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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.


  1. Anonymous8:54 PM

    So why are you opening your mouth???

  2. I think keeping procedures secret is one of the program's problems. What good is done by keeping this procedure secret?

  3. Anonymous10:21 AM

    Take a look at all the convictions that have resulted from E-rate related investigations by the DOJ in the last two years. I'd bet my life that they are just the tip of the iceburg of what people have gotten away with.

    I guarantee you that if the PIA procedures were made public, there would be many applicants, service providers and consultants that would use the knowledge to attempt to circumvent the rules and procedures.

    IMO, that would be the fastest way to get rid of the program.

  4. This comment has been removed by the author.

  5. According to the last round of IPIA audits, 12.9% of all funds disbursed through the E-Rate program were improperly disbursed. Add up all those fraud convictions, and you won't come to even 1% of all the funding disbursed. Fraud isn't what's going to kill the program; it's the secret rules that are causing improper payments.

    There will be fraud, but I don't buy that there are people out there wanting to commit fraud, but held back by not knowing PIA's procedures. Maybe fraud would go up a bit, but not by much.

    None of the fraud cases you cite were caught because PIA's procedures are secret. The secretive procedures harm honest applicants much more than bad actors.

    On the other hand, improper payments would plummet if the secret rules were published, as applicants began to actually understand what was required.

    But let's get back to this particular procedure. How does it prevent fraud to keep secret that applicants which have FRNs that are identical to last year don't need to refile the same Item 21 Attachment that they filed last year?

  6. Anonymous11:56 AM

    The last round of IPIA audits only covered what, 155 FRNs out of over 95,000. I'm not saying that fraud is rampant in the program, it is there and almost impossible to detect. By making the PIA procedures public, you would be inviting, and making it easier, for people to defraud the program. Fraud can kill this program.

    Let's look (from the IG's report) at some of the areas with the highest non-compliance rates from the last round of IPIA audits:

    Procurement records - nothing secret about this, the Rules state that applicants should maintain all records.

    Asset records - this one seems pretty obvious to me too. You must maintain an inventory of equipment purchased with E-rate funds.

    Eligible services - this one is a little trickier, but the ESL does provide a pretty comprehensive list of what is not eligible. Don't play in gray areas and you've got nothing to worry about.

    Tech plan approval - seems like a no-brainer to me. Nothing secret about this.

    Contract before 470 - Again, no brainer. Wait until the 29th day and you've got nothing to worry about.

    CIPA - the Regs a laid out pretty clear on this one too.

    Applied proper percentage - Seems like common sense that applicants should only seek reimbursement for for the goods and services they recieve. Way too many applicants seem to view the E-rate as a grant and just request reimbursment for the total funding commitment, instead of the actual cost of services.

    I realize this may not totally address your concern of secret PIA procedures, but it seems pretty obvious to me that if you understand the Rules and play it conservatively, there shouldn't be too many problems. The PIA procedures are in place to attempt to guarantee that applicants are following the Rules. Playing in gray areas of the Rules is where applicants probably come into trouble.

    Your issue should not be the PIA procedures, but with the vague FCC Rules.

  7. I think we agree on something: keeping the PIA rules secret has not resulted in preventing improper payments.

    I think we'll have to agree to disagree on the effect of increased transparency in the application process. I just don't believe that there is a pool of people eager to defraud the program, but prevented by secret rules. To my mind, sunshine is the best disinfectant, so the more secrecy we can remove from the process, the less fraud we'll have.

    I agree that "if you understand the Rules and play it conservatively, there shouldn't be too many problems." Alas, only people who have seen the secret FCC-approved PIA rulebook can really understand the Rules. The rest of us are feeling our way around.

    I also agree that vague FCC rules are a bigger problem than secret PIA procedures, but some of the vague rules are clarified in the secret PIA procedures, only we don't get to see the clarifications.

    But again, back to the particular procedure in question. I cannot imagine a scenario where someone could commit fraud by exploiting the fact that you don't need to file an Item 21 Attachment if this year's FRN is identical to last year's. Can you?