[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
 FCC'S E-RATE PLANS TO ASSIST GULF COAST RECOVERY: ENSURING EFFECTIVE 
                             IMPLEMENTATION

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 6, 2005

                               __________

                           Serial No. 109-54

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                               __________


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_____________________________________________________________________________
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                    ------------------------------  
                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

RALPH M. HALL, Texas                 JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida             Ranking Member
  Vice Chairman                      HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky               SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia             BART GORDON, Tennessee
BARBARA CUBIN, Wyoming               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,       ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman           GENE GREEN, Texas
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  HILDA L. SOLIS, California
LEE TERRY, Nebraska                  CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey            JAY INSLEE, Washington
MIKE ROGERS, Michigan                TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho          MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                      Bud Albright, Staff Director

        David Cavicke, Deputy Staff Director and General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

              Subcommittee on Oversight and Investigations

                    ED WHITFIELD, Kentucky, Chairman

CLIFF STEARNS, Florida               BART STUPAK, Michigan
CHARLES W. ``CHIP'' PICKERING,         Ranking Member
Mississippi                          DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire       JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  JAY INSLEE, Washington
MIKE FERGUSON, New Jersey            TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas            HENRY A. WAXMAN, California
MARSHA BLACKBURN, Tennessee          JOHN D. DINGELL, Michigan,
JOE BARTON, Texas,                     (Ex Officio)
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Feaster, H. Walker, III, Inspector General, Federal 
      Communications Commission..................................     9
    Navin, Thomas J., Chief, Wireline Competition Bureau, Federal 
      Communications Commission..................................     5
    Rawson, Gary, State E-Rate Coordinator, Mississippi 
      Department of Information Technology Services..............    18
    Zaina, Lisa M., Chief Executive Officer, Universal Service 
      Administrative Company.....................................    15

                                 (iii)




 FCC'S E-RATE PLANS TO ASSIST GULF COAST RECOVERY: ENSURING EFFECTIVE 
                             IMPLEMENTATION

                              ----------                              


                       THURSDAY, OCTOBER 6, 2005

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:05 p.m., in 
room 2123 of the Rayburn House Office Building, Hon. Ed 
Whitfield (chairman) presiding.
    Members present: Representatives Whitfield, Pickering, 
Walden, Burgess, Blackburn, Stupak, and Inslee.
    Staff present: Peter Spencer, majority professional staff; 
Tom Fedo, majority counsel; Jaylyn Jensen, majority 
professional staff; Mark Paoletta, chief counsel; Terry Lane, 
deputy communications director; Jonathan Pettibon, clerk; David 
Nelson, minority counsel; and Jessica McNiece, research 
assistant.
    Mr. Whitfield. I will call this meeting to order, and I 
apologize for just a few minutes delay. Mr. Stupak, his plane 
was delayed coming in from Michigan and we are delighted that 
he is here. And I certainly want to welcome all of the 
witnesses today. We appreciate your being here. And I will 
begin the hearing with an opening statement, and then we will 
go to Mr. Stupak, and then we will swear you all in and we will 
go from there.
    First of all, I want to welcome you. Today, the Oversight 
and Investigations Subcommittee will hear about what is, to 
this subcommittee, a familiar program, but a program that is 
about to be tasked to operate in an unfamiliar situation. We 
will find out about the Federal Communications Commission's 
plans for E-rate Program relief to communities devastated by 
Katrina. The goal of this hearing is to understand what 
measures can be taken to assist those most in need, as they 
work to recover from this devastating storm, and to begin to 
determine whether such measures, as currently envisioned, can 
be implemented effectively.
    The effort to supply assistance effectively to Gulf Coast 
entities and families can be equally challenging, especially 
when working in an area with limited records, urgent needs, and 
where the requirement of speed tests many of the established 
safeguards against waste, fraud and abuse. Our responsibility 
as members of the Energy and Commerce Committee is to oversee 
the relevant operations in areas of our jurisdiction, to ensure 
that the necessary assistance gets to where it is supposed to 
go and to make a positive difference.
    A few weeks ago, the FCC's chairman, Kevin Martin, proposed 
a number of measures to assist the Gulf Coast rebuilding 
effort. I applaud Chairman Martin for seeking to come to the 
region's aid. An important piece of this initiative involved 
plans for the E-rate Program, which is the universal service 
funding mechanism that subsidizes telecommunications and 
certain infrastructure in schools and libraries. As Chairman 
Martin outlined, schools and libraries affected by the 
hurricane would receive relief from the program's standard 
rules and requirements to assist in the rebuilding or 
restoration of E-rate covered services.
    We will learn about the status of some of these proposals 
today, and whether the proposed relief is what is needed to 
meet the needs of affected communities as they seek to restore 
schools and libraries. We will also seek to answer some 
important questions surrounding the proposal. For example, what 
effects will Katrina-related changes have on other program 
funding; what new integrity challenges will arise; what 
measures will be necessary to speed funding relief, while 
guarding against the types of waste, fraud and abuse this 
subcommittee identified in hearings over the past year and a 
half?
    With so much funding potentially involved in the Gulf Coast 
relief initiative, the risk for waste, fraud and abuse is 
great. This hearing is to help ensure that support goes to 
those who need it. The FCC and USAC must do its best to guard 
against waste, fraud and abuse. And we all want this effort to 
succeed. Yet to do so, the FCC and USAC must confront the 
weaknesses that exist in the program, and work to ensure its 
integrity under the increased pressure from this Gulf Coast 
relief.
    You know, we are talking about a $2 billion plus program 
each year, and we know from hearings last year that there was 
some concern about some weaknesses in the program and between 
the communication between the FCC and USAC. And without blaming 
anyone, we want to explore ways to improve the program to make 
it its most effective and certainly to explore today how those 
weaknesses may interfere with this initiate established by 
Chairman Martin.
    We are going to hear from several government witnesses who 
will be essential to the success of the initiative. We will 
hear from the FCC, which sets the rules, and from USAC, the 
administrator of the program, which is responsible for 
implementing the program. We will also hear from the FCC 
inspector general, who may help identify program weaknesses. 
And finally, we will hear from the E-rate coordinator for the 
State of Mississippi, Mr. Rawson. And I would like to extend 
appreciation to all of you for appearing today, and I certainly 
appreciate Mr. Navin, Chief of the Wireline Competition Bureau 
at the FCC, for being here today. He has been on the job for 
only 5 months and is currently working, I know, involved in 
approving one of the largest mergers in telecommunications 
history, so we know his time is valuable as well. And I already 
welcomed Mr. Rawson, but we look forward to the testimony of 
all of you today, Mr. Feaster, Ms. Zaina.
    And at this time, I will turn it over the ranking member, 
Mr. Stupak, for the purposes of an opening statement.
    Mr. Stupak. Thank you, Mr. Chairman. I again apologize for 
being a little bit late here this afternoon. But thanks for 
convening this hearing regarding the use of E-rate funds to 
help the schools devastated by Katrina return to Internet 
conductivity as soon as possible. Understand that tomorrow will 
vote to adopt a staff report on the E-rate investigation of the 
past 2 years. Lessons detailed in that report ought to be 
applied as we rebuild the education infrastructure devastated 
by the hurricanes.
    Let us be clear, while the FCC press release touts a $132 
million in E-rate funds as a critical part of the $211 million 
USF contribution to Katrina rebuilding, it is simply a mirage. 
All the FCC is doing is opening the application window in 2005 
and expanding it in 2006, with a broad assumption that all 
schools in the affected counties will be eligible for a 90 
percent Federal contribution. This is important help, but it is 
merely the reprogramming of funds from other schools in the 
country. This policy will simply take money away from schools 
that were counting on the money and planning to implement their 
programs.
    There is no new money in the FCC's plan, even though there 
should be funds available without raising the ratepayer 
contribution. I am afraid this plan is yet another example of 
the Bush Administration shifting funds from one region of the 
country to pay for Katrina relief effort, leaving some of our 
schools empty-handed.
    Mr. Chairman, we need details regarding the available 
funds, the shifting of the funds, and the uses of the funds. 
Yet, today I expect that the invited FCC guests cannot or will 
not comment on the so-called Katrina Relief program because a 
final order has not been implemented. At a minimum, maybe 
Chairman Martin should be testifying today.
    The lessons of fraud, waste and abuse uncovered in this 
subcommittee's investigation over the past 2 years should alert 
us to two situations that cry for an oversight plan from the 
FCC, a plan that I hope will but I am sure we probably won't 
see today. The first involved the lesson of relying too much on 
the assumption that telecommunication companies will always do 
the right thing.
    In the Puerto Rico case, we learned how Puerto Rico 
Telephone charged the schools $1,500 per month for each of 
hundreds of T-1 lines that they knew, or should have known, 
were not being used because the internal connection and related 
infrastructure were not operable. Still, the carrier 
rationalized their billing, that they were not responsible for 
the failure of the schools to actually use the T-1 lines, even 
though they were never hooked up. I hope not a single telephone 
bill for Internet or other services has been delivered to any 
schools devastated by the hurricanes.
    Unless the FCC and USAC are vigilant, we may have 
executives claiming that their companies were prepared to 
provide the services contracted for before the storms, and 
there is no reason why they shouldn't be paid for now, even if 
the school was completely destroyed by the hurricanes. If that 
happens, Mr. Chairman, I hope you will see to it that they make 
that argument in this room with the TV cameras rolling.
    The second class of fraud that should be a particular 
concern while we are expediting connections to the Gulf Coast 
schools is what we called gold plating. In our investigation, 
we should, and apparently in Atlanta, Cisco Systems convinced 
local officials that individual elementary schools needed 
servers large enough and expensive enough to operate some whole 
school districts. In El Paso, IBM spent some $69 million of 
Federal and local funds on extravagant gear and services, with 
no noticeable effect on the education of the school children in 
that city.
    Mr. Chairman, the Atlanta and El Paso situations were 
merely some of the worse examples of this problem that this 
committee investigated, but it was a pervasive problem. The 
same sales persons with the same ethics are undoubtedly already 
plying the latest whiz-bang gadgetry to the school trade in the 
Gulf Coast. They retain the irresistible selling point that 
Uncle Sam, or in this case, maybe Uncle E-rate, will pay for 
most of it, 90 percent. We have seen repeated examples of the 
most outrageous FEMA contracts going to overpriced and under-
qualified companies in the wake of the storms. There appears to 
be nothing in our E-rate record to suggest that the FCC or USAC 
is capable of preventing a repeat of fraud and waste in the 
rebuilding and reconnecting effort. I truly hope that we will 
hear otherwise today.
    With that, Mr. Chairman, I would yield back the balance of 
my time, and thank you.
    Mr. Whitfield. Thank you, Mr. Stupak. And at this time, I 
recognize the gentle lady from Tennessee, Ms. Blackburn, for 
her opening statement.
    Ms. Blackburn. Mr. Chairman, I will waive the statement and 
reserve my time for questions.
    Mr. Whitfield. Okay, thank you. I know you were sorry to 
hear there are no more opening statements for you to listen to, 
but--so at this time, I want to formally introduce our 
witnesses this morning, or this afternoon.
    First of all, Mr. Thomas Navin, who is the chief of the 
Wireline Competition Bureau at the Federal Communications 
Commission. We also have with us the Honorable H. Walker 
Feaster, who is the inspector general of the Federal 
Communications Commission. We have Ms. Lisa Zaina, who is the 
chief executive officer of the Universal Service Administrative 
Company, and she is accompanied by Mr. Mel Blackwell, who is 
the acting vice president of the Schools and Libraries Division 
at USAC. And then our final witness is Mr. Gary Rawson, who is 
the State E-rate coordinator from the Mississippi Department of 
Information Technology Services.
    As you all probably know, this is an Oversight and 
Investigation's hearing, and it is our custom, when holding an 
investigative hearing, to ask that witnesses testify under 
oath. Do any of you have any objection to testifying under 
oath?
    The Chair would also advise you that under the rules of the 
House and the rules of the committee, you are entitled to be 
advised by counsel. Do any of you desire to be advised by 
counsel during your testimony today?
    In that case, if you would please rise and raise your right 
hand, I will swear you in.
    [Witnesses sworn.]
    Thank you. You are now under oath, and we will start with 
you, Mr. Navin. You may give a 5-minute summary of your written 
statement. Be sure and turn your microphone if it is not.

   TESTIMONY OF THOMAS J. NAVIN, CHIEF, WIRELINE COMPETITION 
 BUREAU, FEDERAL COMMUNICATIONS COMMISSION; H. WALKER FEASTER 
III, INSPECTOR GENERAL, FEDERAL COMMUNICATIONS COMMISSION; LISA 
     M. ZAINA, CHIEF EXECUTIVE OFFICER, UNIVERSAL SERVICE 
     ADMINISTRATIVE COMPANY; AND GARY RAWSON, STATE E-RATE 
 COORDINATOR, MISSISSIPPI DEPARTMENT OF INFORMATION TECHNOLOGY 
                            SERVICES

    Mr. Navin. Thank you, Mr. Chairman and distinguished 
members of the subcommittee. Again, my name is Tom Navin, and I 
have served as the chief of the Federal Communications 
Commission's Wireline Competition Bureau since the beginning of 
May 2005. I thank you for this opportunity to appear before you 
to discuss our plans to use the Universal Service Fund E-rate 
Program to assist in Hurricane Katrina recovery.
    Hurricane Katrina caused catastrophic damage and massive 
flooding in areas of Louisiana, Mississippi, and Alabama. The 
loss of life and damage to property is astounding, and our 
thoughts and prayers go out to those people affected by this 
disaster. AS I am sure that you are aware, most of the 
communications industry sustained substantial damage to their 
facilities in the affected areas, and the damage has had a 
significant impact on consumers in those areas.
    Hurricane Katrina knocked out more than 3 million customer 
phone lines in the Louisiana, Mississippi, and Alabama. The 
wireline telecommunications network sustained enormous damage 
both to the switching centers that route calls and to the lines 
used to connect buildings and customers to the network.
    The work to restore communications services began almost 
immediately. Despite the significant obstacles, like continued 
flooding, lack of commercial power, dwindling fuel resources, 
and security concerns, the companies in the region have made 
meaningful progress to restore service in the disaster area. 
Even with these efforts, given the enormity of the disaster, 
many of the communication services in the affected areas remain 
damaged. Today, we understand that more than 200,000 customer 
lines remain out of service. More than 500 DS-3's worth of 
interoffice facilities remain down. Although many cell sites 
have been restored, hundreds are still not operational in the 
affected area. More than 50 radio and television stations 
remain off the air.
    On August 30, Chairman Martin established an internal task 
force consisting of senior executives in management from within 
the commission. The task force activity centered around three 
major goals: first, regulatory relief for industries; second, 
industry outreach and coordination with other Federal agencies; 
and third, assistance to consumers and evacuees. The task force 
has been working on these assignments continuously since August 
30th, and the commission was open throughout the Labor Day 
weekend, as well as the past several weekends. To date, 
hundreds of commission employees have assisted in this effort.
    On September 15, 2005, Chairman Martin announced his 
intention to propose to the other members of the commission 
action intended to address the damage caused by Hurricane 
Katrina. To enhance the commission's planning and response 
efforts for times of crisis, Chairman Martin announced his 
intention to propose a new Public Safety/Homeland Security 
Bureau to consolidate the public safety, Homeland Security, and 
disaster management functions currently housed in multiple 
bureaus and offices throughout the commission. Chairman Martin 
also announced his intention to establish an independent panel 
to review and improve the disaster preparedness of the agency. 
Chairman Martin also announced his intention to establish an 
independent panel to review the impact of Hurricane Katrina, 
and to make recommendations on ways to improve disaster 
preparedness, public safety operations, and network 
reliability.
    To provide immediate relief to the Hurricane Katrina 
disaster areas and to the disaster victims, Chairman Martin 
proposed to work through the existing USF programs to target 
approximately $211 million in universal service support to 
consumers, schools, libraries, health care providers, and 
telecommunication service providers affected by Hurricane 
Katrina. Chairman Martin proposed to work through the existing 
low-income, rural health care E-rate and high-cost universal 
service programs to make this temporary support available.
    Chairman Martin proposed to use the E-rate Program to help 
reconnect schools and libraries throughout the region. This 
would consist of three measures. First, we would open a new 
funding year for 2005, for the 2005 window, for schools and 
libraries damaged by the hurricane. This action would allow the 
approximately 600 schools and libraries damaged by the 
hurricane, and in need of funds for this funding year, to 
revise their requests for support in light of the dramatically 
changed circumstances caused by the hurricane. Second, we would 
treat schools and libraries struck by the hurricane at the 
highest level of priority, 90 percent, for the funding years of 
2005 and 2006. And finally, we would also allow schools and 
libraries serving evacuees to amend their 2005 applications to 
account for the unexpected increase in population. We estimate 
that these E-rate measures could provide approximately $132 
million to schools and libraries in the disaster areas that 
were damaged by Hurricane Katrina.
    We are committed to making sure that these USF monies are 
used well and that program is protected from potential waste, 
fraud and abuse. For that reason, applicants for this temporary 
support, including the E-rate supported noted earlier, would 
have to comply with all existing program requirements. This 
includes, for example, competitive bidding requirements, 
certification requirements, document retention requirements, 
strengthened technology plan requirements, and potential audit 
requirements. The existing program's application processes and 
procedures, including the Universal Service Administrative 
Company's program integrity assurance review procedures and 
selected review procedures, which subject applications for E-
rate monies through heightened scrutiny, will continue to apply 
to applicants for the Hurricane Katrina-specific support. All 
other safeguards established in the program will continue to 
apply, including the E-rate Program's existing $2.25 billion 
annual funding cap.
    Finally, we are examining potential additional safeguards 
for the Hurricane Katrina initiatives. These include relying 
the Federal Emergency Management Agency determinations, that 
households are eligible for disaster assistance, or that a 
school or library is located in the disaster-struck county. We 
also are considering additional audit and certification 
requirements as part of this temporary package.
    The damage wrought by Hurricane Katrina is tremendous and 
its effects will be felt for months and possibly years to come. 
The commission stands ready to work with Congress, our 
colleagues at the Federal, State, and local agencies, and the 
American public to do whatever we can to help the disaster 
relief and restoration efforts.
    I would be pleased to respond to your questions. Thank you.
    [The prepared statement of Thomas J. Navin follows:]

