E-rate Program Dogged By Concerns

Government regulators see ‘non-compliance’ among some Jewish schools but no fraud charges.

02/22/13
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Editor's Note: This is the third in a three-part series. For the other articles go here and here.

Nine years ago, Thomas Cline traveled from Washington, D.C., to Brooklyn to tour seven buildings occupied by the United Talmudical Academy.

As the assistant inspector general for audit at the Federal Communications Commission’s Office of Inspector General, Cline — whose Southern drawl must have stood out amid the Yiddish accents of Williamsburg — was there to look at the large Satmar school system’s more than $1 million in technology purchases, in 1999, subsidized by the FCC’s E-rate program.

His team found a number of major violations and ultimately recommended that the FCC make UTA return over $900,000. But in the end, the school — which did not return calls from The Jewish Week seeking an interview — paid nothing. In the years that have followed, it and the numerous institutions within its sprawling system of boys and girls’ schools in Brooklyn and Rockland County, each of which now files separately for E-rate, have been awarded tens of millions of E-rate dollars. In 2012, one of UTA’s service providers billed the program $81,600, just on Internet access for the Williamsburg boys’ divisions.

That is despite the fact that UTA students are not allowed access to the Internet.

E-rate, created as part of the sweeping Telecommunications Act of 1996, enables schools and libraries to get telecommunications and other tech infrastructure at a discount — as much as 90 percent for schools, like UTA, in which at least 75 percent of the students are eligible for reduced or free lunches.

Drawing from funds collected through a fee on long-distance phone service, the E-rate program, administered by the nonprofit Universal Service Administration Company (USAC), disburses $2.25 billion a year to more than 4,000 service providers working in over 100,000 schools.

But the money is not distributed evenly, as The Jewish Week learned in a four-month investigation. In 2011, 285 Jewish schools in New York State, which enroll approximately 4 percent of the state’s K-12 students, were approved for over $30 million, more than 20 percent of the state’s total E-rate allocations. The largest of these Jewish institutional recipients are, like UTA and Avir Yakov, a yeshiva in Rockland County, haredi (or, fervently Orthodox and/or chasidic) — the same community that, last May, filled Citi Field and Arthur Ashe Stadium for a rally denouncing the evils of the Internet. Meanwhile, the program, citing a scarcity of funds, has in recent years annually denied over $2 billion in requests from other schools nationwide.

Haredi schools are not the only Jewish ones participating in the E-rate program. A number of Modern Orthodox and liberal schools, including Ramaz, Solomon Schechter of Westchester and the Abraham Joshua Heschel School also benefit from E-rate, but, in part because their student bodies are more affluent,  the amounts they have received pale in comparison to the money lavished on the haredi schools. In addition, the Modern Orthodox and liberal day schools routinely make computers and the Internet accessible to their students.

History Of Problems

E-rate has long been criticized for inadequate safeguards against fraud and waste, and there have been several high-profile cases over the years involving service providers, E-rate consultants and schools filing millions of dollars in claims for services and equipment that were never provided.

Just a few years after E-rate began, Puerto Rico’s secretary of education was caught mismanaging over $100 million in E-rate funds. High-profile fraud cases, some involving big-name companies like IBM and NEC and entailing tens of millions of dollars, have been exposed in Texas and California, with the FCC maintaining a list of people and companies that have been “debarred” from participating in the program. Two General Accounting Office reports (most recently in 2010) have cited problems with USAC’s “internal controls,” and in 2005, the program was the subject of a congressional investigation.

Yet, despite some red flags raised in audits, like the one in 2004 of UTA, no Jewish schools or their service providers appear to have been barred from E-rate or deemed guilty of anything more serious than “noncompliance.”

Nonetheless, the program’s reputation for being susceptible to fraud is the reason why staff at the Jewish Education Project, formerly the Board of Jewish Education of Greater New York, say they have steered clear of E-rate in recent years, even as they help Jewish schools access a wide array of other government funds and services.

And, while few people are willing to accuse the Jewish schools of outright deception, their large E-rate awards are raising some eyebrows.

One E-rate expert who asked not to be identified said the large sums for schools that use minimal technology do look suspicious.

