Fraud Discovered in Library/School E-Rate Fund

by Sabrina I. Pacifici on January 14, 2003

Something has gone terribly wrong with the FCC’s Universal Service Program for Schools and Libraries. Known as the E-Rate Fund, the objective of the program, part of the Telecommunications Act of 1996, is to ensure low-cost public access to Internet services for needy schools and libraries throughout the country. The fund is capped at $2.5 billion in annual expenditures, and is administered by the Universal Service Administrative Company for Schools and Libraries (USAC). Telecom companies collect fees from all their customers (on your bill it may appear as a “universal service fee”), and these fees have then been used over the course of the past six years to fund Internet access to “86 percent of the nation’s public schools, 21 percent of private…and 65 percent of libraries.”
On January 9, The Center for Public Integrity issued a detailed investigative report on the E- Rate program, concluding that it is “honeycombed with fraud and financial shenanigans.” The report cites a number of important documents, including a recent 34 page report from the FCC’s Office of Inspector General that focuses on continued waste and fraud in the program, and a report on Top 25 Service Providers – FY2001, that clearly indicates how IBM and the top telecom companies have profited significantly from the program.

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