  Prepared Statement of Thomas J. Navin, Chief, Wireline Competition 
               Bureau, Federal Communications Commission

    Good morning Mr. Chairman and distinguished members of the 
Subcommittee. My name is Thomas Navin and I have served as the Chief of 
the Federal Communications Commission's Wireline Competition Bureau 
since the beginning of May 2005. Thank you for this opportunity to 
appear before you to discuss our plans to use the Universal Service 
Fund (USF) E-rate Program to assist in Hurricane Katrina recovery.

                               BACKGROUND

    Hurricane Katrina caused catastrophic damage and massive flooding 
in areas of Louisiana, Mississippi, and Alabama. The loss of life and 
damage to property is astounding, and our thoughts and prayers go out 
to those people affected by this disaster. As I am sure you are aware, 
most of the communications industry sustained tremendous damage to 
their facilities in the affected area, and the damage has had a 
significant impact. The damage to the communications infrastructure 
hampered the rescue operations of emergency responders. Relief efforts 
and survivors are still struggling with the effects of the hurricane. 
Survivors lack information about relief efforts. People displaced from 
their homes do not have the means to contact their loved ones to let 
them know they are safe. And of course, survivors remaining in the 
affected area lack a reliable means of contacting the authorities and 
getting help in lifethreatening situations.
    Hurricane Katrina knocked out more than 3 million customer phone 
lines in the Louisiana, Mississippi, and Alabama area. The wireline 
telecommunications network sustained enormous damage both to the 
switching centers that route calls and to the lines used to connect 
buildings and customers to the network. Local wireless networks also 
sustained considerable damage--more than a thousand cell sites were 
knocked out of service by the hurricane. During this disaster, millions 
of telephone calls were simply not able to get through. Of the 41 
broadcast radio stations located in New Orleans and the surrounding 
area, only two AM and two FM stations remained on the air in the wake 
of the hurricane.
    The work to restore communications services began almost 
immediately. Despite the significant obstacles like continued flooding, 
lack of commercial power, dwindling fuel resources, and security 
concerns, the companies in the region have made meaningful progress to 
restore service in the disaster area. Even with these efforts, given 
the enormity of the disaster, many of the communications services in 
the affected areas remain damaged. Today, we understand that more than 
200,000 customer lines remain out of service. More than 500 DS-3 
interoffice facilities remain down. Although many cell sites have been 
restored, hundreds are still not operational in the affected area. More 
than 50 radio and television stations remain off the air.

                           COMMISSION ACTIONS

    On August 30th, Chairman Martin established an internal Task Force 
consisting of senior executives and management from within the 
Commission. The Task Force's activities centered around three major 
goals: (1) Regulatory Relief for Industries; (2) Industry Outreach and 
Coordination with Other Federal Agencies; and (3) Assistance to 
Consumers and Evacuees. The Task Force has been working on these 
assignments continuously since August 30th, and the Commission was open 
throughout the Labor Day weekend to continue the work. To date, 
hundreds of Commission employees have assisted in this effort.
    On September 15, 2005, Chairman Martin announced his intention to 
propose to the other members of the Commission action intended to 
address the damage caused by Hurricane Katrina. To enhance the 
Commission's planning and response efforts for times of crisis, 
Chairman Martin announced his intention to propose a new Public Safety/
Homeland Security Bureau to consolidate the public safety, homeland 
security, and disaster management functions currently housed in 
multiple bureaus and offices throughout the Commission. Chairman Martin 
also announced his intention to establish an independent panel to 
review the impact of Hurricane Katrina and to make recommendations on 
ways to improve disaster preparedness, public safety operations, and 
network reliability. To provide immediate relief to the Hurricane 
Katrina disaster area and victims, Chairman Martin proposed to work 
through the existing USF programs to target approximately $211 million 
in USF support to consumers, schools, libraries, healthcare providers, 
and service providers affected by Hurricane Katrina.
    Chairman Martin proposed to work through the existing Low Income, 
Rural Healthcare, E-rate, and High Cost USF programs to make this 
temporary support available. We estimate that approximately $79 million 
would be made available through the Low Income and Rural Healthcare 
programs to help the disaster area. Waivers, clarifications, and 
temporary modifications of the Commission's Low Income rules could be 
made to authorize support for a package consisting of at least 300 
minutes of wireless service and a handset. Similar waivers of existing 
Low Income program rules could provide support to help people who have 
been cut off from telephone service to reestablish service. Our 
proposal would provide public and non-profit healthcare providers a new 
opportunity to apply for increased discounts for advanced 
telecommunications and information services used in telemedicine 
applications to treat victims of Hurricane Katrina.
    Chairman Martin also proposed to allow high cost carriers 
participating in the High Cost Program to prioritize rebuilding 
facilities damaged by the hurricane. This initiative would allow 
telephone companies greater flexibility to use USF support for 
rebuilding wire centers affected by the hurricane.
    Finally, Chairman Martin proposed to use the E-rate Program to help 
reconnect schools and libraries throughout the region. This would 
consist of three measures. First, we would open a new Funding Year 2005 
filing window for schools and libraries damaged by the hurricane. This 
action would allow the approximately 600 schools and libraries damaged 
by the hurricane and in need of funds for this Funding Year to revise 
their requests for support in light of the dramatically-changed 
circumstances caused by Hurricane Katrina. Second, we would treat 
schools and libraries struck by the hurricane at the highest level of 
priority (90%) for Funding Years 2005 and 2006. Finally, we would also 
allow schools and libraries serving evacuees to amend their Funding 
Year 2005 applications to account for the unexpected increase in 
population. We estimate that these E-rate measures could provide 
approximately $132 million to schools and libraries in the disaster 
areas that were damaged by Hurricane Katrina.
    We are committed to making sure that these USF monies are used well 
and that the program is protected from potential waste, fraud, and 
abuse. For that reason, applicants for this temporary support, 
including the E-rate support noted above, would have to comply with all 
existing program requirements. This includes, for example, competitive 
bidding requirements, certification requirements, document retention 
requirements, strengthened technology plan requirements, and potential 
audit requirements. The existing program's application processes and 
procedures--including the Universal Service Administrative Company's 
(USAC's) Program Integrity Assurance review procedures and selective 
review procedures, which subject applications for E-rate monies through 
heightened scrutiny--will continue to apply to applicants for the 
Hurricane Katrina-specific support. All other safeguards established in 
the program will continue to apply, including the E-rate program's 
existing $2.25 billion annual funding cap. Finally, we are examining 
potential additional safeguards for the Hurricane Katrina initiatives. 
These include relying on Federal Emergency Management Agency (FEMA) 
determinations that households are eligible for disaster assistance or 
that a school or library is located in a disasterstruck county. We also 
are considering additional audit and certification requirements.

                               CONCLUSION

    The damage wrought by Hurricane Katrina is tremendous and its 
effects will be felt for months and possibly years to come. The 
Commission stands ready to work with Congress, our colleagues at 
federal, state, and local agencies, and the American public to do 
whatever we can to help with the disaster relief and restoration 
efforts. I would be pleased to respond to your questions.

    Mr. Whitfield. Thank you very much. Mr. Feaster, you are 
recognized for 5 minutes.

               TESTIMONY OF H. WALKER FEASTER III

    Mr. Feaster. Mr. Chairman and members of the subcommittee, 
I appreciate the opportunity to come before you today to 
discuss the FCC's plans for participation in Hurricane 
Katrina's rebuilding activities, and our plans to provide 
oversight for these activities. I applaud the commission's 
efforts to be a positive force in the post-Katrina recovery, 
and I am supportive of all the agency can do to assist. 
However, I am mindful that, in my role as inspector general, I 
am responsible for ensuring that these relief efforts do not 
present unacceptable risks to the agency and the taxpayers' 
dollars. I would like to discuss my plans for oversight of the 
Katrina-related efforts.
    The FCC's financial contribution to the recovery is via the 
USF. My concerns about the USF, and in particular, the E-rate 
Program, have been the subject of numerous discussions with 
agency management, several audit reports and semiannual reports 
issued by my office, and previous testimony before this 
committee. I will discuss concerns we have had about this 
program, that they may generate higher audit risk associated 
with the hurricane recovery efforts. Due to the materiality and 
assessment of audit risk, we have focused much of our attention 
on USF mechanisms for funding telecommunications and 
information systems for schools and libraries, known as the 
Schools and Libraries Program, or E-rate.
    The audits and investigations performed to date indicate a 
high-level risk for misuse of funds in the E-rate Program. We 
have had specific concerns about these E-rate--about the E-rate 
Program that will have a direct impact to disaster assistance 
funding. These include but are not--excuse me. These include 
but are not limited to a lack of clarity in the program's rules 
being a catalyst for both inadvertent errors and deliberate 
waste and fraud and abuse and weaknesses in the competitive 
procurement requirements that use E-rate goods and--used to 
purchase E-rate goods and services.
    I am concerned that the programmatic weaknesses that we 
have found will be compounded by the confusion of overworked 
school and library administrators trying to rebuild shattered 
information systems under less than ideal circumstances. 
Additionally, I fear these rules, waivers, or exemptions will 
be taken advantage of by unscrupulous E-rate service provides 
that Federal criminal investigations have turned up time and 
time again.
    Our most significant effort to date to implement our E-rate 
oversight program has been our ongoing work to establish a 
three-way contract under which the OIG and USAC can obtain 
audit resources to conduct USF audits. The project has been 
delayed, but the chairman has recently expressed support for 
this three-way agreement, and we are hopeful that the contract 
will move forward in the very near future. In the interim, we 
are working with USAC Internal Audit Department and a public 
accounting firm under contract to USAC to conduct audits of E-
rate beneficiaries.
    Because we have focused our limited resources on E-rate, we 
have not been able to devote a great deal of attention other 
USF mechanisms. The other large USF program is the High Cost 
Program. At present, we are assessing risk in the High Cost 
Program in anticipation of being able to institute an audit 
program in the near future.
    The proposed low-income disaster relief is very 
interesting, in that it seems to represent an entirely new use 
for the fund. To the best of my knowledge, the support 
mechanism has not been used in the past to provide wireless 
handsets and free minutes of service in the past. We will 
include an audit in our fiscal year 2006 audit plan to 
determine how eligibility for this help is determined and 
verified, and measures the commission has taken to ensure that 
the products delivered are in the hands of the people who need 
the help.
    The Office of Inspector General has been and remains 
committed to meeting our responsibility for providing effective 
independent oversight in the USF. My office will dedicate as 
much of our resources as possible to ensure that the extra 
measure of support provided by the commission is utilized in a 
manner that best benefits the people whose lives have been so 
horribly uprooted by Hurricane Katrina.
    Thank you. I will be happy to answer any questions.
    [The prepared statement of H. Walker Feaster III follows:]

Prepared Statement of H. Walker Feaster III, Inspector General, Federal 
                       Communications Commission

    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to come before you today to discuss the FCC's plans for 
participation in Hurricane Katrina rebuilding activities and our plans 
to provide oversight of these activities. Last week I participated in a 
panel before this subcommittee, in which we discussed plans of several 
Inspectors General for providing oversight of their agencies Katrina 
related efforts. Today I will expand on some of the topics touched upon 
in my testimony from that date, and provide additional information on 
my Office's plans for oversight of the FCC's assistance in rebuilding 
in the wake of Hurricanes Katrina and Rita. Since the majority of the 
actual funds used by the FCC in the recovery efforts will come from the 
Universal Service Fund (USF), I will place emphasis on the plans to use 
the USF, and particularly the E-rate fund, in the rebuilding efforts.

            FCC USE OF THE USF IN KATRINA REBUILDING SUPPORT

    The Commission took the unprecedented step of holding an Open 
Meeting in Atlanta, Georgia on September 15, 2005. At this meeting, the 
Commission announced that it would use $211 million of funds from the 
USF to assist recovery efforts in the disaster area. The FCC will use 
the four existing support mechanisms of the USF to provide this 
assistance, as follows:

 The Low Income program will be used to provide evacuees and persons 
        in the affected areas still without telephone service wireless 
        handsets and a package of 300 minutes. This fund will also be 
        used to provide support for reconnecting consumers as the area 
        is rebuilt. The FCC has estimated this will amount to $51 
        million of Low Income support.
 The Rural Health Care program will allow public and for-profit health 
        care providers to apply for assistance with the cost of 
        telecommunications services under relaxed participation 
        requirements. The FCC has estimated this will amount to $28 
        million of Rural Health Care support.
 The Schools and Libraries program (or E-rate) will be used to 
        reconnect schools and libraries in the affected areas to 
        telecommunication and network services. Using a variety of 
        program rule waivers, the FCC will be able to authorize an 
        estimated amount estimated of $132 million in E-rate funds for 
        the 600 schools and libraries hit by the hurricane.
 The High Cost program will allow greater flexibility for telephone 
        carriers to use high cost funds to prioritize facilities 
        affected by Katrina.
    On September 21, 2005 the Commission issued an Order that provides 
some details on how this support will be facilitated. In this Order, 
numerous filings for various forms and information under the USF 
support mechanisms were postponed for a period of up to 150 days, 
including:

 For the E-rate program, responses to information requests from the 
        Universal Service Administrative Company (USAC) relating to 
        funding applications, formal requests for extensions of service 
        delivery deadlines and service substitutions, and filings 
        related to actions seeking recovery of funds disbursed in 
        violation of program rules.
 For the Low Income Program, numerous filings that provide information 
        related to the calculation and receipt of funding.
 Filings that support carrier contributions to the USF.
    These temporary waivers are in effect from August 29, 2005 to 
January 26, 2006. In addition, the Commission has waived recordkeeping 
requirements pertaining to those entities in the Katrina affected 
areas.
    The Commission has also stated that they will distribute additional 
funds in the hurricane affected areas by setting all schools and 
libraries in the disaster area at the 90% level of support, which is 
the highest level of support available under the program, in FY 2006. 
They will open a new 2005 funding window for schools and libraries in 
the affected areas to request new or additional support, and they will 
allow schools and libraries serving evacuees to amend their 2005 
funding to account for increased student populations.
    The Commission is currently drafting additional regulatory relief 
that will be needed to implement aspects of the Commission's plans. My 
Office has been requested to review and provide comment on the proposed 
actions.