The question, he said, is, “Are you dealing with unsophisticated consumers being taken advantage of or are they in on it. … Who knows if this is legitimate of if it’s illegitimate and who’s at fault?”

Asked if it is currently investigating any potential improprieties in E-rate use among haredi institutions, Cline, the FCC auditor involved in the 2004 visit to UTA, declined to share specifics but said, “It’s come to our attention, and we are looking into it.”

In response to a follow-up e-mail from The Jewish Week, sent after the first two installments of an investigative series were published and seeking comment on some of the institutions the articles addressed, Cline said, via e-mail: “I can’t confirm, deny or discuss any investigative activity currently in progress by our staff.”

However, he added, his staff has “found the articles very interesting.”

Steve White, a Rockland County community activist who in 2011 successfully appealed to New York State to block the East Ramapo Central School District’s below-market-price sale of a school building to Avir Yakov, told The Jewish Week that it looks like Avir Yakov, if not others, has been deceptive in its dealings with E-rate.

“To me, it seems obvious that they’re trying to game the system,” he said. “If they expressly forbid their students from using the Internet, then what do they need Internet connections for?”

He noted that the blocked real estate deal between Avir Yakov and the school district, whose board is composed mostly of fervently Orthodox Jews and is currently being sued, involved “appraisal fraud. The exact same place that’s in trouble over real estate fraud is also listed as strangely getting all these monies. There is a pattern.”

`We Pulled Back’

Interviewed in December, Sara Seligson, associate director of the Jewish Education Project’s day schools and yeshivot department, told The Jewish Week that while her department was initially involved with E-rate, “it is a very complex application, and there were some challenges in terms of what the schools were using it for and what they were allowed to use it for. Not just our schools, but schools all over the country were cited for using it inappropriately, and we kind of just pulled back.

She said her department has not had any involvement with the program “for many years.”

In particular, Seligson said she had heard of vendors cutting deals with schools, permitting them to skip paying their 10 percent share.

While acknowledging that E-rate Central and the New York State Department of Education occasionally contact her office when there is a problem processing an E-rate application, she said: “We’re relatively hands-off.”

Rabbi Marty Schloss, the department’s director of government relations and general studies, commented: “[E-rate] had a lot of problems in past, and the last thing we need to do is get stuck in the middle of that. That would destroy our own credibility and ability to work with schools. We in general try to steer clear of questionable practices or practices that could lead us all into trouble.”

Despite its problems in the past, Eric Iversen, USAC’s director of external relations, insisted to The Jewish Week that USAC has “zero tolerance” for fraud and has “a pretty robust audit program.”

In a follow-up e-mail, he wrote that USAC has conducted over 800 audits of E-rate beneficiaries since 2006. “None of these audits has revealed fraud in the program,” he wrote.

The Department of Justice and the FCC’s Office of Inspector General (OIG) also audit E-rate. Thomas Cline, who audited UTA in 2004 and is now deputy inspector general in the OIG, told The Jewish Week that his department has closed about 30 investigations of E-rate recipients and service providers since 2002, and has a number of ongoing ones.

Asked during last week’s interview if he agrees with Iversen’s assessment that E-rate audits rarely find evidence of fraud, Cline said audits more commonly uncover “inconsistencies and noncompliance with certain requirements.

“Overpayments are many times the result of an honest error, rather than an attempt to defraud the federal government,” he said. “The end result of audits is more frequently to catch noncompliance and tell participants how to clean up procedures.”

He emphasized that “the need to recover funds is not in itself necessarily evidence of fraud.”

No Deadline For Payment

In his 2004 audit of UTA, Cline’s team discovered a number of problems:

UTA had not paid its required 10 percent portion of the bill;

Communications Data and Security, Inc. (still an approved E-rate service provider) had billed and received payment for services it had not provided;

There was no evidence of a competitive bidding process;

When auditors attempted to visit various UTA locations to determine the physical existence of the E-rate equipment, they found the school had, without obtaining approval, made numerous equipment substitutions, did not maintain asset records and lacked proof that all E-rate funded services had been received and installed.

