E-Rate is a funding source established by the Federal Communications Commission (FCC) on May 7, 1997. The purpose of the funding is to ensure Universal Telecommunications Service is available to public schools and libraries. Telecommunication services include voice, data, internet, and classroom learning solutions. Schools and libraries apply for E-Rate assistance when adding telecommunications infrastructure upgrades. If approved, applicants are required to follow and maintain strict accounting procedures and any red flags raised during the continual compliance assurance process can immediately stop funding until a resolution is found. The potential for a good deal of tension among education stakeholders exists when E-Rate funding is put on hold due to such audit questions. Such experiences are common as detailed in this case study.
TopThe Case
A prominent school district in the southwest (we’ll call District 1 for the purposes of this case study) was approved for $9 million in annual E-Rate funding for a period of five years. Local officials were thrilled with the award and looked forward to improving District 1’s technology infrastructure to match needed 21st Century learning technologies. Such learning technologies require fast bandwidth in order to stream data-intensive applications to schools and students. The district’s 100 school buildings were quite dated and required electrical upgrades to accommodate 21st Century hardware and software demands. The district’s Chief Technology Officer (CTO), Mr. Secor, expressed his delight at the prospects the E-Rate funding would provide for modernizing District 1 and a five year technology plan was developed and approved by local governing authorities.
Based on the E-Rate funding award, District 1’s new technology budget was approved by the community’s education stakeholders and infrastructure upgrades were ordered by district officials to bring high-speed Internet to the schools. Installation of the costly upgrades began as local contractors got to work retrofitting old buildings with new network infrastructure. Yet, just after the first year of upgrades were completed, a bid-rigging probe began and three district officials were put on leave while E-Rate funds were halted pending a thorough investigation. Halting E-Rate funds is standard procedure whenever there is a question concerning compliance with the strict Federal guidelines that govern the E-Rate program. Beyond bid-rigging accusations and investigations, other questionable budget issues arose with each new school year. As one local newspaper account reported:
“In March 2004, two district Technology and Telecommunication Services (TTS) employees independently called the federal whistle-blower hotline, concerned with how district officials planned to use the federal funds they were seeking. Though budget items were approved with certain compliance requirements, it appeared district technology officials were making unusual arrangements to obtain non-budgeted items by ambiguously labeling purchases so as to confuse auditors.”
Meanwhile, unfinished infrastructure upgrades crippled District 1’s 5 year technology plan which was based on the increased bandwidth provided by the now-halted upgrades. Because of the anticipated funding, new hardware was placed throughout the district’s 100 schools. In addition, more demanding software purchases were made to take advantage of the upgraded infrastructure and hardware.
However, the lack of bandwidth left the new technology sitting idle. Community stakeholders were confused and upset that the steep financial commitments toward improving education were suddenly put on hold mid-stream, so-to-speak. District CTO Secor was continually being questioned at board meetings and by local media about how District 1 would maintain its course toward 21st Century technology integration. Heated debate spread among local media outlets and the situation grew from bad to worse. District monies were pulled from other budgets and allocated to technology expenditures with a promise to reimburse once the E-Rate funding resumed. However, years passed and promised resumption of E-Rate funding remained dormant along with new requests being denied during the complex and lengthy investigation process (see Table 1).