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Yes, Virginia, There is An E-Rate Scandal

by James Punderson
To be Published in Inside Education December 2001

(The following content is Rated R (contains a rant). If your school is not receiving significant financial benefits from the E-Rate program, this column may offend you.)

Once upon a time, when the E-rate program was just beginning, there were many complaints, threats of Congressional action and even lawsuits against it. As we are just about to start filling out the 5th year E-Rate forms for our clients, bizarre bureaucratic procedures and Catch-22-esque policies and decisions cause us to alternate between hysterical laughter and head-pounding-on-wall despair. Every never-to-be-topped ridiculous action is soon elbowed out by another. 

In just a few short years, the E-Rate people have become almost as difficult to deal with as the IRS (please don’t tell them I said so). And yet, that’s not the real E-Rate scandal.

Scandal #1 – “What’s an E-Rate?”

For all those who may have been out of town for the last four years, the E-Rate is a $2.25 billion per year federally-administered program of discounts from 20% to 90% on telecommunications services (phones, pagers, and T-1 lines for example), Internet access charges as well as computer network and telephone wiring, equipment and labor charges (both installation and maintenance). It is limited to K-12 schools (public and private) and public libraries. And anyone who still doesn’t know that is part of Scandal #1.

Variation on Scandal #1 – “We Know But We’re not Eligible”

I can’t tell you how many schools have told us that they didn’t apply for the E-Rate because they’re not eligible. Wrong! Wrong! WRONG! Unless you happen to be a private school with over $50,000,000 in endowment funds, you are eligible. At an absolute minimum, every school is entitled to a 20% discount on all eligible expenses every year. The average discount is between 40% and 50%.

How Big Is the Problem?

Pretty darn big! About 20% of the nation’s public school districts, 50% of public library systems and 80% of private schools that were eligible did not participate at all in the first two years of the program according to the US General Accounting Office (GAO)’s analysis. The non-participating schools are missing out on many millions of dollars of funding for failure to fill out some forms.

Scandal #2 – “We Applied But We Never Got Any Money”

The second scandal, which is even more bizarre than the first, is the failure of schools and libraries that applied for the E-Rate to follow through and actually collect the money owed to them: at least the people in the first group could claim ignorance of the whole program but here we have people who filled out forms, were notified of funding for their discounts and then never bothered to collect their money.

This can only happen in two ways. The first is that the services approved for discounts were never purchased.  If a school is going to do that, then it may as well not apply at all and let the money go to someone who will use it. Every single dollar of telecommunications and Internet discounts a school applies for and doesn’t use directly deprives some other school of funds.

There’s one—and only one—other way a school wouldn’t get any money from the E-Rate program: the school didn’t submit all forms, properly filled out and on time. PERIOD. For four years in a row, all properly completed and timely filed requests for telecommunications services and Internet access have been fully funded and requests for equipment have been at least partially funded every year.

How Big is this Problem?

Last I looked, about a billion dollars’ worth (about 25%) of awarded E-Rate discounts has gone (so far) unclaimed in just the first two years of the program. That’s an awful lot of money to leave on the table.

When a school doesn’t collect the money available to it, the unused money is not given to other schools and libraries; instead, it is given back to AT&T, Verizon and the other vendors who paid into the fund. Worse yet, it also makes Congress and the public think the program is a waste of time and money if the recipients of the discounts can’t be bothered to use them.

What Can Be Done?

If schools don’t know how to properly complete all the forms, then they should either find out how or hire a consultant who already does know how. No one considers it a disgrace to not know how to fill out a tax form. Millions of people hire H&R Block or CPAs to do their tax returns. But it certainly would be a disgrace to lose your income tax refund simply because you filled it in wrong or didn’t file a return at all.

But be careful. There are many E-Rate consultants who “know” things about the E-Rate program that simply aren’t true. Be sure and check their references.

Do your part; make sure your school system isn’t part of the E-Rate scandal. As the famous 1971 Earth Day Pogo comic strip observed, “We have met the enemy and he is us.”




James M. Punderson IV, M.Ed., is a former teacher, school board president, network engineer and author. He is the founder of Networks & More! Inc. (www.k12usa.com), an educational technology and e-rate consulting company providing Internet-based software services exclusively to schools. He can be reached at jpunderson@k12usa.com.

© 2001 All rights reserved

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