                  OTHER REBUILDING SUPPORT BY THE FCC

    The Commission has also announced the creation of a new Bureau--the 
Public Safety/Homeland Security Bureau. This Bureau will be comprised 
of existing functions currently in other FCC bureaus and offices and 
will have responsibility for the FCC's public safety, national 
security, disaster management programs.
    Additionally, the Commission has undertaken several actions that 
allow the telecommunications industry regulatory flexibility in 
rebuilding efforts. Through the issuance of temporary rule waivers and 
special temporary authorities, the FCC is assisting in re-establishing 
emergency communications, providing assistance and relief to television 
and radio stations in getting back on the air, extending regulatory fee 
payments, extending filing due dates for licensees, and performing a 
host of activities to contribute to the recovery efforts. The FCC is 
coordinating with the Federal Emergency Management Agency and the 
National Communications System, as well as state and local governments 
and organizations to communicate the FCC's flexibility in eligibility 
standards and processes to aid in the Hurricane Katrina relief efforts.

          AUDIT OVERSIGHT OF THE FCC'S KATRINA-RELATED EFFORTS

    I applaud the Commission's efforts to be a positive force in the 
post-Katrina recovery, and I am supportive of all that this agency can 
do to assist. However, I am mindful that in my role as Inspector 
General, I am responsible for ensuring that these relief efforts do not 
present unacceptable risks to the agency and the taxpayer's dollar. I 
would like to discuss my plans for oversight of the FCC's Katrina-
related efforts.
    The myriad of rule waivers and special temporary authorities the 
Commission is granting for such areas as the resumption of radio and 
television broadcasting and regulatory licensing has only a small 
impact on audits conducted by my office. I have received estimates from 
agency management that indicate that efforts related to disaster 
recovery will cost approximately $400 thousand in appropriated funding 
for personnel costs and contracted efforts. The Commission does not 
anticipate requesting additional budgetary resources for disaster 
recovery efforts.
    Our primary audit role in these functions is to ensure that 
adequate internal controls are in place and operating effectively to 
ensure regulatory compliance and that financial cost accumulation and 
reporting is current, accurate and complete. While the reorganization 
and formulation of a new bureau carries a higher level of risk, our 
concerns are the same--are the financial and operational controls in 
place to ensure that the agency's programs and functions are operating 
in an effective and efficient manner and in compliance with applicable 
laws and regulations. My financial statement audits for FY 2005 and 
2006 are the best tools I have available to make this assessment. My 
staff is coordinating with our contracted independent public auditors 
to ensure that testing under our financial statement audit will address 
any concerns.
    One area of relief that impacts an area of audit concern for my 
Office is the extension of filing deadlines for payment of annual 
regulatory fees. The Commission has provided regulatees in the affected 
areas an extended deadline for the payment of regulatory fees. My 
Office currently has in progress an audit of regulatory fee collections 
and we will incorporate additional tests into this audit to ensure 
compliance with the deadline extension granted by the Commission. 
Additionally, we are considering adding a review of the Emergency Alert 
System to our FY 2006 Audit Plan to determine of it operated as 
effectively as possible during the hurricane event.

                OIG OVERSIGHT OF THE USF KATRINA FUNDING

    The FCC's financial contribution to the recovery is via the USF. My 
concerns about the USF, and in particular the E-rate program, have been 
the subject of numerous discussions with agency management, and several 
audit reports and semiannual reports issued by my Office. We have 
testified before this Subcommittee on three occasions, as well as other 
House and Senate committees, about concerns regarding the E-rate 
program. I will summarize the four parts of the USF and our efforts to 
provide oversight of the fund. In this discussion, I will focus on how 
concerns we have had about this program may generate higher audit risks 
associated with the hurricane recovery efforts.
    Due to materiality and our assessment of audit risk, we have 
focused much of our attention on the USF mechanism for funding 
telecommunications and information services for schools and libraries, 
also known as the ``Schools and Libraries Program'' or the ``E-rate'' 
program. The E-rate program has expended $10 billion since its 
inception in 1998. Our involvement in E-rate audits and investigations 
has highlighted numerous concerns with this program.
    Our E-rate oversight program is designed around two corollary and 
complementary efforts. First, we would conduct audits on a statistical 
sample of beneficiaries large enough to allow us to derive inferences 
regarding beneficiary compliance at the program level. Second, we would 
establish a process for vigorously investigating allegations of fraud, 
waste, and abuse in the program.
    The primary obstacle to our implementation of effective and 
independent oversight of the E-rate program has been a lack of adequate 
resources to conduct audits and provide audit support to 
investigations. Despite limited resources, the OIG has implemented an 
aggressive independent oversight program. My oversight program 
includes: (1) audits conducted using internal resources; (2) audits 
conducted by other federal Offices of Inspector General under 
reimbursable agreements; (3) review of audit work conducted by USAC; 
and (4) active participation in federal investigations of E-rate 
fraud.1To date One-hundred and fifty-eight (158) audits have been 
completed by the OIG, USAC internal auditors, or USAC contract auditors 
in which the auditors have reached a conclusion about beneficiary 
compliance. Of the 158 audits, auditors determined that beneficiary 
were not compliance in 34% of the reports issued. Recommended fund 
recoveries for those audits where problems were identified total nearly 
$18 million. Additionally, we are providing audit support to 26 
investigations into E-rate fraud allegations and monitoring another 13 
investigations. There have been successful criminal prosecutions for E-
rate fraud and settlement recoveries in excess of $30 million.
    The audits and investigation performed to date indicate a high 
level of risk for misused funds in the E-rate program. We have specific 
concerns about the E-rate program that will have a direct impact the 
disaster assistance funding, and I would like to highlight some of 
these issues.
    For example, we have cited a lack of clarity in the program's rules 
as being a catalyst for both inadvertent errors and deliberate fraud, 
waste and abuse. We believe that it is critical that participants in 
the E-rate program have a clear understanding of the rules governing 
the program and the consequences that exist if they fail to comply with 
those rules. In circumstances under which additional rule waivers are 
laid on top of existing ambiguities, the potential for either 
accidental or intentional noncompliance with the rules and abuse of the 
Fund is dramatically increased.
    We believe that it is possible under the current structure that 
applicants may not have a clear understanding of program rules. We are 
concerned that the Commission has not determined the consequences of 
beneficiary non-compliance in many cases and that, in those instances 
where the Commission has addressed the issue of consequences for non-
compliance, the consequences associated with clear violations of 
program rules do not appear to be consistent. In some cases, USAC has 
implemented numerous policies and procedures to administer the E-rate 
program that the Commission has not adopted these USAC operating 
procedures and therefore, there is no legal basis for recovery of funds 
when applicants fail to comply with these procedures. To further 
complicate matters, we have been advised that, in some cases, USAC may 
have exceeded their authority in establishing program requirements.
    We have also described weaknesses in the competitive procurement 
requirements used to purchase E-rate goods and services and the 
ineffective use of purchased goods and services. Program rules require 
that applicants use a competitive procurement process to select 
vendors, to preclude instances where prices charged to schools and 
libraries are needlessly high and the Fund is unable to provide support 
to eligible schools and libraries.
    Although the programs competitive bidding requirements were 
intended to ensure that schools and libraries are informed about all of 
the choices available to them, we have observed numerous instances in 
which beneficiaries are not following the program's competitive bidding 
requirements or are not able to demonstrate that competitive bidding 
requirements are being followed. We question whether the rules are 
adequate to ensure a competitive process is followed. In addition, weak 
recordkeeping requirements to support the procurement process, as well 
as other aspects of the E-rate application, offer little protection to 
the program.
    Since our involvement in this program, I have become increasingly 
concerned about efforts to resolve audit findings and to recover funds 
resulting from E-rate beneficiary audits. It has been our observation 
that audit findings are not being resolved in a timely manner and that, 
as a result, actions to recover inappropriately disbursed funds are not 
being taken in a timely manner. While it appears this situation may be 
slightly improved in the past year or so, I remain concerned about the 
Commission's support to resolving audit findings. In September 2004, I 
issued three draft reports on E-rate compliance at private schools in 
the Virgin Islands. The Commission did not provide timely responses to 
these drafts, and in fact, never formally responded to these draft 
reports. On August 18, 2005, I issued these reports in final without 
agency comments. Given the planned increase in the number of E-rate 
audit reports over the next several weeks and months, I have strong 
concerns at the Commission's ability to provide comment on draft 
reports and resolve audit findings.
    Site visits are conducted during most E-rate beneficiary audits. 
Site visits are conducted for several reasons including to evaluate the 
eligibility of facilities where equipment is installed, to verify that 
equipment is installed and operational, and to verify that equipment is 
being used for its intended purpose. Examples of concerns identified 
during audits and investigations are as follows:

 Goods and services not being provided.
 Unauthorized substitution of goods and services.
 Goods and services being provided to ineligible facilities (e.g., 
        non-instructional building including dormitories, cafeterias, 
        and administrative facilities).
 Equipment not being installed or not operational. Program rules 
        require that nonrecurring services be installed by a specified 
        date. However, there is no specific FCC rule requiring 
        beneficiaries to use equipment in a particular way, or for a 
        specified period of time, or to full efficiency. Commission 
        staff have provided guidance stating that if the equipment was 
        uninstalled (i.e., still in a box) that would represent a rule 
        violation. However, Commission staff has also provided guidance 
        stating that the rules do not require that beneficiaries 
        effectively utilize the services provided or that the 
        beneficiaries maintain continuous network or Internet 
        connectivity once internal connections are installed.
    In addition to the concerns listed above, we have on-going concerns 
regarding the program's over reliance on self-certification by 
participants, weaknesses in technology planning, discount calculations 
and beneficiary payment of their share of the costs. I am concerned 
that the kinds of programmatic weaknesses I have described will be 
compounded by the confusion of overworked school and library 
administrators trying to rebuild shattered information systems under 
less than ideal circumstances in the hurricane affected areas.
    Additionally, I fear these rule waivers or exemptions will be taken 
advantage of by unscrupulous E-rate service providers that federal 
criminal investigations have turned up time and again. Since the 
inception of the E-rate program in 1998, over $184 million has been 
expended in Louisiana, and over $79 million in New Orleans alone. As 
well as E-rate funds, the High Cost program has expended $555 million 
in the state of Louisiana since 1998. Rebuilding the shattered 
infrastructure is critical. The financial needs will be huge and the 
risk of misspent funds must be taken into account. This level of 
funding will certainly attract the less honest service providers to the 
area who might hope to take advantage of the additional funds being 
expended under relaxed rules.
    I have mentioned the lack of resources my Office has struggled with 
in our work to provide effective and independent oversight of the E-
rate program, as well as the other USF support programs. We have 
requested appropriated funds in our last three budget requests to 
Congress and have been supportive of efforts to provide the Commission 
with access to the USF for oversight funding. In addition, we are 
working with USAC Internal Audit department (IAD) and a public 
accounting firm under contract to USAC to conduct audits of One-hundred 
(100) E-rate beneficiaries. This project was initiated in August 2004 
and is expected to be completed in FY 2006.
    The round of 100 audits is being conducted under a relationship 
with USAC and the public auditors that could be described as semi-
formal, at best. OIG is not a party to the contract between USAC and 
the contracted auditors and our participation is documented only in the 
engagement letter. We believe that our participation in this process 
would be enhanced by a more formal partnership between the Commission, 
USAC and the contracted auditors.
    Our most significant effort to date to implement our E-rate 
oversight program has been our on-going work to establish a three-way 
contract under which the OIG and USAC can obtain audit resources to 
conduct USF audits. Under this contract, we intend to conduct the body 
of audits necessary to assess fraud, waste, and abuse at the program 
level by conducting a statistically valid sample of audits for each of 
the four USF funding mechanisms. An additional objective is to identify 
improper payments as defined by the Office of Management and Budget to 
estimate error rates for the Improper Payments Improvement Act of 2002 
(IPIA). Unfortunately, this project has been delayed. A Request for 
Proposal for this contract was issued in November 2004. The proposal 
evaluation process was completed, a contractor was selected and USAC 
submitted the proposed contract for Commission approval in April 2005. 
The proposed contract was held up in the transition between the former 
FCC Chairman and Chairman Martin, as the Chairman wanted to give this 
procurement detailed review prior to approval. Recently, we were 
provided a memorandum that lists concerns that the FCC Office of 
General Counsel has regarding the contractor selection process. Given 
the issues raised by the General Counsel, I have agreed, along with the 
Managing Director of the FCC, the Chief of the Wireline Competition 
Bureau and the General Counsel, that recompeting this contract is 
necessary to protect the interests of the fund and the integrity of the 
procurement process. The Chairman has recently expressed support for 
this three-way agreement and we believe that the contract will move 
forward in the very near future.
    USAC is contemplating further audits to meet their oversight 
responsibilities, and we may be invited to participate in the same 
manner as we are in the current round of 100 audits. While this 
arrangement is less than ideal, it does allow for E-rate compliance 
audits to continue. Our auditors will incorporate appropriate steps in 
the audit work programs currently in use to ensure the Katrina rule 
waivers are considered in audit planning and fieldwork. We will 
continue to work in close coordination with USAC internal auditors, 
independent auditors under contract to USAC, and other federal auditors 
conducting E-rate audits under interagency memoranda of understanding. 
We will ensure that the special risks that the FCC's proposed rules 
bring are addressed in the conduct of future audits.
    However, the current working relationship we have with USAC IAD and 
the three-way contract are both solutions that could be described as 
second best. As we have stated previously, limited resources have 
precluded our ability to implement our planned oversight of the USF. 
Our preferred method of providing oversight of the USF program is for 
OIG to have direct access to the Fund for our use in implementing an 
independent oversight program. Any oversight program of the magnitude 
encompassed by the three-way agreement presents management challenges 
for our office. The audit supervision and quality assurance necessary 
for an audit program of this size is a major effort, and I do not have 
adequate staff to perform this work. I have requested funds in my 2006 
and 2007 budget requests for additional staff and contract resources to 
assist in the management of this audit program; however, I would 
reiterate my support for enabling OIG to use the USF as the source of 
funds for this work.
    Because we have focused our limited resources on the E-rate 
program, we have not been able to devote a great deal of attention to 
the other USF mechanisms. The other large USF program is the High Cost 
program. This program provides support to telecommunication carriers to 
ensure that consumers in all regions of the United States have access 
to and pay rates for telecommunications services that are reasonably 
comparable to those services provided and rates paid in urban areas. 
This program has averaged over $2.5 billion in annual expenditures and 
my office is aware that we need to expand our oversight in this area. 
However, we have not had the resources to establish an effective 
oversight program. In the breakdown of the $211 million of Katrina 
relief there does not appear to be additional funds contemplated for 
High Cost and I believe that the primary effect of the Katrina support 
will be the redistribution of existing support. At the present, we are 
assessing risks in the High Cost program in anticipation of being able 
to institute an audit program in the future and will ensure our plans 
address any considerations brought by the Katrina relief.
    The proposed Low Income disaster relief is very interesting, in 
that it seems to represent an entirely new use of this Fund. The Low 
Income program assists eligible low-income consumers to establish and 
maintain telephone service by discounting services provided by local 
telephone companies. The USF reimburses the telephone companies for the 
discounts under the Low Income program. This program provided $759 
million in support in 2004 and is considered to be of lower audit risk 
than the E-rate or High Cost programs. To the best of my knowledge, 
this support mechanism has not been used to provide wireless handsets 
and free minutes of service in the past. We will include an audit in 
our FY 2006 Audit Plan to determine how eligibility for this help is 
determined and verified and measures the Commission has taken to ensure 
the products provided are in the hands of the people who need the help.
    The Rural Health Care program is the smallest USF program, having 
disbursed $38 million since 1999. The FCC's proposed $28 million of 
disaster assistance to emergency health care providers in the affected 
region will represent a dramatic increase in Rural Health Care 
expenditures. This is being accomplished by increasing the discount 
rate, which is the portion of costs covered by the support mechanism to 
50% for qualified providers in the affected areas and for health care 
providers providing assistance to disaster victims nationwide. 
Additionally, the FCC will allow health care providers to file new or 
amended applications for funds in the current year. We are still 
assessing the requirement for oversight represented by the additional 
disaster relief funds.