Cline’s team recommended that USAC recover $934,300 from the school. UTA appealed the audit decision and in 2008, Jennifer K. McKee, the acting chief of Wireline Competition Bureau’s Telecommunications Access Policy Division, the FCC division responsible for E-rate, granted the appeal.

“Based on the record before us, it appears that this matter can be resolved through USAC’s review of additional documentation UTA provided to the Commission in its appeal, which it had not previously provided to USAC,” she wrote. In other words, the bureau determined that it was acceptable for UTA and its service provider, who had been unable to provide appropriate documentation when they were audited, to submit receipts years after the fact.

Interviewed last week about the overruling of his audit recommendations concerning UTA, Cline said the UTA audit, like many audits of that time, revealed that “in the early years of the program there were significant problems with weaknesses in the rules designed to protect the program. As a result, FCC has issued orders doing away with the loopholes and tightening the rules.”

Asked if was not suspicious for a company to produce a receipt after the audit was complete, and for the FCC to accept it, Cline noted that “the issue was there was no requirement of time in which you had to pay. That was the problem. So if you pay years later, there was nothing in the rules saying that was a problem.”

Rules specifying deadlines for payment have been implemented.

As for the UTA’s other findings, Cline said he no longer recalls the details. “We do the audits and make recommendations, but we’re not the administrators,” he said. “We have things we can do if we’re not satisfied, but how far you elevate things like that depends on the circumstance.”

Various Jewish schools have been cited for noncompliance in USAC-commissioned audits, yet, like UTA, they seem not to have been penalized.

In 2009, KPMG carried out an audit of Bais Ruchel D’Satmar, which in the early years of the program filed for E-rate together with UTA,  and found “material noncompliance with technology plan certification and service substitution requirements” during the fiscal year 2008. Notably, the functionality of the requested services on the original application was for T-1 services, while the functionality of the substituted services was for wireless phone services. While USAC decided to seek recovery for the monetary effect of this finding, nowhere in the audit, however, were the reasons for this substitution questioned or made clear.

Meanwhile other FCC rulings of Jewish schools — and other schools’ — appeals seem to have been similarly lenient. In May 2006, FCC Secretary Marlene Dortch granted 30 appeals on behalf of 96 participants, many of them haredi Jewish schools, accused of violating competitive bidding rules. USAC had flagged the schools because the language on their technology plans was very similar; however Dortch argued that considerably more evidence was needed before making the schools and their service providers return their funding.

Julie.inthemix@gmail.com, @Julie_Wiener

Radio Conversation With Julie Wiener
 
On Friday, Feb. 22, Julie Wiener, the co-author of The Jewish Week's E-rate series, answered questions about E-rate on the Ramapo Times/Rockland Community News Hour on WRCR AM 1300, hosted by Richard Gandon.
 
 

 

Last Update:

05/13/2013 - 15:58

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Impressive reporting.

This is a disappointing conclusion to two interesting articles. The focus on a 2004 investigation of the early years of the program is pretty irrelevant. The overseers admitted that the rules were poorly laid out and generally misunderstood. Also these were the early years of the internet and schools really didn't yet know what they wanted and needed. The question should have been focused on today - why are these schools taking money if they don't allow student internet access - especially in the large amounts requested and who are these suppliers without a business address and a technology history.

Clearly, Mr Peter Y and Stan Cohen have large chips on their shoulders inasmuch as they cannot face the truth. To Mr. Y (why?) Whether they are Bobov, Satmar, Skeverir etc they are stealing. Needless to say, money that was been earmarked specifically for computers, tele-comminucations etc is and was not going where it was supposed to be going. That's the bottom line. Period.
To Mr. Stan Cohen, you would do yourself a favor and relearn the concepts of Loshon Hora. I'm sick and tired of hearing and reading about child molesters and outright gonovim being protected by that bandied about idea of loshon hora. Loshon hora was not conceived for the purpose of protecting garbage. Calling gonaiva as another form of tzedaka? How utterly absurd. Its about time Jews of any sect when confronted with crimes against the state be brought to justice.

I guess the Jewish Week has come down on the side of the "good Jews." These are the ones that are politically correct and go out of their way to show that they are better citizens than the "other" Jews. In the process, they besmirch the "others" by making them out to be crooks, wantonly dipping into public coffers and illicitly stealing large sums at the expense of the poor taxpayer. What about all of the other Haredi organizations that are honest? The average reader cannot nor will not distinguish between one Haredi group and another. To them all Haredis look and act alike.

