Prepared Statement of The Honorable Greg Walden

Problems with the E-rate Program: Waste, Fraud, and Abuse Concerns in the Wiring of Our Nation's Schools to the Internet

Subcommittee on Oversight and Investigations
September 22, 2004

Thank you, Mr. Chairman. Today we will continue to explore a critical issue with respect to our oversight of the E-rate program. And that is: how well does the application process ensure that applicants have taken the appropriate steps to choose the most cost-effective E-rate goods and services?

This is a central issue with this program. Weaknesses up front in the application process - be it the planning or the competitive process to choose the goods and services for E-rate support - paves the way either to effective educational enhancements envisioned for the program or to the waste and abuse of limited resources.

Incentives really matter. When a program is designed to provide recipients and applicants access to other people's money, there is a powerful incentive to buy more than is needed. And when tens of millions of dollars are at issue, there is a powerful incentive to spend wastefully.

To prevent such wasteful spending, the program must deploy measures that enhance the incentives that ensure efficient and effective spending for schools and libraries.

At today's hearing we will approach this from several perspectives; we will continue to look at the impact of the NEC-BNS conspiracy we heard testimony about this past July, and the involvement of certain schools in this mess; we will also focus on the planning and decisions by school districts that pursued a procurement method advertised as useful for "maximizing" E-rate funding.

We'll hear today about school districts' obligations to do their homework, so what they ask for can be put to use. I'm interested to learn more from our witnesses about the burdens of planning, and also about the ways to plan properly so districts don't "bite off more than they can chew." I'm interested to learn how we can strengthen the incentives to plan properly. I would like to learn if efforts to improve certifications on the applications are sufficient for this task.

Planning is essential. Also essential is to know the rules and to understand what is necessary for a competitive process to flourish.

We'll hear today about a case where competition did not flourish and where it appears that school districts really did not fully plan out what they needed for the program. The result was tens of millions of dollars of questionable spending in one poor school district. In another school district, the result was an application that asked for more than what the district really needed. (Fortunately, the district took subsequent steps to scale the request back; but I'm not sure that's what normally happens.)

What is the responsibility of the vendor in these situations? Despite a powerful incentive to sell and do business, vendors must play by the E-rate rules as well. Today we'll be able to learn about the responsibilities of vendors in this process and whether the requirements and rules are clear and sufficient to ensure vendors participate appropriately.

One of the foremost issues we must address is accountability. Today we'll hear about accountability from all parties - the school districts, the vendors, and the agency charged with overseeing the program. I think this is a critical hearing for our oversight of this program.

Let me welcome the witnesses. I'd like to thank, especially, the efforts made by Charles Tafoya of El Paso Independent School District, who will join us via video link today. We appreciate his efforts given the last minute complications in his plans to attend the hearing.

Thank you, Mr. Chairman. I'll yield back the remainder of my time.

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