                               CONCLUSION

    The Office of Inspector General has been and remains committed to 
meeting our responsibility for providing effective independent 
oversight of the USF. My office will dedicate as much of our resources 
as possible to ensure that the extra measure of support provided by the 
Commission is utilized in a manner that best benefits the people whose 
lives have been so horribly uprooted by Hurricane Katrina.
    Thank you. I will be happy to answer any of your questions.

    Mr. Whitfield. Thank you, Mr. Feaster. Ms. Zaina, you are 
recognized for 5 minutes.

                   TESTIMONY OF LISA M. ZAINA

    Ms. Zaina. Thank you, Mr. Chairman. Good afternoon, Mr. 
Chairman and members of the subcommittee. My name is Lisa 
Zaina, and I am the chief executive officer of USAC, which 
administers the Federal Universal Service Fund. Thank you, Mr. 
Chairman, for convening this hearing today.
    I appreciate the opportunity to come before you today to 
discuss USAC's role in administering the fund and how USAC can 
assist the FCC with its Hurricane Katrina rebuilding 
activities. As we all know, the Gulf Coast was devastated by 
Hurricane Katrina and then Hurricane Rita. Our hearts go out to 
all of the survivors who are now struggling to put their lives 
back together. I would like to say at the outset of the hearing 
that USAC stands poised to assist the FCC in implementing its 
hurricane-related efforts.
    USAC looks forward to working closely with the commission 
to implement Chairman Martin's September 15 proposals to use 
$211 million from the fund for immediate relief to the program 
participants affected by Katrina. In anticipation of 
implementing Chairman Martin's proposals as quickly, 
efficiently and effectively as possible, USAC review its 
operations to better prepare it to carry out the necessary 
functions. USAC staff identified critical issues to the 
commission.
    Today, I will discuss USAC's role in administering the 
fund. With me today is Mel Blackwell, Acting Vice President of 
the Schools and Libraries Program at USAC. We are happy to 
answer any questions you may have.
    USAC is the private not-for-profit corporation that 
administers the USF's support programs, pursuant to the 
commission's Part 54 Rules. The four support programs are High 
Cost, Low-Income, Rural Health Care, and Schools and Libraries. 
USAC is governed by a board of directors that includes a broad 
representation of USF stakeholders. USAC anticipates support to 
be approximately $7 billion this year in universal service 
funds, with the High Cost Program receiving $4 billion, the 
Schools and Libraries Program, $2.25 billion, the Low-Income 
Program, $800 million, and the Rural Health Care Program, $44 
million.
    USAC and its dedicated professional staff are intimately 
familiar with the operations of the many aspects of the USF. 
USAC was very pleased to be able to assist the commission by 
providing the information it requested regarding USF support in 
the affected areas. USAC looks forward to working closely with 
the FCC to implement as quickly, efficiently and effectively as 
possible the emergency provisions the commission adopts. We 
recognize the proposals as an effort to ensure that people can 
begin putting their lives back together after the devastation 
of this disaster, and that we must work quickly to ensure that 
help gets to where help is needed.
    We applaud Chairman Martin and the commission for the quick 
response to the horrible devastation caused by Katrina. In 
addition to working with the commission to implement Chairman 
Martin's relief proposals, we support the commission's efforts 
to quickly address any emergency situation that implicate the 
USF in the future. With stakeholders, including schools and 
libraries, rural health care providers, telecommunications 
providers, we believe USAC can and will play an important role 
in providing information and assistance.
    As the administrator, one of the greatest concerns for USAC 
is protecting the integrity of the fund. To echo Mr. Feaster's 
concerns in his testimony, USAC wants to make certain that it 
has the operational controls in place to ensure that USF 
programs and functions are operating in an effective and 
efficient manner, and in compliance with laws and regulations. 
We are prepared to work with the commission and the inspector 
general to identify additional ways to protect the integrity of 
the fund, in addition to the many measures USAC already 
employs. USAC will have a dedicated team to resolve any 
administrative issues regarding the chairman's proposal.
    At the same time, USAC wants to ensure that the process for 
program participants is streamlined and easy to use. This is a 
point that Chairman Martin made in his statement at the open 
meeting September 15. USAC stands ready and is prepared to 
offer additional information to assist the commission on the 
operational aspects as well on the implementation of Chairman 
Martin's proposals, and to work for a future streamlined and 
more systematic way to address disaster situations, whatever 
their cause and wherever they may occur.
    Once again, thank you for having me here today to testify 
on these important issues.
    [The prepared statement of Lisa M. Zaina follows:]

Prepared Statement of Lisa M. Zaina, Chief Executive Officer, Universal 
                     Service Administrative Company

                              INTRODUCTION

    Good afternoon Mr. Chairman and members of the subcommittee. My 
name is Lisa M. Zaina and I am the chief executive officer of the 
Universal Service Administrative Company, or USAC, which administers 
the federal Universal Service Fund (USF or Fund). Thank you, Mr. 
Chairman, for convening this important hearing today.
    I appreciate the opportunity to come before you today to discuss 
USAC's role in administering the Fund and how USAC can assist the 
Federal Communications Commission (FCC or Commission) with its 
Hurricane Katrina rebuilding activities. As we all know, the Gulf Coast 
was devastated by Hurricane Katrina and then Hurricane Rita. Our hearts 
go out to all of the survivors who are now struggling to put their 
lives back together. I would like to say at the outset of this hearing 
that USAC stands poised to assist the FCC in implementing its 
Hurricane-related efforts.
    USAC looks forward to working closely with the Commission to 
implement Chairman Martin's September 15th proposals to use $211 
million from the Fund for immediate relief to the program participants 
affected by Hurricane Katrina. In anticipation of implementing Chairman 
Martin's proposals as quickly, effectively, and efficiently as 
possible, USAC reviewed its operations to better prepare it to carry 
out the necessary functions. USAC staff identified initial critical 
issues to the Commission.
    Today, I will discuss USAC's role in administering the Fund. With 
me today is Mel Blackwell, Acting Vice President of the Schools and 
Libraries program at USAC. We are happy to answer any questions you may 
have.
    USAC is the private, not-for-profit corporation that administers 
the USF support programs pursuant to the Commission's Part 54 rules. 
The four support programs are High Cost, Low Income, Rural Health Care, 
and Schools and Libraries. USAC is governed by a Board of Directors 
that includes a broad representation of USF stakeholders. USAC 
anticipates support to be approximately $7 billion this year in 
universal service funds with the High Cost Program receiving $4 
billion, the Schools and Libraries Program $2.25 billion, the Low 
Income Program $800 million, and the Rural Health Care Program $44 
million.
    USAC and its dedicated professional staff are intimately familiar 
with the operations of the many aspects of the USF. USAC was very 
pleased to be able to assist the Commission by providing the 
information it requested regarding USF support in the affected states.
    USAC looks forward to working closely with the FCC to implement as 
quickly, efficiently, and effectively as possible the emergency 
provisions the Commission adopts. We recognize the proposals as an 
effort to ensure that people can begin putting their lives back 
together after the devastation of this disaster and that we must work 
quickly to ensure that helps gets to where help is needed.
    We applaud Chairman Martin and the Commission for the quick 
response to the horrible devastation caused by Hurricane Katrina. In 
addition to working with the Commission to implement Chairman Martin's 
relief proposals, we support the Commission's efforts to quickly 
address any emergency situation that may implicate the USF in the 
future. With stakeholders including schools and libraries, rural health 
care providers, and telecommunications providers, we believe USAC can 
and will play an important role in providing information and 
assistance.
    As the Administrator, one of the greatest concerns for USAC is 
protecting the integrity of the Fund. To echo Mr. Feaster's concerns at 
a hearing before this subcommittee September 28, USAC wants to make 
certain that it has the operational controls in place to ensure that 
USF programs and functions are operating in an effective and efficient 
manner and in compliance with laws and regulations. We are prepared to 
work with the Commission and the Inspector General to identify 
additional ways to protect the integrity of the Fund in addition to the 
many measures USAC already employs. USAC will have a dedicated team to 
resolve any administrative issues regarding the proposal.
    At the same time, USAC wants to ensure that the process for program 
participants is streamlined and easy to use. This is a point that 
Chairman Martin made in his statement at the open meeting September 
15th.
    USAC stands ready and is prepared to offer additional information 
to assist the Commission on the operational aspects, as well as on the 
implementation, of Chairman Martin's proposals--and to work for a 
future streamlined and more systematic way to address disaster 
situations, whatever their cause, and wherever they may occur.
    Once again, thank you for having me here today to testify on these 
important issues.

    Mr. Whitfield. Thank you, Ms. Zaina. At this time, I will 
recognize Mr. Rawson for his opening statement.

                    TESTIMONY OF GARY RAWSON

    Mr. Rawson. Thank you. I am Gary Rawson----
    Mr. Whitfield. Do you have your microphone on?
    Mr. Rawson. Is that better? I am Gary Rawson, State E-rate 
Coordinator for Information Technology Services in the State of 
Mississippi. I have been the E-rate coordinator for 8 years 
since the beginning of the program. I am also chair of SECA, 
which is State E-rate Coordinators Alliance, and I support this 
program with all the enthusiasm that I can communicate to you.
    As you all know, Katrina was and continues to be the single 
most devastating natural disaster to strike the United States. 
Recovery goes well beyond the cleanup of debris, beyond 
rebuilding of roads and buildings. Recovery will take years. 
Recovery starts with the communities and the people who make up 
those communities.
    So what do we do first? First, we provide homes for these 
folks. FEMA and many other groups are working on that issue.
    Second, we get the kids back into school. If these kids 
miss out on the remaining school year, then they must repeat 
the school year. No child wants to repeat a school year. If 
these kids have to move up to another community or to another 
State to stay in school, they will. Parents will follow the 
kids. Once these kids get into another school, another 
community, and the parents find new jobs, new homes, and a new 
life, they may never move back. Communities die because their 
life-source, the people, have moved on; some because they 
simply couldn't find a school. We need to do everything we can 
to get these kids back into school in the shortest time period 
possible. By today's date, many schools are back in operation. 
Some may have fewer teachers, some may have fewer students, 
some may have less of the resources that they need to do an 
effective job of teaching, but what matters is that the kids 
are in school and are learning again. And what matters most is 
that these kids are getting some level of normalcy back into 
their lives.
    We have several stages of devastation related to schools 
and libraries in the affected areas; little or no damage and we 
are able to open back up soon thereafter; minor damage and 
opened--reopened several days or even a few weeks later; 
sustained significant damage, and repair will take weeks or 
months, but will be able to reopen before the school year is 
out; sustained major damage or total destruction and will have 
to be demolished or rebuilt. The rebuilding may take several 
years.
    In some of these cases, schools were able to relocate in 
some other facility and resume classes. I have heard of one 
school that is now located in an empty Wal-Mart building. Other 
schools merged with another school that had the space and 
resources to accommodate. Other schools simply closed and 
students relocated to parts unknown.
    What can the FCC and the E-rate Program do to help these 
schools and yes, these libraries get back into operation? E-
rate can only serve a very small need in a situation of many 
needs. What comes first? Buildings, lights, books, teachers, 
pencils, paper, buses, fuel, or Internet access. I think the 
answer is obvious. But we need to get these kids back to where 
they were before, as disadvantaged as they may be.
    Put yourself into the seat of fourth grade student. You 
used to live in Biloxi, Mississippi. Today, you are sitting in 
a class in Tupelo, Mississippi. All of your friends are 
scattered and you have no idea where. You haven't seen any of 
your teachers since August the 28th when you and your family 
drove north to escape Katrina. Suddenly, your teacher in Tupelo 
calls you over to one of the computers in the back of the room, 
and right there in front of you is the face of your English 
teacher from Biloxi smiling at you from a video conferencing 
classroom in Greenville, Mississippi. Imagine the job. 
Interactive video between classrooms to connect the student to 
a teacher, that, good people, is what the FCC and the E-rate 
Program can do.
    Time is critical. We need all the help we can get. We hope 
that all of this help is close to what we will ultimately need. 
We know that Chairman Martin issued a statement on September 15 
that promised 90 percent discount for those affected schools, 
and that a special Katrina window would be forthcoming. A 
special window is needed because the current funding year 
window for services, July 1, 2005 through June 30, 2006, is 
closed. Thus the need for a new window to give the affected 
schools and libraries the opportunity to apply for discounts E-
rate eligible services to replace services and equipment lost, 
or to better serve the students that they have retained or 
absorbed. But how are we, meaning the FCC, USAC, SLD, and the 
E-rate coordinators, service providers, and the schools and 
libraries gong to manage this process?
    Under current rules and normal circumstances, the 
technology plan is the foundation from which the applications 
are based. Contracts are based upon a documented procurement 
process. But what if all school and district documentation is 
now scattered northward through the countryside or floating 
somewhere out in the gulf? How can we be sure if schools and 
libraries only apply for what they need to get back to where 
they were before Katrina struck?
    We cannot base post-Katrina needs on pre-Katrina 
applications because many schools, due to their discount level, 
have never been funded for internal connections equipment or 
wiring. Now, under Katrina rules, those schools are eligible to 
replace equipment and wiring they purchased outside of E-rate. 
How long should this special Katrina relief effort take before 
we are done? Well, how long does it take to demolish, 
disinfect, rebuild, and repopulate a community?
    How will monies set aside for this special Katrina relief 
affect the other schools and libraries across the country? It 
has been proposed that FCC use--that they use rollover funds, 
funds that were committed but not spent in previous years, but 
are still available, to be used for the special Katrina window. 
This would provide $365 million to pay for services requested 
by the affected schools and libraries during the period of 
September 1, 2005, just after Katrina, through June 30, 2006, 
the remainder of this funding year. If this funding mechanism 
were chosen, the current demand estimate and the current 
funding request would not be affected.
    Are there any other sources of funding, outside of what the 
other applicants have requested? Yes. Many of the affected 
schools and libraries will be unable to use the funding they 
have already been approved for, and funding they have not yet 
been granted. The services referred to here are those for 
funding period July 1, 2005 through June 30, 2006. Those 
dollars should be identified, and can be identified, and used 
to help fund the Katrina window.
    What should happen after this special Katrina window closes 
and the schools and libraries have not been rebuilt? An 
affected entity should be granted this relief until they are 
back to where they were before August 29, no matter how long it 
takes. Those affected schools and libraries should apply during 
the regular funding year window, just as everyone else does. 
Don't create a new process, but do provide priority application 
review and funding to those entities.
    If this becomes known as a special Katrina window or 
special Katrina relief effort, then where is the special 
oversight going to come from? As complex and confusing as the 
Katrina situation is, it would not be fair to the other schools 
and libraries in the country to be adversely affected by 
prioritizing limited resources of USAC and FCC with the Katrina 
relief. Special circumstances call for special considerations. 
We all want this special E-rate process to stay within the 
current rules and regulations the E-rate Program where 
possible. We know there must be some special considerations due 
to the lost documentation and lost equipment, but the SLD 
application process should not be compromised. The affected 
States fully recognize the need for additional scrutiny. We 
have committed--we the States have committed to provide a level 
of oversight that has never been available before. The State E-
rate coordinators will verify which entities fit the criteria 
as an affected entity, will verify that they seek only services 
that will restore them back to the level they were before, and 
will verify the procurement process that led to the service 
contract within legal confinements of State law, and will 
assist in the posting of needed SLD application forms, 
specifically the Form 471. Specific hands-on training and 
support will be provided to each applicant, and we submit that 
no application should be approved without the certified 
verification of the State E-rate coordinator.
    Should schools and libraries that have not applied 
previously for E-rate discounts be allowed to participate in 
the Katrina relief? Absolutely. Don't further penalize them 
because they didn't have the resources or the needed discount 
level that would allow them to participate now.
    My main point is, I don't want you to call me back up here 
in 3 years and ask me why the Katrina relief effort failed. 
Thank you.
    [The prepared statement of Gary Rawson follows:]

