| The FCC adopted a new E-rate Order at the August
4th Commission meeting. Although details will not be available until the actual
Order is released later this month, a press release was issued summarizing the
major program changes included in the Order (see
FCC Press Release).
For the most part, the Fifth Report and Order (FCC 04-190) deals with issues
raised by recent audits and concerns regarding waste, fraud, and abuse.
Specifically, the Order does the following:
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“[S]ets forth a framework regarding what amounts should be recovered by the
Universal Service Administrative Company (USAC) and the Commission when funds
have been disbursed in violation of specific statutory provisions and
Commission rules;
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“announces that USAC and the Commission will conduct audits or other
investigations relating to use of E-rate funds within five years of receipt of
supported services;
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“eliminates the current option to offset amounts disbursed in violation of the
statute or a rule against other funding commitments;
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“extends the red light rule previously adopted pursuant to the Debt Collection
Improvement Act (DCIA) to bar beneficiaries or service providers from receiving
additional benefits under the schools and libraries program if they have failed
to satisfy any outstanding obligation to repay monies into the fund;
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“requires beneficiaries and service providers to maintain all documents
necessary to demonstrate compliance with program requirements for five years,
which will enhance the Commission’s ability to conduct all necessary oversight
and provide a stronger enforcement tool for detecting statutory and rule
violations;
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“requires applicants to develop a technology plan consistent with the U.S.
Department of Education and USAC guidelines for technology plan content;
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“amends and strengthens the Commission’s certification requirements for E-rate
applicants and service providers to enhance oversight and enforcement
activities;
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“directs USAC to submit a plan for timely audit resolution; and
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“directs USAC to submit, annually, a list of its administrative procedures for
potential codification to enhance the Commission's ability to limit waste,
fraud and abuse.”
One other point to note is that the new Order does not address a change in the
discount matrix (to reduce the 90% maximum discount available for Priority Two
services). This change, which has been widely discussed as a way to curb abuses
involving high discount Internal Connections funding, is still under
consideration by the FCC. Although, in a separate statement, the Chairman
indicated that the FCC is expected “…to issue an order adopting additional
measures in the near future,” we believe it is now unlikely that any changes to
the discount matrix will be made in time to impact FY 2005 funding.
A more detailed analysis of the Fifth Order will be provided when the Order is
formally released. If “the devil is in the details,” our greatest concern is
that the new Order will overlay an already complex program with another layer
of bureaucratic conditions. This concern is obviously shared by at least one
Commissioner, Michael Copps, who noted:
“A large part of the challenge we face here is crafting a balanced
approach. Vigilant oversight and procedures adequate to forestalling abuse are,
of course, essential. But it would also be possible to go overboard by
multiplying the complexity of the E-Rate program and making the process so
cumbersome as to discourage applicants from taking advantage of it. If needy
schools and libraries lack the resources to navigate a growing minefield of
rules and requirements, we could wind up deterring the very applicants this
program was designed to benefit and, worse, denying thousands of children
access to the communications services they need to grow into fully productive
citizens. So we must always keep the beneficiaries in mind as we work to
resolve problems in the program.”
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