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Two steps forward, look over your shoulder

I spent this morning with my boss and a coworker at a seminar on E-Rate, given by one of the City law firms. The Firm was, of course, sharking for new business from their clients (they had invited all of their school system clients). The seminar was part E-Rate refresher and part Funding Year 8 update.




For those who do not know, the Federal E-Rate program provides funding in the form of purchasing discounts to enable schools and libraries to purchase telecommunications products and services. The fund gives out some $2.25 billion each year. Discount rates run from 10% to 90%, based on the number of children in your school or school district who are eligible for free or reduced-price hot lunch under the Federal guidelines. The program is currently in its seventh year, and is gearing up for year eight. The City qualifies for a 90% discount rate because of it's overwhelming poverty.




The E-Rate program is the financial vehicle we have used to build a fiber network that touches every school and library in the City. E-Rate's discounts on telecom services are what allows us to take a $2.3 million school IT budget and get ~$6 million in spending out of it. For the first five years of the program it was the gas in our technology car. Then, last year (Year 6), the car stalled.

Someone who isn't with the organization any more (I'll call him 'B') got really greedy and filed for $23,000,000+ in funding. Then B failed to grasp that when the program staff wanted documents from us to show that everything was kosher (and that we indeed had $2.4 million we required to pay our 10%) he needed to provide the goods... with a smile and a "is there anything else I can do to help you ma'am?" As a result we got denied -- for everything. No Federal money for new projects, for the phone bill, for Internet access -- nothing. All because B asked for more than we had the money to pay for, and then treated the program staff like that was no big deal.

Taking all new projects right off the table, this failure to obtain funding left us with a $1.6M hole in our operating budget. We cut services (our Internet feed went from 20Mbps to 3Mbps; we pulled the plug on half of the cell phones in the schools; we cut some other things, too), we held off on filling open positions so that we could use the salary money to pay the phone bill. We're still paying off our back debt to AT&T for Internet access. It's amazing that they didn't just cut us off. One man's greed, stupidity, and dereliction cost us a year of progress.

For Year 7 we brought in outside consultants to help us with the process, we revoked all of the contracts that B bid out in 2002 and bid them out anew, and we followed every rule and answered every question the program people asked us. It looks like we're in good shape. There's a hold up now as the group that administers the program (USAC, the Universal Service Administrative Company) brings its accounting practices in line with what the FCC wants, but all things look good for getting money later this fall. If we fail again, the effects will be just as nasty as last year. But, I have a reasonable confidence that we will succeed.

But, we're not in a position to put the problems B caused us in the past and focus on recovering and moving forward. Last year we got visited with an audit covering what we did in Year 3 of the program, and B's fine record keeping and sloppy business practices could cost us somewhere between $90,000 and $450,000 when USAC gets around to asking for their misspent moneys back. Whether it's the larger number or the smaller number depends on whether USAC decides that we're at fault for all of it, or that our vendor at the time is at fault for ~$360,000 of the problem. How long it will take USAC to get through their internal processes and send us a letter demanding the funds is anyone's guess. It took a year and a half for us to get to the point where we know that the auditors are recommending recovery of funds, and what the dollar amount is. With appeals (and by god we will appeal) this could drag on for years.

So, it was a singular experience to sit in a conference room surrounded by staff from other school districts in the state listening to a lawyer give a talk on all the ways you can get rejected by USAC and thinking "yep, B did that," and "yep, B did that too." That experience was made all the more pleasant by knowing that we are part of the reason the E-Rate program is under attack in Congress. There have been hearings about waste, fraud, and abuse in the program, and I know that what B did was wasteful, and (under program rules) fraudulent. Granted, other districts have done worse things (and some people have gone to jail for it), but to know that you're part of the problem is not a warm and fuzzy feeling.

Tomorrow is another day; all we can do is try to get it right from here on out and deal the best we can with the problems B has left us. Someday we'll be through with it. Someday we'll be able to focus on kids, and teachers, and firemen, and City staff, and the citizens like were supposed to. For now it's two steps forward and look back over your shoulder.

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