  Prepared Statement of Gary Rawson, Mississippi E-rate Coordinator, 
       Mississippi Department of Information Technology Services

    I have been the e-rate coordinator for Mississippi since the 
program began in 1998. I also serve as the Chair for the State E-rate 
Coordinators Alliance (SECA) which is made up of approximately 90 e-
rate professionals representing 39 states.
    As you all know, Katrina was, and continues to be the single most 
devastating natural disaster to strike the United States. Recovery goes 
well beyond the cleanup of debris, beyond rebuilding of roads and 
buildings. Recovery will take years. Recovery starts with the 
communities and the people who make up those communities. So, what do 
we do first?
    First, we provide homes for these folks. FEMA and many other groups 
are working on that issue.
    Second, we get the kids back into school. If these kids miss out on 
the remaining school year then they must repeat the school year. No 
child wants to repeat a school year. If these kids have to move to 
another community or another state to stay in school, they will. 
Parents will follow their kids. Once these kids get into another 
school, another community, and the parents find new jobs, new homes, 
and a new life, they may never move back. Communities die because their 
life source, the people, have moved on; some because they simply 
couldn't find a school.
    We need to do everything we can to get these kids back into school 
in the shortest time period possible. By today's date, many schools are 
back in operation. Some may have fewer teachers; some may have fewer 
students; some may have less of the resources they need to do an 
effective job of teaching. But what matters is that kids are in school 
and are learning again. And what matters most is that these kids are 
getting some level of normalcy in their lives.
    We have several stages of devastation related to schools and 
libraries in the affected areas.
1) Sustained little or no damage and able to reopen as soon as power 
        was restored.
2) Sustained minor damage and was able to reopen after a few days of 
        repair work.
3) Sustained significant damage and repair will take weeks or months, 
        but will be able to reopen before the school year is out.
4) Sustained major damage or total destruction and will have to be 
        demolished and rebuilt; the rebuilding may take several years.
    In some of these cases schools were able to relocate in some other 
facility and resume classes. I have heard of one school that is now 
located in an empty Wal-Mart building. Other schools merged with 
another school that had the space and resources to accommodate. Other 
schools simply closed and students relocated to parts unknown.
    What can the FCC and the e-rate program do to help these schools 
and yes, these libraries get back into operation?1E-rate can only serve 
a very small need in a situation of many needs. What comes first . . . 
buildings, lights, books, teachers, pencils, paper, buses, fuel . . . 
or internet access. I think the answer is obvious. But, we need to get 
these kids back to where they were before, as disadvantaged as they may 
be.
    Put yourself in the seat of a 4th grade student. You used to live 
in Biloxi Mississippi. Today, you are sitting in a class in Tupelo 
Mississippi. All of your friends are scattered and you have no idea 
where. You haven't seen any of your teachers since August 28th when you 
and your family drove north to escape Katrina. Suddenly, your teacher 
calls you over to one of the computers in the back of the room, and 
right there in front of you is the face of your English teacher smiling 
at you from a video conferencing classroom in Greenville Mississippi. 
Imagine the joy.
    Interactive video between classrooms, to connect a student to a 
teacher. That, good people, is what the FCC and the e-rate program can 
do.
    Everyone in the country is asking the same questions: ``Why don't 
those Katrina folks let the FEMA money, and the insurance money and 
those billions of dollars Congress has approved fix everything?'' That 
is a very good question. Here is my response:

1) FEMA pays a percentage (75% last I heard) of the depreciated value.
2) FEMA takes a very long time to pay.
3) Insurance pays the depreciated value, less the deductable, IF the 
        insurance company decides the losses were covered under the 
        policy.
4) Often, insurance has a cap on what it will pay. Here, we are talking 
        large dollars that simply go beyond the scope of some 
        insurance.
5) Congress has approved the funding, but where is the money?
    Time is critical. We need all of the help we can get. We hope that 
all of the help, and we have been blessed with a lot of help, is close 
to what we will ultimately need.
    We know that Chairman Martin issued a statement on September 15th 
that promised a 90% discount for those affected schools and that a 
special Katrina Window would be forthcoming. A special Window is needed 
because the current funding year Window, for services July 1, 2005 
through June 30, 2006 is closed. Thus, the need for a new Window to 
give the affected schools and libraries the opportunity to apply for 
discounts on e-rate eligible services to replace services and equipment 
lost, or to better serve the students they have retained, or absorbed.
    But, how are we, meaning the FCC, USAC, SLD, the e-rate 
coordinators, service providers, and the schools/libraries going to 
manage this process?
    Under current rules, and normal circumstances, the technology plan 
is the foundation from which the applications are based. Contracts are 
based upon a documented procurement process. But, what if all school 
and district documentation is now scattered northward through the 
countryside, or floating somewhere out in the gulf? How can we be sure 
schools and libraries only apply for what they need to get back to 
where they were before Katrina struck?
    We cannot base post-Katrina needs on pre-Katrina applications 
because many schools, due to their discount level, have never been 
funded for internal connections equipment or wiring. Now, under Katrina 
rules those schools are eligible to replace equipment and wiring they 
purchased outside of e-rate.
    How long should this special Katrina relief effort take before we 
are done? Well, how long does it take to demolish, disinfect, rebuild, 
and repopulate a community?
    How will the monies set aside for this special Katrina relief 
affect the other schools and libraries across the country? It has been 
proposed to the FCC that rollover funds (funding that was committed, 
but not spent, in previous years, but is still available) be used for 
the special Katrina Window. This would provide $365 million to pay for 
services requested by the affected schools and libraries during the 
period September 1st, 2005 thru June 30th, 2006. If this funding 
mechanism were chosen the current demand estimate, and the current 
funding requests, would not be affected.
    Are there any other sources of funding, outside of what the other 
applicants have requested? Yes. Many of the affected schools and 
libraries will be unable to use the funding they have already been 
approved for, and the funding they have not yet been granted. The 
services referred to here are those for funding period July 1st 2005, 
through June 30th, 2006. Those dollars should be identified and used to 
help fund the Katrina Window.
    What should happen after this Special Katrina Window closes and the 
schools and libraries have not been rebuilt? An affected entity should 
be granted this relief until they are back to where they were before 
August 29th, no matter how long it takes. Those affected schools and 
libraries should apply during the regular Funding Year Window just as 
everyone else does. Don't create a new process. But, do provide 
priority application review and funding to those entities.
    If this becomes known as the Special Katrina Window, or Special 
Katrina Relief Effort, then where is the ``Special Oversight'' going to 
come from? As complex and confusing as the Katrina situation is, it 
would not be fair to the other schools and libraries in the country to 
be adversely affected by prioritizing the limited resources of USAC and 
FCC with Katrina relief. Special circumstances call for special 
considerations. We all want this special e-rate process to stay within 
the current rules and regulations of the e-rate program, where 
possible. We know there must be some special considerations due to lost 
documentation and lost equipment, but the SLD application process 
should not be compromised. The affected states fully recognize the 
needs for additional scrutiny. We have committed to provide a level of 
oversight that has never been available before: the state e-rate 
coordinators will verify which entities fit the criteria as an 
``affected'' entity, will verify they seek only services that will 
restore them back to the level they were before, will verify the 
procurement process that led to the service contract (within the legal 
confinements of state law), and will assist in the posting of the 
needed SLD application forms (specifically the 471). Specific hands-on 
training and support will be provided to each applicant. We submit that 
no application should be approved without the certified verification of 
the state e-rate coordinator.
    Should schools and libraries that have not applied previously for 
e-rate discounts be allowed to participate in the Katrina Relief? 
Absolutely. Don't further penalize them because they didn't have the 
resources or the needed discount level that would allow them to 
participate now.
    If this special relief were granted today, how long before schools 
and libraries felt the benefit? If the relief were granted today, and 
the Special Katrina Window opened tomorrow morning, 471s would be filed 
tomorrow evening, and those applicants would anxiously wait for a 
Funding Commitment Decision Letter (FCDL).
    Will the existing e-rate process work in this special case? 
Absolutely.
    I don't want you to call me back up here in three years and ask me 
why the Special Katrina Effort failed.
    I want to sincerely thank you for the opportunity to speak with you 
today.

    Mr. Whitfield. Thank you, Mr. Rawson, and I thank all of 
you for your testimony.
    Ms. Zaina, I want to just start of questions with you this 
afternoon. Mr. Stupak, in his opening statement, mentioned the 
fact that the requirement for expenditures to reconnect these 
schools and libraries may be such that it may be required to, 
for other schools and libraries around the country, that they 
may not receive the funding that they expected because of the 
special needs in the Katrina area. I think there is something 
referred to as an overflow fund, and I would ask you, is Mr. 
Stupak's concern a legitimate concern for us, or how do you 
decide when to use the overflow fund and so forth?
    Ms. Zaina. Sir, the overflow fund, it is the rollover fund 
and it would be used at the recommendation of the FCC. 
Essentially, the rollover fund is basically the residual left 
from the contingencies that we build into the program, whether 
or not there will be appeals monies available and the like. And 
currently, that rollover fund is at $365 million. So whether we 
use the rollover fund, affects the magnitude of the effect on 
the other schools and libraries in the country, as compared to 
those in the gulf States. The $2.25 billion, if we were to take 
it out of that and not use the rollover fund, they would be 
immediately directly affected. If we use the rollover funds, 
the magnitude might be different, depending upon how the 
commission tells us to use the rollover funds.
    Mr. Whitfield. Okay. And that would be the decision of the 
FCC?
    Ms. Zaina. Yes, sir.
    Mr. Whitfield. Okay. Now, on September 21, 2005, you sent a 
letter to the chairman and the commissioners at FERC, and I 
think everyone has a copy of this, in which identified certain 
areas of concern that would have to be addressed as we try to 
respond to the needs created by Hurricane Katrina. Have your 
concerns been met that you express in this letter?
    Ms. Zaina. Mr. Chairman, we sent that letter on September 
21 in order to allow the commission to deliberate about all of 
the concerns we felt would be necessary for them to consider as 
they transferred or created this proposal and turned it into an 
order that could be operationalized. We asked questions about 
eligibility. We asked questions about programmatic issues. We 
asked questions about implementation. And to date, we have not 
had any discussions with the commission regarding those issues 
that we raised. We have, however, had discussions with the 
commission on the September 28 order, the September 28 letter 
that we sent pursuant to their waiver order about--with the 
deadlines.
    Mr. Whitfield. And without objection, I am going to ask 
that this--your letter be placed into the record. Yes, all 
three of you. All three of them. Thank you.
    [The information referred to follows:]

