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Wednesday, June 25, 2008

Jedi protecting the E-Rate?

Check it out! George Lucas testified in front of Congress in support of the E-Rate. Here's the transcript of his testimony. Here's a newspaper article with lots of congresspeople invoking Star Wars imagery. In his opening statement, Rep. Ed Markey says that Lucas supported the E-Rate back in 1993, and led Markey to fight for its inclusion in the Telecom Act. I didn't realize Lucas was such a big E-Rate supporter. I take back everything I ever said about Jar Jar Binks.

Now if only we could get Shatner to support the program.

Another interesting E-Rate footnote: in his opening statement, Rep. Markey claims credit for coining the term "E-Rate." I thought Gore claimed credit for that, just like he invented the Internet.

Monday, June 23, 2008

Another $600 million misspent

I shouldn't have used such a pessimistic title, because I think this is good news, mostly: today the FCC rolled over $600 million in unspent funds from the 2002, 2003 and 2004 funding years, into funding year 2008. (Here's the announcement.)

First, my complaint: the FCC should stop changing the size of the fund after the application window has closed. It's unfair. As I've said before, the FCC should take this rollover money and use it to set the Priority 2 denial threshold before the application window.

For the short term, though, this rollover is wonderful news. As I posted earlier, it is likely that USAC will need more than $2.25 billion just to cover Priority Two for the 90% applicants (after paying for Priority One).

The bad news is, this rollover probably isn't enough for USAC to start funding Priority 2. About $1.95 billion was requested for Priority One, and Priority Two requests from 90% applicants totalled about $1.07 billion. That's $3.02 billion. With this rollover, the fund has $2.85 billion. Now some of the funding requests will be denied, so eventually maybe the $3.02 billion will be reduced to $2.85 billion; they'd only have to deny 6% of requests to do that. It seems likely that eventually, 6% will be denied. E-Rate Central did some calculating on this, and 14% of applications were denied in 2007.

But it will take time for USAC to deny $170 million. I'm betting no Priority Two until maybe September.

On the other hand, I would have expected the FCC to do whatever was necessary to find enough funding to allow USAC to start funding Priority Two, so maybe I'm wrong.

Sunday, June 22, 2008

A secret step in the right direction

So I just got confirmation that I thought a PIA reviewer had hinted at some time ago: a client's application was approved without submitting any Item 21 Attachments.

The applicant in this case has two small FRNs ($3,000 and $1,000 in funding), both for Telecom Services, both identical to FRNs from the year before. We prepared Item 21 Attachments online, but didn't submit them. PIA never contacted us requesting the attachments, they just approved the FRNs.

A few months back, a PIA reviewer had mentioned that he could use last year's Item 21 Attachment, but since I never heard any official confirmation of that, we've been submitting attachments. And we have gotten requests from PIA, though I can't be sure that any of them were for identical requests. Also, maybe only small FRNs can be approved this way.

This is great news! We're moving closer to something I've been asking for for years now: a "same as last year" button, where an applicant just presses a button and duplicates the funding requests from the previous year.

But why is it secret? This change should be spelled out on the USAC Web site, which still says: "Each funding request on the Services Ordered and Certification Form (Form 471) must include a description of the products and services for which discounts are sought." And it should be the topic of a News Brief. Instead, the June 6 News Brief says: "Remember that PIA cannot review your application without your Item 21 attachment."

Is this just a part of the culture of secrecy? So much of the inefficiency and fear in this program stems from an apparent core belief at USAC and the FCC that if you tell public servants what the application review procedures are, they will use that knowledge to circumvent the procedures.

Or maybe they're just trying to quietly cut small applicants some slack, and I should keep my mouth shut.

Tuesday, June 17, 2008

Unfunding mandate

Well, it must be Audit Report Day, because another audit just crossed my desk. Unfortunately, this applicant was not an On-Tech client, so they had a couple of "findings" (for those who have the good fortune of never failing an audit, a "finding" means a material deficiency has been found). I'm not going to go into details, but one of the findings surprised me a bit.

The applicant apparently took over 90 days to pay a bill, and the auditor thought that meant the applicant should give back all the money from that FRN.

Based on how long it takes my clients to pay me, I've got to think that a lot of schools and libraries don't make that 90-day deadline every time. I remember looking at this once, and the average time for clients to pay me was like 135 days. Since then I think it's gotten better. The current recordholder? 550 days and counting.

Hmmm, I wonder if we could get the FCC to mandate that applicants pay their E-Rate consultants within 90 days....

Audit final score: couln't run, managed to pass

I got my first draft audit report from the new round of FCC OIG IPIA audits, and it surprised me. Surprised me because it was so brief, and somewhat unclear. It basically boiled down to a form letter and a checklist.

I jumped right to the checklist scanned it, and found 5 boxes not checked. I was ready to blow a gasket, because I knew we had answered all the auditors questions.

But once I read the unchecked items, I realized that in at least 4 cases, the box wasn't checked because the item was not applicable. It's not as clear whether the 1st unchecked box indicates non-compliance or non-applicability.

