Huge E-Rate Project Runs Into Problems

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It could have been one of the E-rate program's greatest successes.

A consortium of 14 Georgia school districts draws up a plan to use the latest video technology in their most disadvantaged schools and wins a whopping $28.7 million in federally subsidized education-rate discounts to pay for it. That's more than 34 entire states received under the program.

By all appearances, the award was a coup for the region's schools and represented just the kind of cooperation among districts that administrators of the E-rate program in Washington had encouraged.

Now, though, the project is threatening to unravel, and the cooperation appears to have been an illusion. Six of the 14 districts have pulled out of the project, saying they do not intend to match the E-rate dollars with their portions of the cost. At least three other districts--including Atlanta, which alone accounts for 97 of the 315 schools on which the application was based--may drop out as well.

As a result, at least one-third of the $28.7 million--and possibly much more--will go unused.

Though the money will remain in the E-rate fund and could be distributed in future years, the award took millions of dollars off the table from hundreds of other schools and libraries that could have received discounts this year, but didn't because funding ran out.

The problems with the application also raise questions about other awards to consortia, which together garnered $225 million in discounts this year, or 14 percent of the $1.66 billion total. The remaining applications were submitted by school districts or by individual schools and libraries.

Mark Root

"This was totally not done right," Mark Root, the vice president of education technology at Infotech Strategies, a Washington consulting firm, said when told details of the Georgia consortium's application. Until recently, Mr. Root was tracking urban E-rate issues as the manager of technology and information services at the Council of the Great City Schools.

A school technology director of an Eastern state who spoke on condition of anonymity had a similar reaction. "It sounds like the districts got swept up by someone who was pushing a glitzy technology," she said. "It reinforces the need for this to be happening in the context of [district] planning activities that are meaningful."

The project's difficulties are surfacing at an important time for the E-rate program. Money is on the verge of flowing to first-year projects, and the Federal Communications Commission, which oversees the program, is expected to make a decision next month on how much money to allocate for it during its second year. Any mismanagement of a major E-rate project is likely to be seized upon by critics of the program in Congress who cut the program's funding last year from $2.25 billion and almost succeeded in scuttling it entirely.

"This could come back to haunt them on Capitol Hill," Mr. Root said.

Video on Demand

The E-rate program, launched in January 1998, is designed to speed the telecommunications revolution in schools and libraries by awarding them discounts on a variety of services and equipment. The discounts range from 20 percent to 90 percent, with the greatest discounts going to schools and libraries serving the most economically disadvantaged students. After numerous delays, the first-year awards were announced between last November and February.

The Georgia project, called MRESAnet2000, would install a state-of-the-art system for delivering video programming "on demand" and providing interactive teleconferencing in classrooms. The application was filed by the Metropolitan Regional Educational Services Agency, an Atlanta-based organization created by the state legislature to provide special education, technical support, and training to 11 Atlanta-area districts and three districts elsewhere in the state.

Of Georgia's 16 RESAs, only MRESA and the Heart of Georgia Regional Educational Services Agency, in Eastman, filed consortium applications for E-rate funds.

MRESA's project picked out the 315 schools in the districts it serves that were eligible for the deepest discounts on equipment and services--from 70 percent to 90 percent--based on the large number of students they enrolled who were eligible for free or reduced-price school lunches. The video system, if installed at all the schools, would serve more than 200,000 students and nearly 12,000 teachers.

MRESA got word in February that it would receive E-rate funds. At the time, Georgia officials cited the award as an impressive example of local initiative.

But an examination of key documents and interviews with expert observers and officials suggest that the MRESA application had serious flaws and probably should never have been awarded discounts in the first place.

The chief problem is that MRESA failed to get firm commitments from the 14 districts on whose behalf it was acting, despite Executive Director A. Bernard Hatch's certification on the application that all resources to support the project were secured.

By contrast, the Heart of Georgia RESA, which received a $1.8 million award for its project, gathered signatures from district officials committing them to paying their shares before submitting its application, according to the director, June Bradfield.

Mr. Hatch said the superintendents of the 14 member districts, who make up MRESA's governing board, had voted unanimously in December 1997 to authorize the agency to apply for the E-rate discounts. He sounded frustrated that many of the districts now don't plan to participate in the project.

"Any time you're doing something collectively, you're at the whims of individual districts," Mr. Hatch said.

But it wasn't until March of this year--after MRESA was notified of its award--that the consortium told district officials key details of the project, including the cost the districts would have to bear for each school, and asked them to sign contracts committing them to pay.

Randy M. Brittain, the superintendent of the Douglas County schools, said he and his colleagues did not view the December 1997 vote as financially binding.

"We've signed no agreement. The first contract we've seen was in March 1999," he said, adding that superintendents had only a few general discussions of the project before that.