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    Mr. Whitfield. Mr. Rawson, the FCC states that it is 
considering relying upon FEMA determinations to identify 
schools and libraries that should be eligible for Katrina-
related relief. Does every school in the FEMA zone need E-rate 
assistance, or have you been able to assess that?
    Mr. Rawson. Yes, we have assessed that. No, every school in 
the FEMA-defined region does not need E-rate support or even 
rebuilding. There is minor damage and considerably lesser 
chance of damage to E-rate-eligible services. There may be 
schools that are fairly close to the coast that sustained very 
minor damage. And then you go 150, 200 miles inland and you 
will have another school that was damaged considerably by trees 
or wind damage to the roof or flooding or whatever it might be. 
So no, we have already surveyed all school districts who, in 
turn, let us, the State, the State Department of Education, 
know the level of damage for all entities.
    Mr. Whitfield. And what percent of the schools in that--in 
the FEMA-designated area would you say needed assistance?
    Mr. Rawson. We haven't done a calculation of the 
percentage. It is--it is just various schools and with various 
damage.
    Mr. Whitfield. Okay.
    Mr. Rawson. And some minor, some major.
    Mr. Whitfield. Have you come to the conclusion on the 
amount of money that may be needed in the schools that do have 
needs?
    Mr. Rawson. No, we have not, because the needs vary and 
certainly within the E-rate application, the data provided 
through that, that is--that doesn't provide the information we 
need, either, because many of the schools haven't used the E-
rate funds to provide their infrastructure.
    Mr. Whitfield. And how would explain or define or describe 
the coordination between the FCC, USAC, and your colleagues 
following the Katrina relief proposals?
    Mr. Rawson. Well, up to this point, there is not really a 
Katrina proposal that we know of, that we have been told about, 
we, being the applicants. So we are waiting on an order from 
the FCC, and then we will react accordingly.
    Mr. Whitfield. Okay. Okay.
    Mr. Rawson. May I add one more thing, though? We, being the 
tri-State area, Alabama, Mississippi, and Louisiana, did submit 
a proposal for Katrina relief to the FCC. And I think----
    Mr. Whitfield. Yes. Would you elaborate on that? When did 
you do that?
    Mr. Rawson. Oh, goodness. I have forgotten the date, but it 
is--it was about the 18th of 20th of September. As a matter of 
fact, the day that he came out with the original order on the 
15th, we were scurrying to get our Governors to sign the 
letter. And the 15th was a Thursday, and the following Monday 
is when we submitted to the FCC.
    Mr. Whitfield. Yes. Mr. Navin, let me ask you, when you all 
formulated this relief plan, which all appreciate your doing 
very much, how did you, for example, determine that there would 
be 600 schools that might be affected?
    Mr. Navin. At the time that the chairman announced his 
intention to present an item to his fellow commissioners about 
a relief package, we had been contacted at that point by the 
Governors of Mississippi and also Louisiana, and in addition, I 
believe, the superintendent of schools for the State of 
Alabama. They were all asking for some special consideration by 
the commission relating to E-rate funding. I believe that using 
historical data, we were able to come up with a figure of 
approximately 600 schools, and we looked at the type of 
priority to funding that those schools demanded or requested in 
earlier years.
    Mr. Whitfield. Now, do you have any idea of when the final 
order will be completed?
    Mr. Navin. I know that the chairman has sent a proposal to 
the other commissioners. I know that they are continuing to 
debate some of the finer points of that proposal. For me to put 
a timeframe on it, I think it would be unfair to those 
deliberations, but I will say that they have certainly engaged 
on the finer details of the order, and they recognize the 
urgency of getting the order out as soon as possible so that 
the relief in the order gets to the affected areas as soon as 
possible.
    Mr. Whitfield. Ms. Zaina, have you had any discussions with 
them on timeframe for the final order?
    Ms. Zaina. No, sir, we haven't.
    Mr. Whitfield. Okay. So, Mr. Navin, since the announcement 
of the program, have you consulted or been in pretty detailed 
discussions with USAC about possible implementation of the 
program or not?
    Mr. Navin. My staff is in daily contact with USAC on a 
variety of issues. We also, having received the letters from 
USAC raising various questions, have tried to incorporate those 
issues into the draft item where possible--where it was 
possible to do so. So we certainly have recognized those 
issues. The chairman has requested that, to the best of our 
ability, we address those issues in the item.
    Mr. Whitfield. Okay. Well, my time has expired, so I will 
recognize Mr. Stupak for 8 minutes.
    Mr. Stupak. Thank you, Mr. Chairman.
    Mr. Navin, you testified that you are committed to making 
sure that USF monies are used and are well spent and the 
program is protected from potential fraud, waste and abuse. Yet 
our subcommittee's investigation found a program rife with 
waste, fraud and abuse, and the FCC IG remains concerned that 
Katrina rebuild will result in more abuse, especially when you 
testified that there will be regulatory relief which, in my 
mind usually means less controls and more possibility to open 
up for fraud. So what is the status of the planned 700 audits 
that were promised? It is my understanding that the they were 
at the chairman's office from March until August 15, and where 
have they gone now? Who is holding those things up?
    Mr. Navin. That might be a question better put to the FCC's 
IG. One of the things Chairman Martin has tried to do early in 
his----
    Mr. Stupak. Okay. Well, let me go to Mr. Feaster, then. Do 
you know the answer, of who has the audit reports now?
    Mr. Feaster. Yes, sir. Excuse me. The plan was held up, the 
three-way plan you are referring to----
    Mr. Stupak. Right.
    Mr. Feaster. [continuing] and audits, was held up during 
the transition from Commissioner--Chairman Powell to Chairman 
Martin. During that time, the general counsel's office found 
that the way that the people were selected for--the contractors 
were selected, there were two flaws in the selection process. 
This was presented to me in consultation with the chief of the 
Wireline Bureau and the commission's managing director. We felt 
it was best to re-complete the thing, re-complete the contract 
application. And we expect to have a final contract within 90 
days in place to start on those audits.
    Mr. Stupak. This final order that the chairman is trying to 
get done and have the commissioner sign on how they are going 
to rebuild, shouldn't we have a good understanding of what is 
in those audit reports before you do a final order, because 
aren't we bound to repeat the same errors?
    Mr. Feaster. I think we have some background based on about 
150 audit reports that we have done to date. And any changes in 
the processes and procedures, we would apply to those new 
audits so we--they would be in our audit plan to look at those 
type of situations.
    Mr. Stupak. And I don't mind them helping to rebuild, but I 
don't want to build on a program that we have had a lot of 
problems or discussions on, if we are just going to do another 
rebuilding on flawed foundations. So let me ask this question, 
Mr. Navin, if I can. Puerto Rico Telephone I mentioned in my 
opening statement, about $1,500 per month they charged for 
hundreds of lines, even though they weren't used. Have you or 
the commission been put on notice that telecom or other 
Internet service providers are priority one services; that they 
will not be paid for connections that are unusable during this 
time they have been down due to the hurricane, or are we still 
paying $1,500 a month for these lines? Do you know?
    Mr. Navin. I don't know the answer to that specific 
question. What I can say is that one of Chairman Martin's first 
priorities when I became bureau chief was to take a look at the 
Universal Service Program and consider fundamental structural 
reform of the program, for purposes of addressed both Congress' 
and the IG's----
    Mr. Stupak. Sure. But in your opening, you mention all this 
stuff about you were immediately getting things back in repair 
and all this, and did anyone check to see, are you still paying 
for lines that aren't being used?
    Mr. Navin. During the outreach, it is my understanding from 
some of the personal outreach that I did, that carriers were 
asked for consideration on that issue. I don't have any 
statistics in front of me right now that I can I provide you 
concerning the number of carriers who agreed to stop billing 
and the number of carriers who said no, we were under a 
contract and we are gong to continue to bill.
    Mr. Stupak. So they could, under contractual obligations, 
continue to charge $1500 and we really have no recourse other 
than they are good heartedness. Will that be changed in the 
new--in this final order that is coming up? I mean, that is 
just one example of just waste, if the thing goes down, and not 
to any fault of theirs, but I mean, should we continue to pay?
    Mr. Navin. We are certainly aware of that issue, and I do 
not know whether the final order will specifically address that 
or not.
    Mr. Stupak. Well, I hope you express our concerns. Of the 
600 libraries and schools you have identified, are all these 
schools and libraries going to be rebuilt, or are some of them 
not going to be rebuilt? Do we know that yet?
    Mr. Navin. I think the answer is, we don't know that, and I 
think what is important on this point is that, what our order 
proposes, or what the chairman's proposal does, is to make 
these schools and libraries eligible. It doesn't guarantee them 
support, and to the extent a school or library is not rebuilt, 
then they will not be filing for additional support under 
priority two for internal connections.
    Mr. Stupak. You know, we mentioned a little bit about the 
rollover rate there, that $360 million that rolls over. I am 
not quite sure how disadvantaged--disadvantaging, I should 
say--other schools nationwide is the best policy to pursuing--
to be pursued here. Isn't there any other place we can subtract 
money from? For instance, won't there be an E-rate money from 
200? And then that is the rollover money. Why couldn't we just 
use those--that money instead of obligating other school 
districts' promised money to rebuild the gulf?
    Mr. Navin. I think it is difficult for any of us to say 
what the exact impact is going to be at this point in time 
because of the cash management system that is used at USAC. It 
is----
    Mr. Stupak. So then, why won't we start with the rollover 
money so we don't impact other promised money?
    Mr. Navin. Well----
    Mr. Stupak. Use that first until we know.
    Mr. Navin. [continuing] there is currently enough money in 
the fund today to cover all priority one requests.
    Mr. Stupak. Including those in other parts of the country?
    Mr. Navin. Correct. Yes, for priority one requests, that is 
true. For priority two requests----
    Mr. Stupak. Correct.
    Mr. Navin. [continuing] what our order proposes to do is to 
recognize that those schools and libraries in the disaster area 
are now some of the neediest schools in the country.
    Mr. Stupak. Sure.
    Mr. Navin. And therefore we treat them as such.
    Mr. Stupak. But before you commit that money, we should 
probably determine how many schools and libraries there are, 
when they are going to open, and the extent of the damages. It 
sounds like Mississippi has done some of that, Mr. Rawson, and 
I am sure there has got to be some of them there that just 
aren't going to open because of lack of population and other 
things, and putting an expensive system in a school that may or 
may not open, or even doing the basic wiring wouldn't be worth 
it right now. Is that fair to say?
    Mr. Rawson. Well, we don't know. We have to go back and 
build the schools and see who comes back.
    Mr. Stupak. Sure.
    Mr. Rawson. You know, right now, the people in the 
communities aren't there because there is little community 
left, in some cases. But you build the school back and then 
hopefully your teachers come back, and the students come back 
when you get some semblance of normal community life.
    Mr. Stupak. But I am sure that Mississippi and others 
aren't going to build a school and hope they come. I mean, you 
are going to have some kind of foundation that people are going 
to be returning. And again, I am sure we all want them back as 
soon as possible, but some of these areas, it is going to take 
a long time before they get back. So I don't want to be 
committing funds for a school that may or may not ever come 
back, and then the rest of the priority two or someone gets 
pushed back for another year. See, that is what I am concerned 
about. We all want to help out, but this is what, about our 
fourth or fifth hearing, and it seems like everyone is 
promising money and no one knows where it is going or when it 
is going to be spent, and we are asking everyone else to step 
back. And I have no problem with that, I just want to make sure 
there is a plan, that there is a proposal, that we really know 
what we are talking about instead of just throwing money at it. 
That is why I am a little perplexed why we wouldn't have the 
audit report, which shows all the problems we have, before we 
startup a program again in a massive area, in which we are 
waving regulations. I just think we are throwing good money 
after bad at times.
    Mr. Rawson. That is a good point, sir, but you know, which 
comes first, the chicken or the egg? But you go back and you 
build Gulfport back. If you don't put the school back, then the 
people aren't going to come back to Gulfport, or Biloxi or any 
of the other places that are devastated. The school is part of 
the restructure and it has to be.
    Mr. Stupak. Absolutely. For many communities, it is the 
heart and soul of that community. But at the same time, there 
has to be some plan on areas we are going to rebuild and not 
rebuild, too.
    Mr. Rawson. That is true. And while I have got your 
attention, could I give you some statistics related to what you 
just----
    Mr. Stupak. Sure.
    Mr. Rawson. [continuing] asked a minute ago? The libraries 
that were destroyed and the schools that were destroyed, you 
were asking that question.
    Mr. Stupak. Right.
    Mr. Rawson. In Alabama there was one library and one school 
destroyed. In Louisiana there were four libraries destroyed, 82 
schools destroyed, 70 libraries damaged, and 229 schools 
damaged. In Mississippi there were six libraries destroyed, 28 
schools destroyed, 29 libraries damaged, and 280 schools 
damaged. And recognize that when we wrote this, when we came up 
with these statistics, we couldn't get into Louisiana and 
couldn't get into New Orleans to do an assessment there.
    Mr. Stupak. Sure.
    Mr. Rawson. But there is another 212 schools and 13 
libraries that were not part of this assessment.
    Mr. Stupak. Well, I agree. And you know, the President says 
we are going to rebuild New Orleans, and we have an opportunity 
to make it the new modern city, but that doesn't mean those 
same libraries will be in those same locations, and those same 
schools will be in those same locations. So before we start 
committing and obligating funds that we may not have and impact 
the rest of the Nation, maybe we ought to figure out where the 
places the libraries and schools are going to be before we make 
these commitments and withhold funds from other parts. And I 
certainly appreciate the answers from everybody on this panel.
    Thank you, Mr. Chairman, for your patience.
    Mr. Whitfield. And I might also add that it is our 
intention to offer everyone a second round of questions as 
well. So at this time, I recognize Ms. Blackburn for 11 
minutes.
    Ms. Blackburn. Thank you, Mr. Chairman, and I want to thank 
all of you for being here today. And, Mr. Chairman, I thank you 
for holding the committee and convening this for us today, 
because we all do have concerns about the E-rate Program, and 
we know it has some problems with waste, fraud and abuse.
    Mr. Rawson, I will tell you, I was in Jackson and Meridian, 
Mississippi this week, on Tuesday, and I will tell you, it 
makes me proud, for you all, for how you are approaching this 
issue of recovery, cleanup, reconstruction, and I am 
appreciative for the thoughtful approach that the Mississippi 
citizens are using as they move forward, and a lot of 
commonsense that they are bringing, and that is reflected in 
your remarks and I thank you for that. I will tell you, there 
is a little bit of head scratching going on down there, as to 
why FEMA would do some of the things they are doing, like 
buying trailers for portable schools from Alaska and hauling 
them down to Mississippi. You know, it doesn't make a whole lot 
of sense. And I learned a lot being there on the ground.
    Let me ask you this. The E-rate Program money, is that 
going to be used for Internet connectivity in these portable 
school buildings? And also, you mentioned putting the students 
and teachers together via the Internet. How much money are you 
designating for wireless connectivity? I know, as you look at a 
lot of what has happened in Mississippi, and the hard-line 
phones are not up, the cell service is sporadic, this is an 
opportunity to rebuild and rebuild it right. And, Mr. Navin, I 
certainly wish that the FCC, in your points, you have three 
points of things that Chairman Martin, in his aggressive 
agenda, is putting forth, but you don't mention anything about 
rebuilding it right. And I think all of us would have liked to 
have seen something about innovation and doing it right. While 
you have the opportunity to do it right, for goodness sakes, 
let us do it right.
    But back to my point, Mr. Rawson. What are you all doing 
with wireless technology as you rebuild?
    Mr. Rawson. Well, we leave that up to the individual school 
districts and schools to request whichever they want. Yes, 
there has been much talk about going back now, because we are 
starting from scratch in many cases, and putting wireless, 
particularly in the situation where we have temporary services 
set up, so that Wal-Mart that I mentioned in my write-up, they 
put in wireless there at the Wal-Mart, then when they move back 
to the renovated building or repaired building, they can take 
that wireless technology back with them, rather than hardwiring 
the temporary locations and then abandoning it when they leave.
    Ms. Blackburn. Okay. That sound great. Now, Ms. Zaina, 
looking at wireless versus a traditional hardwired system, has 
USAC performed any cost benefit analysis on the hardwired 
system versus the wireless system? Have you done any of that 
work?
    Ms. Zaina. We have not done any analysis, Congresswoman, 
but we do look at the cost of the proposal as one of the most 
important issues for an entity to be looking at when they do 
ask for schools and libraries' funding.
    Ms. Blackburn. Okay. Mr. Feaster, thank you for being with 
our committee again. I know we have kind of worn you out over 
the last few weeks. We have lots of questions and you have lots 
of answers, and we appreciate your time. Are you going to be 
