FY 2008 and FY 2007 Funding Status

Wave 7 for FY 2008 is scheduled to be released on Tuesday, June 10th. Funding in this wave is expected to be $29.5 million. The cumulative national FY 2008 funding total is $589 million. No Internal Connections requests are being funded yet for this year.

Wave 54 for FY 2007 is scheduled for release on Wednesday, June 11th, for $38 million. The cumulative national FY 2007 funding total is $2.36 billion. The final Internal Connections funding threshold for FY 2007 is 81%.

Applicants who are still awaiting FY 2007 funding may take some comfort in knowing that they are not alone. As of Wave 53, which was released last week, the pending funding requests are as follows:

Even with the large Wave 54 being released this week, there will still be over one-half billion dollars in requests outstanding. It appears that over half the dollar value of these requests is represented by Texas applicants (of which almost 45% is for Dallas alone). New York has almost 60 applicants pending with requests totaling about $5.5 million. The bad news, of course, for the more than 525 applicants still waiting for FY 2007 funding decisions is that, by this stage in the review cycle, the remaining applications are being subjected to extra SLD scrutiny. Unresolved issues may include competitive bidding procedures (often involving specific service providers), eligibility of certain entities (particularly Head Start operations whose eligibility varies by state), and discount levels. Final resolution, either for funding awards or denials, will take even more time.

The Judy Green E-Rate Case

One of the more interesting instances of E-rate fraud that has arisen, been investigated, and resolved over the past 7-8 years is the Judy Green case. Now that Ms. Green has been convicted and sentenced, a brief review of the case is both appropriate and instructive. The following summary is reprinted from the most recent semiannual report from the FCC Office of the Inspector General ("OIG") for the period ending March 31, 2008.

Judy Green, a former education consultant from California, was sentenced on March 19, 2008 to serve 7 1/2 years in prison for bid rigging and defrauding the USF [Universal Service Fund] E-Rate program. She was sentenced in the U.S. District Court for the Northern District of California in San Francisco after a jury found her guilty on 22 counts of fraud, bid rigging, and conspiracy to commit wire fraud at schools in seven states.

At its inception the E-Rate program was intended to provide discounts to assist most schools and libraries in the United States obtain affordable telecommunications and information services. Discounts range from 20% to 90% of the costs of eligible services, depending on a determination of poverty levels and the urban/rural status in the areas served by the schools and libraries.

Ms. Green became acquainted with the E-Rate program as an employee with the Los Angeles Unified School District in the fall of 1999. She leveraged her Los Angeles experience into being a consultant to school districts. As a consultant she would persuade her clients to apply for E-rate funding, guide them through the process, and submit or help the school districts submit their E-Rate documents. Ms. Green preyed on schools at the 90% level (in poorer areas of Arkansas, California, Michigan, New York, Pennsylvania, South Carolina, and Wisconsin) because it was easier to inflate costs to cover the local match required by the FCC of 10%. Ms. Green was aware that the 90% schools almost always got funded for internal connections. Her scheme did not involve schools with a discount lower than 90% because they were not likely to get funding for internal connections which, in turn, meant Ms. Green could not make any money pursuant to her scheme. During this time, she also worked in a different and contradictory role acting as a sales representative for an E-Rate vendor where she marketed products to educational institutions including school districts. In her dual role as consultant/sales representative, she implemented wire fraud schemes designed to inflate the cost of eligible equipment and services in order to pay for ineligible equipment and services. A critical aspect of the scheme was to make the E-Rate program believe the schools would pay their local match (10%). Ms. Green invented various methods, including bogus donations from non-profit organizations, to hide the fact that the co-pay was actually being paid by E-Rate funds.

Ms. Green also rigged the bids of these projects in favor of vendors who had business relationships with her. She communicated with vendors when to bid or not bid, and who should be awarded a prime contractor or subcontractor role. The vendors followed these arrangements. To accomplish this scheme, a sham bidding process was conducted so that vendors were wrongfully selected on the basis of their relationship with Ms. Green. She would direct E-Rate projects to vendors in return for five to ten percent of any E-Rate funding the vendor received.

The FCC OIG was the first organization to investigate Ms. Green, opening an investigation on the later part of 2001. Eventually this office played a substantial role in the joint investigation that was conducted by the U.S. Department of Justice Antitrust Division and numerous offices within the Federal Bureau of Investigation.

A copy of the full FCC OIG semiannual report is available at FCC OIG 3/31/2008. The SLD Web site contains additional E-rate suspension and debarment information on other individuals involved in the Judy Green case (see Suspensions and Debarments).

E-Rate Updates and Reminders

Although most E-rate applicants will not be filing their Form 470s for FY 2009 until later in the year, the SLD's online system is set up for the next funding cycle and is already being used by some applicants (particularly those with long or early procurement requirements). The first series of Form 470 Receipt Notification Letters ("RNLs") for FY 2009 were issued by the SLD on June 4th.

An interesting FCC E-rate appeal was filed last week by the U.S. Department of the Interior on behalf of its Bureau of Indian Education ("BIE"). The appeal cites a commitment adjustment ("COMAD"), and a resulting Demand Payment Letter, involving almost $1.4 million for alleged violations of E-rate record retention rules. One particularly unique aspect of the appeal is the argument that BIE is not subject to the FCC's Red Light Rule — a rule that precludes any additional funding for an applicant who is more than 30 days in arrears on a debt owed the FCC — because:

1. The definition of "debt" owed a Federal agency excludes money due from another Federal agency (which would include BIE); and furthermore
2. An Executive Order requires that the FCC must resolve interagency claims by negotiation.

Schools and Libraries News Brief for June 6th

The SLD's News Brief for June 6th provides a number of tips for filing a Form 486 online, including:

1. Applicants can practice filing Form 486s (or other forms) online using the SLD's training site. Instructions for using this site are discussed in an earlier News Brief (see September 21, 2007).
2. Use Internet Explorer 6.0 or higher (Mac users are encouraged to use Netscape 7.0 or higher).
3. If filing before July 1st, for services that will start in July, the Item 6a box must be checked.
4. A single Form 486 can be used to list FRNs from different Form 471s, but only for the same funding year.
5. If the applicant's contact person has changed since the filing of one or more Form 471s, contact information should be updated following the guidance on the SLD Web site (see Contact Information Changes).
6. There is both a standard version and an interview version of the online Form 486. If an applicant is having trouble with one, try the other.
7. Pay attention to warning messages or pop-ups (which must be enabled). Applicants with problems should call the SLD's Client Service Bureau (888-203-8100).