Then I went back to the form letter, and it said "Blah blah blah [two paragraphs of blah blah blah] In our opinion, management’s assertions that the [applicant] complied with the aforementioned requirements are fairly stated, in all material respects." So I guess all the unchecked boxes meant "not applicable."

I get the impression that this is a standard checklist, so I think it should be revised before they do the rest of the 260 audits this year. At the very least, they ought to have an "n/a" option for the checklist. Even better, in the case of any unchecked box, a brief comment on why the box isn't checked.

Because this is a program fraught with fear, and nothing is scarier than one of these audits.

Sunday, June 15, 2008

Searching for the silver lining

The June 16th newsletter from E-Rate Central has an interesting article on the incentives of the E-Rate program. The idea is that the E-Rate rules have created incentives that change school and library behavior in positive and negative ways. They list 3 positive and 4 negative incentives.

Let's start with the negative, because I agree with all those points:
  1. The 90% discount creates all sorts of waste, fraud and abuse. Back in 2003, the FCC formed a Task Force on the Prevention of Waste, Fraud, and Abuse. Their report was clear: 90% is just too close to free.
  2. The Eligible Services List is not technology-neutral. I agree. It also promotes inefficiency. But at least we get to comment on it every year.
  3. The "2-in-5 Rule" is a failure, promotes premature spending, punishes those who lease. This is currently the worst rule in the program. And it was sprung on us with no warning. (Most rules go through a Noticed of Proposed Rulemaking, but not this one.) It has to go.
  4. E-Rate support for maintenance by outside personnel provides an incentive to cut district tech staff. That's why I left my last district job: I outsourced all the interesting parts of my job, quit, and was replaced by someone who was an expert in integrating tech into the curriculum, not maintaining technology.
The incentives that E-Rate Central sees as positive, however, I find at best ineffective.
  1. Technology planning requirements force schools and libraries to plan ahead. I disagree. If you force someone to write a plan, they'll do whatever's required. But then the plan gets filed away until a required revision. And the E-Rate rules prevent applicants from seeking outside expertise. In my experience, the best way to determine what technology to implement is not a top-down planned approach, but in response to grass-roots demand. The E-Rate, with its long application cycle, makes this more difficult.
  2. Item 25 certifications help make applicants mindful of the ancillary expenses in implementing technology. It makes the person who fills out the application mindful of it for a few hours in January, but I don't think that makes much difference. And since applicants are not allowed to include possible grant funds in the Item 25 total, it provides a disincentive to leveraging E-Rate funding with other grant funding.
  3. E-Rate deadlines prevent procrastination. Well, OK, in a disfunctional system where necessary tech procurements are put off, E-Rate deadlines will force the procurements to happen. But saying that's a good thing is kind of like saying it's good that my PC crashes often, because rebooting from time to time can help clean crud out of memory. Well, sort of, I guess.
Call me the E-Rate Curmudgeon, I guess. I can't see any real silver linings in these rules.

Wednesday, June 11, 2008

Burnt offerings

USAC released a preliminary schedule for the fall training, and I am very pleased to see them coming back to NJ!

I think we should schedule a pilgrimage to PIA, which is about 25 minutes from the airport. Of course, we would never be allowed into the inner sanctum, but we could kowtow in the parking lot, and burn Item 21 Attachments as a sacrifice.

Government lawyers on my side

Man, I love the latest appeal from the Bureau of Indian Education (BIE)! They made two arguments that I would love to see them win.

First, they said that other government procurement processes, even if they differ from the FCC process, should satisfy the "competition" requirement. The BIE is talking about federal rules, but imagine if the FCC said following federal or state public contract law satisfied the competition requirement. Suddenly, only private schools would have to file a Form 470, since public schools and libraries already follow state public contract laws.

The other argument is one that could make it more difficult for USAC to COMAD. Apparently, in the absence of evidence to the contrary, it should be assumed that public officials acted conscientiously. (I know the idea of assuming that public officials are conscientious just made some of you blow your morning coffee out through your nose, but that's what the law says, according to the BIE.)

The FCC has been approaching this point of view, for example when they remanded the "pattern analysis" denials, but this idea opens up a new line of defense against COMADs. Up until August 13, 2004, when the Fifth Report & Order was released, the only records that applicants were required to keep were records they would normally keep. So USAC shouldn't be able to COMAD any application before that date, unless the applicant happened to keep records that demonstrate that officials broke the rules.

Let's take this further: while the Fifth Report & Order listed many documents that must be retained, it didn't actually say that all those documents must be created. For example, all RFPs must be retained, but RFPs do not have to be created. So if an applicant didn't create a bid evaluation worksheet, can they say there is no evidence that officials were not conscientious, so USAC must presume that they selected the most cost-effective vendor, with price as the primary factor?