putting any full-time staff into Louisiana or Mississippi for 
onsite audits and use of the E-rate funds?
    Mr. Feaster. No, I have no plans to do that. You need to 
remember that my staff totals--my total staff is 10 people, and 
there is four people working in the four areas of the USF, so 
we have quite a small staff. We do have one of my staff on 
almost continuous travel to assist the U.S. attorneys in 
investigations.
    Ms. Blackburn. So you have one staff member, basically, 
that is designated?
    Mr. Feaster. Yes.
    Ms. Blackburn. Well, maybe we need to look at taking some 
of those USF funds and re-designating some of those to cover 
the expenditure----
    Mr. Feaster. That would be an excellent idea.
    Ms. Blackburn. [continuing] of those funds so that we are 
auditing that money as we go. I think that is probably, for the 
record, the third time you have made us aware----
    Mr. Feaster. Yes.
    Ms. Blackburn. [continuing] on the size of that staff. I 
think it is beginning to sink in, sir. And then let me ask you 
this. There again, bearing in mind that we are aware that you 
have a small staff, what kind of up-to-the-minute review or 
ongoing auditing are you going to do on uses of the equipment 
that is being purchased through the E-rate Program, and then 
putting that into facilities and being certain that the 
equipment is going into facilities that actually exist, and 
that they are in the facilities where students are actually 
sitting, that these aren't ghost facilities or misdirected 
facilities?
    Mr. Feaster. Well, right now we are working with USAC. They 
are conducting 200 audits of various beneficiaries. In our 
three-way proposal, or three-way plan, where we will do 710 
audits, we will have 250 audits of the beneficiaries. What I 
would plan to do in the next 6 months is that we would ask USAC 
auditors to, as we do a statistical survey based on the 700, to 
do some focused audits in some of the areas down in the New 
Orleans area. And in our typical audit, we always look at how 
the equipment is being utilized, whether it is hooked up and 
whether there is people there using it, and that is pretty much 
in all our audits.
    Ms. Blackburn. Let me ask you this. As you go through the 
bid process, is there a part of the contract that requires a 
description of how the beneficiary is going to use that 
equipment and for how long?
    Mr. Feaster. The tech plan, and, Lisa, stop me if I am--I 
should give this one to you, really.
    Ms. Blackburn. Sir, would you prefer for Ms. Zaina to 
answer that?
    Mr. Feaster. I would think she could answer it better than 
I could.
    Ms. Blackburn. Okay, I will be happy to redirect the 
question. Ms. Zaina?
    Ms. Zaina. You asked a question about whether or not an 
entity is going to be using equipment in a certain fashion.
    Ms. Blackburn. Right. If you require a description for how 
the beneficiary plans to use that equipment, details on where 
it is going to be used, how much detail you are asking for in 
the bid process on the front end, so that you have got 
something in your audit, your working----
    Ms. Zaina. Yes, we ask a very comprehensive set of 
questions about how the--how that equipment is going to be 
used, how the funding is going to be used. We have a very 
comprehensive application process, a very comprehensive 
invoicing process on top of that. In addition, we started an 
initiative this year, Congresswoman, that we are visiting a 
thousand schools and libraries, determining whether or not 
these schools and libraries are using the funds appropriately.
    Ms. Blackburn. Okay. That is great. Thank you for your 
answer on that. I have just a little bit of time left. Mr. 
Navin, I want to come back to you, and it is not really a part 
of the E-rate Program, but I have continued to hear some 
questions about these handsets, the wireless handsets and the 
300 minutes, and some questions on that program and how you all 
went about that. And I would like to know a little bit about 
what kind of oversight is in place on that, and monitoring the 
use for that, and how you are qualifying the residents. I think 
there are still a lot of questions that are out there. And I 
would also like to know what other alternatives you all might 
have considered, other than that handset program.
    Mr. Navin. I will once again try to answer your question as 
specifically as I can, while respecting the ongoing 
deliberations at the agency. You were referring to the 
commission's proposal, or the chairman's proposal under the 
Low-Income Program to provide consumers in the disaster-
affected area with a wireless handset, and I believe what we 
announced is that it would be a minimum of 300 minutes and the 
handset for $130. And what we have done, or as the idea has 
evolved, is, I think, that we have provided some additional 
flexibility in the order for carriers to provide these low-
income consumers with other types of plans.
    As it relates to the auditing or, you know, particular 
safeguards that we have adopted, relating to that particular 
plan, I would point out that we are, in the first instance, 
relying on FEMA's disaster designations and application 
processes to determine the eligibility for the temporary 
support, and the checks and balances that are build into FEMA's 
internal controls and procedures, to ensure that parties are 
either eligible or ineligible for FEMA support. Similarly, we 
targeted the temporary support to the counties and parishes and 
individuals that have suffered the most from the disaster, and 
I believe that we will be able to identify the counties in the 
order that are affected.
    Ms. Blackburn. Thank you, sir. Mr. Chairman, I yield back.
    Mr. Whitfield. Thank you. At this time, I will recognize 
the gentleman from Washington, Mr. Inslee, for 8 minutes.
    Mr. Inslee. Thank you, Mr. Rawson, and I am sorry I wasn't 
here for your whole testimony. But I just wonder if you can 
address this issue of using rollover funds. Apparently, there 
is $365 million available, and I just wondered if that makes 
sense to use that and what affect it would that have on other 
potential recipients.
    Mr. Rawson. Yes, that does make sense because, if the $365 
million rollover funds, which is funding that is left over from 
previous years, if that were used, it would not affect any of 
the FCDLs or funding commitment decision letters, that are in 
place now for the other applicants throughout the country, and 
also future commitments that are under review at this point. It 
would totally separate the Katrina window and the Katrina 
window funding from what is not in process, and life goes on 
for the rest of country.
    Mr. Inslee. And forgive me for this layman question, but I 
assume there are other potential recipients of those rollover 
funds who would not be getting it because they went to the 
Katrina relief effort. It is not a zero-loss situation, I 
assume.
    Mr. Rawson. Absolutely. If you take them from somewhere, 
you know, somebody has got to give it up. But that is true, if 
the funds are not used, then it rolls back into the general, or 
to the--added to the $1.25 billion, so yes, that is correct.
    Mr. Inslee. Okay. And could you give us any flavor for what 
percentage other districts can anticipate reduction or foregone 
receipts as a result of this relief effort through E-rate?
    Mr. Rawson. The only way to do statistics is to know the 
overall requests that will come from this, and we have no way 
of knowing that at this time. But I would think, out of $2.25 
billion available to commit, then what we are talking about 
here would hardly be missed.
    Mr. Inslee. By individual districts?
    Mr. Rawson. That is correct.
    Mr. Inslee. Okay. Now, this is maybe the--not the most 
welcome question, but let me ask it anyway. Does it--if we want 
to make this commitment to the Nation's system that are 
benefited by the E-rate Program, is there argument that we 
should really--instead of using E-rate funds for this, use 
general appropriations out of disaster relief so that we don't 
diminish, even to a small amount, the commitment to the other 
function?
    Mr. Rawson. I have been asked that question many times, and 
my response has always been, yes we have FEMA funds, but there 
are problems with FEMA, about delays in getting funding and 
FEMA only pays a certain percentage after you take depreciation 
into consideration. Then there is individual school district 
insurance, the same thing there, depreciated value, the delays 
in getting funding. We are trying to get these schools back in 
operation now, or as soon as possible. E-rate, as convoluted as 
some of you may think, it is still a clean process. And if we 
can use the E-rate funds to get that small portion of the needs 
of the school back in place, we could do that much sooner than 
we can going through any of these other vehicles that we have 
available. And speaking of all the billions of dollars 
committed, I don't know about you, but I haven't seen an 
armored truck yet go south with any money in it.
    Mr. Inslee. So I may have missed this. You may have talked 
about this. But do you have any kind of brackets at all about 
the numbers we would be talking about to have sort of an 
extraordinary response?
    Mr. Rawson. The numbers of what?
    Mr. Inslee. Of the amount that we would be putting in from 
E-rate dollars to Katrina response.
    Mr. Rawson. We don't know yet. We have done an assessment 
of some of the damage, but we don't know what it is going to 
cost to put those services back in yet. We know a lot about the 
equipment, we know the connectivity they had, but we have not 
done individual school site assessments of what it is going to 
take to get them back to where they were before.
    Mr. Inslee. And I will be happy if some of those E-rates 
are used to provide people access to the NOAA site, from the 
National Fluid Dynamics Laboratory that predicts a one-half 
increase in intensity of hurricanes in the next several decades 
due to global warming. So I will hope you will plug these 
students into that, in fact, maybe some Members of Congress, 
too. Thanks a lot.
    Mr. Rawson. Well, actually, we have been doing that.
    Mr. Whitfield. Thank you, Mr. Inslee. At this time, I will 
recognize the gentleman from Oregon, Mr. Walden, for 8 minutes.
    Mr. Walden. Thank you very much, Mr. Chairman. And I 
appreciate our panelists today testifying on this very 
important issue and, Mr. Chairman, your leadership on this 
issue as well. As you know, this subcommittee, over the last 2 
years, has investigated the E-rate Program. Some of you are 
painfully aware of that. And we will be putting into the record 
tomorrow in a meeting the report that is now in draft form 
regarding the E-rate Program and concerns that we have. And 
obviously, a lot of what we have found over the years in 
investigating is just this lack of communication and maybe even 
a relationship between the FCC and USAC.
    I am a bit concerned, as I look at how this program was 
rolled out, that it seemed to come out by press release first 
with communication second. And I understand to a certain extent 
the desire of all Federal agencies to step up and respond to 
this very horrific hurricane and the tragedy that has ensued 
thereafter, and to do everything possible and kind of cut 
through the red tape to get things done.
    But, Mr. Navin, maybe you can explain. How did the FCC come 
up with the numbers that it came up with, $132 million that is 
referenced in the news release? How reliable do you think that 
number is it? Was that done in close coordination with USAC? 
Why don't we start there.
    Mr. Navin. We certainly obtained the historical data from 
USAC, and what we did is we looked at the schools and libraries 
in the disaster-affected area.
    Mr. Walden. Right.
    Mr. Navin. And based upon historical demand, under priority 
two, we made the estimate of $132 million. But it is just an 
estimate.
    Mr. Walden. How confident are you in that number?
    Mr. Navin. Again, I think, because of the cash management 
system at USAC and the way we fund priority one and priority 
two services, it would be difficult to specify today exactly 
how much is going to be--you know, how much is going to be 
requested. We make them eligible to request. We don't know----
    Mr. Walden. Okay.
    Mr. Navin. We know that it will not exceed the $2.25 
billion cap.
    Mr. Walden. Well, I would, yes, hope not, just in the wake 
of Katrina. There are other schools out there in need as well, 
and I guess that raises the next set of issues, which is, we 
have been supplied with the letters USAC wrote to the 
commission on, I guess, perhaps the 16th of September and then 
again on the 21st, raising a lot of questions about--pardon 
me--the FCC roll out of the news release, saying, here is what 
we are going to do, and waive all these things. And then USAC 
has come forth with a long laundry list of questions. And I 
know you have already been asked about this to a certain 
extent. Do you have answers for these yet?
    Mr. Navin. What I can tell you for certain is that we have 
reviewed those questions, and to the best of our ability tried 
to reflect, in the order, answers to those questions.
    Mr. Walden. Now, following the issue of the order, I 
believe there was yet another letter from USAC detailing 
additional issues of concern and questions. Before you issued 
the order, does the FCC sit down with USAC and talk about this 
stuff, or do you guys just share letters back and forth? How 
does this work? Maybe, Ms. Zaina, do you want to talk about 
that? What is this relationship?
    Ms. Zaina. Sir, under these circumstances, as per the 
Katrina situation, we were asked by the commission on September 
1 and 2 to provide the commission with some data, which 
included deadlines for the program----
    Mr. Walden. Okay.
    Ms. Zaina. [continuing] included recipients of the 
program----
    Mr. Walden. All right.
    Ms. Zaina. [continuing] in the affected areas. And then we 
became aware of the chairman's proposal on September 15, when 
we were monitoring the open meeting, and on September 16, sent 
the letter saying we have, you know----
    Mr. Walden. A lot of questions.
    Ms. Zaina. [continuing] ideas for you so that you can 
consider them as you deliberate, as you move this proposal and 
turn it from a proposal into an order. And because of the--
knowing that this wanted--this was something that the 
chairman----
    Mr. Walden. Right.
    Ms. Zaina. [continuing] wanted to move quickly, we thought 
it would be expedient if we were to provide a letter with the 
list of issues that we have, hoping to have a discussion about 
them. We did not have a discussion about the letter from 
September 21 with the commission, but the September 28 letter, 
sir, that you have mentioned, is a letter that was in response 
to the commission's waiver deadline order, and we have had a--
we have had a couple of conversations with the commission 
regarding that order, but we have not discussed the September 
21 issues.
    Mr. Walden. All right. I have only got a couple of minutes 
here, so let me try and be brief. Mr. Navin, okay, the 
commission says, in the wake of Katrina, we are going to waive 
these rules and expedite this help to schools and lord knows, 
they need the help. How about Rita victims? I mean, I hear from 
people that there is a problem in Texas with schools. We know 
the problems of hurricanes that have occurred in Florida. We 
don't get many of them up in the northwest in Oregon, 
fortunately, but all this will impact what is in the fund and I 
assume delay other projects in other schools elsewhere. Does 
this set a precedent that now it will be used, and how are you 
going to deal with Rita victims? Has the commission reviewed 
that?
    Mr. Navin. Fortunately for the FCC, unfortunately for the 
folks in Texas and western Louisiana, we were very well 
prepared for Rita, and we started our outreach related to Rita 
very early in the process. We called public safety answering 
points and made sure that they had contingency plans in place. 
We called all the carriers.
    Mr. Walden. Right.
    Mr. Navin. This was all before the disaster struck. We have 
continued that outreach effort. We have continued the outreach 
effort to western Louisiana----
    Mr. Walden. Good.
    Mr. Navin. [continuing] as well as to Texas. And I am sure 
that there are individual carriers who have been----
    Mr. Walden. But what about----
    Mr. Navin. [continuing] harmed substantially, but we have 
not--what I was just going to say is, to contrast the two 
situations, in the wake of Katrina, we received letters from 
several public officials in Louisiana, Mississippi, and 
Alabama. In the wake of Rita, we did not receive similar 
inquiries or similar proposals related to that.
    Mr. Walden. You will after this hearing. But in all 
seriousness, if you are waiving these rules and expediting the 
application process and moving money around to deal with broken 
schools or missing schools in Mississippi and Alabama and 
Louisiana or wherever, I want to make sure I understand it. Are 
you saying you are not expanding that to schools that are 
similarly destroyed in the wake of Rita, or were there none? 
Maybe there weren't any. I don't know.
    Mr. Navin. Congressman Walden, what I can tell you is, if 
someone brings a proposal to the FCC, or someone presents 
evidence to us to show that that is a remedy that we should be 
considering as it relates to Rita, I am sure that Chairman 
Martin would deliberate that proposal and present it to his 
colleagues. I can tell you that the order that they are 
currently considering does not include disaster areas related 
to Rita.
    Mr. Walden. But wouldn't you say it sets a precedent for 
similar areas that are similarly--I mean, nobody has been 
similarly destroyed as in the wake of Katrina, but if you are 
in Small Town, Mississippi and your school is out in the gulf 
now, and you are in Small Town, Texas and your schools is 
washed up the road somewhere, it is the same effect.
    Mr. Navin. And perhaps the difference is, in the wake of 
Katrina, the disaster was so widespread, some global order 
resolving the situation for all schools was perhaps more 
appropriate. The agency does have a waiver process for 
individual circumstances, like the circumstances that you are 
suggesting. So schools would be free to use that waiver process 
to bring any damage or special circumstances to the 
commission's attention.
    Mr. Walden. Why couldn't they have used that waiver 
process, then, if it is functional and effective in Mississippi 
and Louisiana?
    Mr. Navin. I think, because of the number of entities 
involved, carriers----
    Mr. Walden. Right.
    Mr. Navin. [continuing] schools, customers, that it would 
have been very difficult to use that waiver process, which is 
really for individual or unique circumstances. And the 
circumstances in the aftermath of Katrina were common among all 
of these parties. So----
    Mr. Walden. All right.
    Mr. Navin. [continuing] it lent itself to a more global 
resolution.
    Mr. Walden. All right. Thank you, Mr. Chairman. I know my 
time has expired.
    Mr. Whitfield. Thank you. At this time, I will recognize 
the gentleman from Mississippi, Mr. Pickering, for 8 minutes.
    Mr. Pickering. Thank you, Mr. Chairman. I want to welcome 
Mr. Rawson from Mississippi up here, and all the panel. And I 
do want to put everything into context, that we need to have 
these schools rebuilt, and a critical component of that is the 