As of last week, MRESA had received contracts from only three of the 14 member districts, according to Mr. Hatch. Those districts--Chatham County and the cities of Decatur and Buford--represent 34 of the more than 300 schools included in the application.

Year Late, Dollars Short

MRESA is still trying to persuade districts to get on board. For example, the agency is sending a mobile demonstration unit to the Richmond County schools this week, district officials there said.

But administrators in several districts--even those who are impressed with the video technology and whose eyes gleam at getting it at 10 or 20 cents on the dollar--say they cannot do so.

Charles Sipos, the executive director of technology services for the Fulton County district, said the contract from MRESA came too late in the budget process for the district to act on it.

"We're in the ninth month of our fiscal year, and we had not budgeted for an outlay of $326,000" to pay for the project, Mr. Sipos said. "It created an obligation for us that we were not prepared for."

Other districts budgeted more than a year ago for their own, separate E-rate projects. The Atlanta district, for example, earmarked $1.4 million in 1997 to pay for its share of telephone services and infrastructure projects, for which it received $6.1 million in E-rate discounts last winter.

Atlanta still hasn't rejected the MRESA project. "We're still reviewing our interest in participating," said LaMarian Hayes-Wallace, the assistant superintendent in charge of the district's division of information services.

But she noted that as the 1999 fiscal year winds down, the project faces stiff competition from many other priorities for the $1 million it would cost the district. "That's a high hurdle," she said, adding that it would require school board approval.

MRESA applied for a second year of E-rate funds in March so it could expand the project to additional schools. But, again, it didn't get commitments from districts for the required funding; and, once again, most districts haven't budgeted for it.

Not Enough Time

The project's belated entry into the districts' budget process is more than a financial issue: It didn't give school officials enough time to work with MRESA to tailor the project to their needs and existing technologies.

The technology managers of several districts are now expressing doubts about basic issues, such as whether the technology duplicates video-delivery systems and wiring that many of them already have, whether the equipment is worth even the small portion of the costs that the districts would pay, and whether the free video content that MRESA has promised is educationally useful.

Jon Peterson, the director of instructional technology for the Rockdale County schools, said that though the video system "is a fascinating tool," the district had decided not to go ahead with the project.

"Our schools probably have greater needs than interactive video in the classroom, where we need to be teaching reading," he said.

The Marietta city schools also opted out. "Our principals told me for this amount of money, they didn't believe it would be an improvement over what we have already," Penny L. Angel, the district's technology director, said.

But officials in some districts said they would come up with the money to take part.

"Our system will get $210,000 for $42,000," Stephen R. Spofford, the director of operations of the Buford city schools, said. "The equipment they're giving us is stuff that can be used for other things. It doesn't have to be used exclusively for video."

Adequate Oversight?

Mr. Root of Infotech Strategies said the award raises questions about how the MRESA project received approval from the Universal Service Administrative Co., the nonprofit organization that administers the E-rate program. "Since it's such a big [award] and a consortium application, why didn't this get flagged for a preaudit?" Mr. Root said.

In an interview last month, USAC President Kate L. Moore declined to discuss the MRESA application specifically. But she said that every application was scrutinized by the program's "project integrity assurance review." That process, the details of which are kept secret, was overhauled last summer to match recommendations from a General Accounting Office study ordered by members of Congress.

"The point of our review is to evaluate compliance with program rules, so before we make a funding commitment or a promise of cash we are confident that the program rules are complied with," Ms. Moore said.

USAC reviewers spent a lot of time on the Georgia consortium's application, according to Edward Kramer, a technology associate at MRESA who led the design of the project.

He said reviewers called him on eight separate occasions to ask for additional documents and advised him to make numerous changes. "They had a firm understanding of what we were doing," Mr. Kramer said. "Basically, when they told us to change the application, we did."

But USAC did not ask if the districts were committed to supporting the project, he said.

USAC's Ms. Moore said that relying on self-certification--enforced by criminal penalties--is one way the program reduces the administrative burden involved in getting the signatures of many participants on a consortium application. The rules presume that the person signing the application form has gotten the sign-off of all the members of consortium, she added.

Although USAC has sent commitment letters to applicants, it has not yet sent any checks to vendors for services. Officials point out that they will continue to examine E-rate projects about which questions are raised.

A USAC task force is currently looking at ways the program could be improved. Michelle C. Richards, a lobbyist for the National School Boards Association in Alexandria, Va., said she would not be surprised if the application-review process still needed fine-tuning.

"The challenge," she said, "becomes how to look at the things that need tweaking in a reasonable, rational way to try and make the program work well and not have them become fodder for, basically, people who want to sink the program."

Vol. 18, Issue 35, Pages 1, 16-17

Published in Print: May 12, 1999, as Huge E-Rate Project Runs Into Problems
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