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Published in Print: January 28, 2004, as E-Rate Purchases for Chicago Schools Found Wasted

E-Rate Purchases for Chicago Schools Found Wasted

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A congressional committee is asking why $5 million in telecommunications equipment that was purchased for the Chicago public schools with federal E- rate money was never installed and has been sitting for years in a warehouse.

U.S. Rep. Billy Tauzin, R-La., the chairman of the House Energy and Commerce Committee, sent a letter dated Jan. 15 to Chicago school officials, asking for audits and other records of the district's E-rate projects that were awarded funding in 1999 and 2000.

The committee has been investigating charges nationwide that the E-rate program, which gives schools and libraries discounts on the cost of telecommunications, is rife with waste, fraud, and abuse. Money for the $2.25 billion annual program is raised through a tax on telephone bills.

The House panel expects to hold hearings in late February or early March, committee spokesman Ken Johnson said last week.

SBC Communications Inc., the San Antonio-based vendor for the Chicago district's E-rate-financed projects, told committee aides that about $5 million in equipment bought with money from the second and third funding years of the program was still in storage, Mr. Johnson said.

Assigning Blame

Traveling to Chicago several weeks ago, congressional investigators found cables, electronic switches, and some computers in storage, he said.

"Clearly the equipment is outdated and no longer functional—it's a glaring example of the waste and abuse in the system," Mr. Johnson said.

District officials pinned the blame on the vendor.

"All I can say is, we never received the equipment," said Celeste Garrett, a spokeswoman for the 437,000-student Chicago school system. "In my mind, it's always been sitting in an SBC warehouse—never delivered, though paid for."

SBC spokesman Dave Pacholczyk said the equipment was purchased as part of a three-year, $159 million projectincluding $139 million in E-rate fundsto install networks at more than 300 Chicago schools.

"It's neither's fault," he said. "The delay was the result of a lot of different factors."

In general, E- rate-financed projects must be completed no later than about 16 months after the money is awarded, said Mel Blackwell, the vice president for external communications for the Universal Service Administrative Co., or USAC, the Washington-based agency that manages the program for the Federal Communications Commission.

"You cannot have equipment sitting around and never installed," Mr. Blackwell said. "If that's the case, we will ask for the money back. That is a violation."

Experts note that USAC has worked recently to strengthen its systems for preventing waste, fraud, and abuse. ("FCC Issues New E-Rate Rules to Help Simplify the Program," Jan. 14, 2004).

Still, problems persist, Mr. Johnson said.

"USAC has made some much-needed improvements," he said. "But much more needs to be done before we'll be satisfied."

Vol. 23, Issue 20, Page 12

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