It doesn't matter whether the allegations are true or false, it is NOT the responsibility of the Jewish State to act as Judge, Jury and Executioner. Shame on the writers for writing the articles, shame on the newspaper for publishing them and shame on those readers deriving vicarious thrills out of reading them.

The supposed aggrieved complainants here make themselves out to be religious Jews with terms such as chilul hashem. It's interesting that they also conveniently forget about terms such as.loshon hora. For my equally heretical and hyoocritical brethren allow me to further educate you in the art of critical reading and interpretation. You banter around words such as fraud and thievery despite the FACT that the article clearly states that there were no findings of that sort at all. Indeed had there been someone would have gone to jail. Instead these become your personal assertions making you culpable under Jewish tenets of faith. In your unfounded and obvious biased indignation you act like people's pockets are being lined via the theft of your tax dollars when in truth they are being used to fund the education of struggling schools. Instead of hurling self hating and hateful comments why don't you just write it off as tzedakah and call it a day.On a final note, if you are going to broadly assassinate the characters of your fellow Jews and institutions against the laws of loshon hora at least have the courage to sign your hateful comments and not hide behind the name anonymous.

You assertions are just plain idiotic. It is outright Geneva (theft) for these institutions to take government money under false pretenses. You know these institutions took money for establishing internet use in the schools. Do they allow internet use? No. That is fraud and a chillul hashem. there is till time to put people in jail. When that happens will you admit its a chillul hashem? When will all the chillul hashem by chasiddim stop. Rubashkin was another massive chillul hashe. Weberman another. Metziza Bpeh another chillul hashem. I could go on and on.

"so why would anyone get upset about some petty cash being misdirected by E-Rate". Interesting question. The answer is with the way education is funded, especially in NYS, school taxes are out of control and still, districts like ERCSD in Rockland County, which has more Heredi students than most except for Williamsburg, is being destroyed by the Heredi Board members and blaming anything they can except themselves. Their Yeshivas get millions from E-Rate, only G-d know where the money goes, and the board in that district is cutting all sports, music, art, and many AP classes next school year forever damaging the chances of non-Heredi students to succeed in our society. How much longer will they be able to operate this way with impunity? That is the important question.

You have summarized the debacle in Rockland county. Children in public schools will have to go out into the "secular" world and be productive. how can this happen if they are unprepared?

An excellent three part report on waste, fraud and abuse in Federal programs. Even if the e-rate program problems are swept under the rug, the financial problems of the Federal government are growing by the day. Sooner or later the usual suspects will be blamed.

You are self hating jews.
What do you have against orthodox schools getting money from the government.

USAC themselves say they are following the rules.

You are a self hating jew

Please continue reporting on haredi institutional fraud. Exposure is the only hope. Otherwise their innocent children will continue being exposed to the corrupt world the haredim have created. Save the kids, give them a chance. Report, report, report.

It is an absolute disgrace and Hillul Hashem what is being done in the Charedi communities. How can you study Torah when the money is tainted by thievery? It is theft from the government and from honest citizens when they are being paid from our taxes which are filtered to them for food stamps, medicaid, free cell phones, and free transportation which they are not entitled to since a majority have cash businesses and lie about their earnings. How does one live such a religious dichotomy? Obviously, they cannot believe in Hashem since they do not fear any repercussions.

T-1 services for Bais Ruchel D'Satmar? Fitting for mesibat Purim.
"flagged the schools because the language on their technology plans was very similar". Curious coincidences, this is playing out as a satirical hatsagah, so timely for Purim. But the underlying theme, seems to be, stress on seems, that no one anywhere cares, or has motivation not to care. But what do I know, I just read the paper..
and after the subprime mortgage fiasco, why should anyone get upset about small potatos.
I ponder the fact that at the time of the S AND L disaster, 3500 bankers went to jail, and now? MF Global "appropriating" customer money, and we all know who was involved with that, so why would anyone get upset about some petty cash being misdirected by E-RATE.
i think I've seen this movie before.

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