifications that are required as part of the application process. Finally, the FCC and USAC were directed to change the accounting rules that govern their transactions.

In order to accommodate the rule changes, the USAC suspended issuing E-rate commitment letters to schools and libraries in early August. Commitment letters direct the E-rate funds to be spent by or on behalf of libraries and schools and may be relied upon by vendors as an assurance of payment. As a result, schools and libraries have been forced to use other resources to fund ongoing Internet service fees or have been required to drop the service due to lack of funding.

Schools and libraries in rural areas have been hit particularly hard. Several schools in Alaska, North Dakota, and West Virginia have had to discontinue online access during the funding shortage. In one instance, an isolated school district in Alaska relied on Internet access, including videoconferencing, to share specialist instructors among widely scattered schools in order to comply with the No Child Left Behind Act.

Audit and Anti-Fraud Mechanisms

The rule changes, and the subsequent suspension of funding, appear to be triggered by two issues. The first issue was a recognized need to improve audit and anti-fraud mechanisms in the E-rate program. Although the majority of program funds went for their dedicated purpose, government and independent audits were showing that some funds were being misspent. As recently as Oct. …

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