As I see it, the FCC has two choices: either scrap the 470 process, or come up with a real set of procurement rules, like the Federal Acquisition Regulation (FAR), which is about 1900 pages long. Currently, the FCC is making up the rules one appeal case at a time, which benefits no one.

In any case, it sure feels good to have government lawyers making these arguments.

Saturday, June 07, 2008

New wave

Is it just me, or has PIA been drinking too much coffee? I've just been getting swarmed with new requrests this week. I'd guess that maybe a fifth of all our applications went into review this week. Maybe it's just the luck of the draw.

Thursday, June 05, 2008

That's what I said!

I got my paper copy of eSchoolNews and reread the special report that I talked about earlier. This time I saw support for two things I've been saying for years.

First, only about a quarter of respondents thought the 2-in-5 rule was effective. You know I hate the 2-in-5 rule. At first, I was please that so many recognized its ineffectiveness. Then I started thinking: how could anyone think it's been effective? Show me some effect that it's had. (Besides perhaps inadvertently forcing a tiny but positive rule change on cabling.)

Second, the #1 change that applicants would like to see is a simplified application for Priority 1 services. Now how can we channel that into some kind of campaign? First, we need a catchy name: 471EZ? PIA Lite? The "Same As Last Year" Button?

Wednesday, June 04, 2008

Monster mash

If the two-signature/two-date rule was Jason, and COMADs call to mind NOMAD, then what is the Cost-Effectiveness Review (CER)? I recently compared it to Frankenstein's monster, but now it has reached a new level of evil.

I just picked up a new client, and right off the bat, I'm hit with a CER. Only it's for a 2005-2006 FRN for which disbursements are complete. So the client may be looking at a COMAD. It's like Frankenstein's monster and NOMAD working together. And they have a time machine.

Tuesday, June 03, 2008

Audits for us all!

The FCC's Office of the Inspector General (OIG) has released another semi-annual report. It didn't seem like as good a read as before, although the Judy Green investigation was interesting reading on a consultant gone bad. She got 7.5 years in prison!

One thing the report does make clear is why so many FCC OIG audits are being launched this year. The Improper Payments Information Act (IPIA) apparently requires more auditing if initial audits find more than 2.5% of payments (and at least $10 million) were improper. The E-Rate comes in at 12.9% of payments made improperly. So apparently IPIA has some formula that gets used to determine the new amount of audits, so the OIG will be doing 260 audits this year.

At what cost? Well, the audit I was involved in seemed to provide full employment for 3 auditors for at least 4 weeks (and it was not a big or complicated audit), so let's just use 12 person-weeks per audit. Multiply that by 260, and you get 3,120 person-weeks. Divide that by 52 weeks/year, and you get the equivalent of 60 full-time people. How much would a person like that cost as a contractor (salary+benefits)? $60,000? That's $3.6 million in audits.

Still, the OIG projects an improper payment amount of $210 million, so maybe that's a reasonable cost.

Will the new round of audits bring the program under the IPIA's 2.5% threshold? No way. This program is so complex, and so many of the rules are hidden, that there is no way the percentage of improper payments is going to get anywhere near that low. So what happens when 260 audits also find that the E-Rate is "at risk"? More audits?

So what can we do to cut the amount of improper payments? Simplify the rules. I would bet that 90% of the audit findings (and most of the program fraud, too) come from applicants not understanding the rules. If applicants knew how to follow the rules, they would.

How do we start? Put all the rules in one book, and make that book available to applicants. Once all the rules were in one place, it would be obvious that it was an embarassing amount of rules to have for a program that is mostly giving public entities a few thousand dollars off their phone bill. And it would become more apparent where the rules are contradictory and where the rules don't make clear what should be done. And the rules could be approved by the FCC, so there would be no applicant claims that USAC gave them incorrect information. And it would be clear to auditors later what set of rules should be used.

If only I could find the time, I would start compiling The Book myself. Alas, I have applications to work on.

Monday, June 02, 2008

Look! Up in the sky!

This new appeal made me smile: the Metropolis Public Library missed a 471 deadline. What, they couldn't get Superman to reverse the spin of the Earth and rewind time like he did in the movie? Or perhaps Clark Kent is not a regular library visitor.

Opportunity knocks

A new survey report has been released by eSchoolNews and Funds for Learning. It's worth a read, though most of it is about what you'd expect. Here are some things that jumped out at me:

First, the opening story is a library director getting fired for making a simple mistake on the application.

"The average applicant spends 21 hours a month managing the E-rate process." There is no way this little program should take so much time for most applicants.

"More than 2 in 5 respondents (43 percent) have experienced some type of program audit." Is this the most audited funding program in the world or what? And really, PIA is sort of an audit, so in my book, 100% of applications are audited.

Only 18% of applicants use a consultant. I know it's higher in NJ, but it's not always possible to tell which applicants are using a consultant.

It makes me want to crank up the marketing machine. If I promise to take the bullet for any mistakes, free up 252 hours of staff time each year and handle all audits, I ought to be able to pick up the 82% of applicants not currently using a consultant.