communications capabilities, the Internet access; of having a 
good functioning school in an area that has been devastated, 
that lost its critical infrastructure; that lost, in many of 
the schools, not only the school buildings, but all the 
documents. And so what we are talking about today is very 
important. People will come home when they can send their 
children to school. Rebuilding their school needs to be a 
critical first priority. There needs to be a sense of urgency 
about it. It is appropriate, in times of crisis, to waive rules 
that make sense in normal circumstances, but do not make sense 
in a crisis circumstance and disaster.
    The second context is that you need to coordinate and 
communicate with the people most affected, as you develop your 
rules or your waivers, or we find a more streamlined way to get 
help to the schools in the rebuilding effort, but to do it in a 
way that you maintain the accountability standards. And I think 
that we can achieve those things, and I want to talk to Mr. 
Rawson, and then the other members of the panel, to see what is 
the most effective way for us to achieve these objectives.
    Mr. Rawson, since Katrina, have you had any communication 
coordination from the FCC or from any other Federal entity, as 
it relates to your proposals on E-rate?
    Mr. Rawson. No, I have not.
    Mr. Pickering. No communication?
    Mr. Rawson. No direct communication from them. We have 
submitted a proposal to them, which you have a copy of, but 
nothing from them coming back to us.
    Mr. Pickering. Okay. No one initiated communication with 
you, and no one has responded to your communication to them?
    Mr. Rawson. That is correct.
    Mr. Pickering. That is correct. And this is a disaster, and 
we have an urgency here, and it is unacceptable not to 
communicate and not to coordinate with the most affected 
parties first. Do you think that the FCC estimate of $132 
million is accurate, is inaccurate? What are the needs based 
on, the schools in Mississippi, and as you talk to your 
colleagues in Louisiana and Alabama?
    Mr. Rawson. We don't know what the accurate figure would 
be. It would take a considerable amount of assessment at the 
individual schools to see what they had before and what they 
need now, and there is so many variables, temporary services, 
the kids moving to another school, will they come back? There 
are many, many variables involved. We cannot put a dollar 
figure on it now.
    Mr. Pickering. My understanding is that the $132 million 
estimate is based on last year's applications, is that correct?
    Mr. Rawson. I believe it is.
    Mr. Pickering. Now, $132 million is based received 
applications, based from in a stable situation with whole 
schools, under normal circumstances. I would assume that the 
$132 million, when you have lost everything, is not an accurate 
projection. Would that be a fair assumption, Mr. Rawson? So you 
would say that the needs would probably be greater than $132 
million?
    Mr. Rawson. I would expect, me, I would say that I would 
expect $132 million for the three States would not be enough. 
One factor about the estimate that was provided, that is a 
verifiable number and that is a good thing. We always want 
verifiable numbers. But the variable to that is, there were 
many schools, especially along the coast and various other 
places, that did not apply for internal connections last year 
because their discount was too low. Or it could be, you have a 
90 percent school in central Mississippi that was destroyed. 
They didn't apply for internal connection last year because 
they already had what they needed. The wiring is in place, the 
equipment is in place. So last year's application figures 
really have nothing to do with what it is going to take to put 
those schools back starting from zero.
    Mr. Pickering. Now, the underlying service providers, 
BellSouth, the other regional communication companies, they 
have had their complete infrastructure wiped out, is that 
correct?
    Mr. Rawson. That is correct.
    Mr. Pickering. And the capacity of what they have been able 
to restore, on a percentage basis, is still very low, 
especially in the coastal counties along Mississippi.
    Mr. Rawson. That is correct.
    Mr. Pickering. So to have comparable capability to what you 
had prior to Katrina is going to require significant 
investment, not only from the private sector, but for the E-
rate to give functional equivalencies to your schools, is that 
correct?
    Mr. Rawson. That is correct.
    Mr. Pickering. Before--Mr. Navin, before the FCC revises 
its estimate, it seems to me that you should talk to the 
affected people in Mississippi, Louisiana, and Alabama, before 
you can make accurate projections so that we as policymakers 
know what is going to be needed to help rebuild the 
capabilities that existed prior to Katrina.
    The other thing is that the failure to communicate and 
coordinate shows a lack of urgency. Now, I have been dealing 
with FEMA a good bit, and I can tell you that the people in the 
States are very frustrated because it takes so long to get what 
is needed, because you have to go through so many regulatory 
red tape, bureaucratic hurdles. And I would hope that the FCC 
would want to take lessons learned from sister agencies and try 
to streamline this process as quickly and as effectively as 
possible, while maintaining accountability. But let us get help 
to the people in a quick way, in an effective way, without a 
lot of red tape, so that these schools can get up and running 
and that the parents will bring their--not only their families 
back, the children back to the schools, but the economy of 
those regions. The economy needs the parents for the jobs, and 
the parents need the schools for their children, and we have 
got to do both.
    Three hundred and sixty-five million dollars now exists in 
a rollover fund, is that correct? Would it make sense--if we 
are trying to do this quickly, would it make sense to send that 
directly to the affected States, to an appropriate entity, 
whether it is the E-rate coordinators or to the State 
Departments of Education, and let them spend it as quickly as 
possible without all the red tape? Mr. Rawson? Or some portion 
of that $365 million. It wouldn't compete with any other 
States, but we could take the $365 million or some number that 
people can agree to, whether it is $132 million or $200 million 
or $250 million or $300 million, send it to the States that are 
affected, send it to the State Departments of Education or the 
E-rate coordinators, and let you all certify, do your 
accounting, your documentation, with FCC consultation, but let 
us cut to through the red tape, get the money and let you 
rebuild your school and hook up to the Internet. Would that be 
quicker? Wouldn't that be better?
    Mr. Rawson. It would be quicker. The oversight, the 
management of that would be a significant and a tremendous 
burden on the State to do so. Then the other part you have to 
consider is making sure you don't make it competitive between 
the States or among the States; that is fair to all the 
entities that were involved. So there would be some issues, but 
I will be honest with you, I thought I thought of everything, 
but you floored me on this one.
    Mr. Pickering. If we did it that way, who would do the 
oversight? Who would do the monitoring so that everybody in the 
country could say, this money went quickly, it went 
effectively, but there was no fraud and abuse? Who would do the 
backend accountability under that proposal?
    Mr. Rawson. If you keep it under the guidelines of the 
current system, as far as electrical service is concerned and 
what is eligible for E-rate discounts, then there would have to 
be a mirroring between the State and FCC and USAC. We 
couldn't--I don't think we could divorce ourselves from that. 
What good is it to steal E-rate funds? But as far as oversight 
of managing the funding and who is eligible and how much they 
get and what they replace, then the States could do that. They 
could certainly do that.
    Mr. Pickering. Would it be quicker, then, to, through the 
next supplemental appropriation bill, take from the $365 
million, give it to the States, but do it based on current FCC 
guidelines and standards, and FCC accountability at the end?
    Mr. Rawson. It would be quicker, but what is the audit 
process in the back of that to make sure the funds were used 
appropriately?
    Mr. Pickering. That would give you both----
    Mr. Rawson. Yes.
    Mr. Pickering. [continuing] quick, efficient, compassionate 
release of the funds, with accountability assured by everybody.
    Mr. Rawson. Correct.
    Mr. Pickering. Thank you, Mr. Rawson.
    Mr. Whitfield. Thank you, Mr. Pickering. Your testimony and 
the questions asked, I am sure, raised some additional issues 
with members of the panel. And so, Mr. Inslee, would you have 
any additional questions you would like to ask at this time? 
Mr. Walden, do you have any additional questions?
    Mr. Walden. I do, Mr. Chairman.
    Mr. Whitfield. You are recognized for 5 minutes.
    Mr. Walden. Mr. Chairman, I would like to ask a question of 
Mr. Feaster. In your discussion, in your testimony here, sir, 
page 15, you talked about this process and the audits, and you 
know that is obviously something this subcommittee has been 
very interested in over the last couple of years since we have 
done our investigation, and I wonder if you can detail for me, 
what was it that caused Chairman Martin to put a halt to the 
contracting process when he took over? Because, you know, there 
had been discussions before this subcommittee about how this 
was online and ready to go and all of that. Can you speak, or 
maybe Mr. Navin can, as to why?
    Mr. Feaster. What I was told during that, the 3-month 
process that was held, it was under review by the chairman's 
office. Then I was later presented with a memorandum from the 
general counsel's office that listed some problems they had and 
concerns that they had with the regional procurement.
    Mr. Walden. Is there not a procurement process in place----
    Mr. Feaster. Well----
    Mr. Walden. [continuing] for this sort of contracting?
    Mr. Feaster. This was, as we keep referring to it as three-
way, is between----
    Mr. Walden. USAC.
    Mr. Feaster. [continuing] my office, USAC, and a 
contractor. And USAC's process does not exactly duplicate the 
FCC's procurement----
    Mr. Walden. I see.
    Mr. Feaster. [continuing] process. And you may want to ask 
Lisa, again, if she agrees with that or not.
    Mr. Walden. Do you agree with that?
    Ms. Zaina. Congressman, I am not completely familiar with 
our procurement process. All of the steps that we take, we try 
to follow as many of the procurement process. And for instance, 
in the FAR requirements, as the Federal acquisition 
requirements, as we can. So we mimic that, in a sense. And I 
understand, from what I hear Mr. Feaster saying, possibly, is 
that there were bidding issues regarding the involvement of the 
FCC as per the FCC and not necessarily in the process itself. I 
don't know if that is what I am hearing or not.
    Mr. Walden. Mr. Navin, can you speak--is it Navin or Navin? 
I am sorry.
    Mr. Navin. Navin is the actual correct pronunciation.
    Mr. Walden. Navin.
    Mr. Navin. But one of my ancestors determined to turn to it 
to Navin for some reason.
    Mr. Walden. Oh, so it doesn't matter.
    Mr. Navin. So it won't sound like an Irish name.
    Mr. Walden. Yes, all right. Can you speak to this? I am 
just perplexed. I mean, that was several months ago. We have 
been pushing hard, as you know----
    Mr. Navin. Sure.
    Mr. Walden. [continuing] about getting these audits going. 
This is a program that has what, $2 billion-plus allocated 
every year and 158 audits. That is about 20 a year that get 
done. And 34 percent of them, according to your own data, show 
there is problems. I mean, we have had recoveries of $30 
million or something. What is the hiccup?
    Mr. Navin. Well, much of this occurred before I came into 
my current position.
    Mr. Walden. All right.
    Mr. Navin. I started in May of 2005, thereabouts. It is my 
understanding that the memo that was presented to Inspector 
General Feaster was--those concerns were memorialized in a memo 
fairly recently, but that the concerns were raised sometime 
earlier in the process. So that very well may explain why it 
got held up.
    Mr. Walden. And when was that? When was it held up, Mr. 
Feaster?
    Mr. Feaster. Well, March through----
    Mr. Walden. June?
    Mr. Feaster. Later than that. Actually, the memo was dated 
August 16, I believe. So it was being held at least until that 
period.
    Mr. Walden. When did that process start to recruit an 
auditor among the three of you? How long does this take to get 
done right? I mean, I am starting to feel a little frustrated.
    Mr. Feaster. The answer to that question is 90 days. That 
is the choice we made, thinking that----
    Mr. Walden. I know, but how far back does this go? When did 
you start this three-way audit process under the prior 
chairman?
    Mr. Feaster. It was 2004.
    Mr. Walden. When in 2004?
    Mr. Feaster. The spring, late spring, I believe.
    Mr. Walden. Do you see why I am frustrated----
    Mr. Feaster. Yes, sir.
    Mr. Walden. [continuing] and why this committee is?
    Mr. Feaster. I am frustrated, also.
    Mr. Walden. I mean, I am not up here to preach at you, but 
you know, this stuff is hard to explain at home, it really is.
    Mr. Feaster. I understand that.
    Mr. Walden. And you know, to have started just figuring out 
how to get an auditor hire, the contract, in the spring of 
2004, it is October of 2005 and you are telling me it is 90 
days 3 months from now, right?
    Mr. Feaster. As we have said several--as I have said 
several times to the committee, we had to go through a second-
best process. I have said on several occasions, that we need to 
do, aggressive oversight, is direct access to the USF, the 
fund.
    Mr. Walden. And I don't disagree with that and----
    Mr. Feaster. And somehow keeps not happening each year. 
Again, in 2006, it was eliminated from our budget request.
    Mr. Walden. By the Congress?
    Mr. Feaster. By the Congress, yes, sir. And that forced us 
into a little convoluted situation with the development of this 
three-way plan.
    Mr. Walden. My time has expired. Sorry.
    Mr. Whitfield. Mr. Pickering, do you have an additional 
round of 5 minutes?
    Mr. Pickering. I do. Mr. Navin, if we wanted to the regular 
order, when would the $211 million announced by the 
commissioner, the chairman, when do you think that that order 
will be done, and the rules for establishing a Katrina fund and 
the processes by which that is going to be done, when do you 
think that will be complete at the FCC?
    Mr. Navin. As I mentioned before, the order, some of the 
finer details of the order are still being debated among the 
chairman and his fellow commissioners. So I don't want to give 
a specific time period. What I can tell you is, we are late in 
the process. We have dotted many I's and crossed many T's, but 
at the same time, for me to set a specific period of time would 
really infringe upon their deliberative process and I don't 
want to do that today.
    Mr. Pickering. Two weeks, 4 weeks, 6 weeks? A frame of 
reference that----
    Mr. Navin. I personally would be--given the speed with 
which we put the order together, given the speed with which the 
chairman and his colleagues were able to come to a unanimous 
consensus on agreement in principle, which in part explains why 
there was not a lot of back and forth with Mr. Rawson, was 
because the four commissioners, or the three commissioners and 
the chairman agreed with his position. So hopefully you will 
see that reflected in the item. But I think that we are very--
we are close.
    Mr. Pickering. And so once that order is completed and is 
close, then the schools in the States would apply, and you 
would see disbursements by when?
    Mr. Navin. I think I defer the disbursement question to Ms. 
Zaina. But I can tell you that the order will be effective upon 
release, if the Office of General Counsel allow us to do that.
    Mr. Pickering. Ms. Zaina? So once they did their order, how 
long would it take you to help the schools in Mississippi?
    Ms. Zaina. Mr. Pickering, we want to be able to disperse 
those funds as quickly and efficiently and as effectively as we 
can, with a mind toward program integrity. And I have not had 
an opportunity to review anything beyond the press release from 
the chairman on September 15. So questions about eligibility, 
programmatic aspects, and implementation are critical for us to 
be able to answer and have answered, and I was very pleased to 
hear Mr. Navin say that they took our September 21 letter and 
they worked very closely from it, in order to establish and 
craft an order based on this. But decisions made on those sorts 
of things, programmatic, the eligibility, and implementation 
issues are critical for us to be able to move this money out to 
the people who are in the greatest need.
    Mr. Pickering. If we were to do a supplemental 
appropriation in the first 2 weeks of November, do you think 
that you all will have the program up and running and 
dispersing funds by the first 2 weeks of November, given where 
you are in the regulatory process, and given what you need for 
program integrity?
    Ms. Zaina. Mr. Pickering, it would depend on, first of all, 
what the details of the commission's proposal is, because we 
can't make policy. That is something USAC can't do. What we do 
is administer the program. So the commission would first have 
to make the policy, we would first have to understand what that 
policy is, and then we would be able to craft something to 
disperse those funds.
    Mr. Pickering. Let us say the FCC complete its work in 2 
weeks, so you have your policy guidelines within 2 weeks, would 
you then be able to disperse to the people and the schools in 
Mississippi before Thanksgiving?
    Ms. Zaina. I can't answer that question, Mr. Pickering, 
because I don't know if all of the answers have been given to 
the questions we raised for purposes of deliberation of the 
commission.
    Mr. Pickering. You know, this--Mr. Chairman, this is the 
same type of answers we get on getting our people help through 
FEMA, and it is just--and there is nothing wrong with the 
current process or the current agencies. Good people and a good 
process in normal times. But the Federal Government and rapid 
response don't go together. And so that just creates a lot of 
frustration for people who need immediate help to rebuild their 
communities. And the communities all along the Mississippi 
coast, the Gulf Coast, they don't have any tax base. It was 
completely wiped out. And so they are going to have to depend 
on getting the Federal resources to rebuild our infrastructure, 
schools, highways, and our communication capability. And what 
we are trying to do is to have some degree of certainty as to 
when this is going to happen so that we can plan the 
rebuilding.
    And so I hope that you all would all coordinate closely 
together, the policy side, the administrative and implementers 
of the policy, and the recipients and those who are going to be 
doing it at the local and State level. And that coordination 
really needs to be improved. I appreciate the commissioners' 
quick announcement in trying to move this regulatory process. 
But if we could have better coordination and greater certainty, 
that helps the emotional well-being as well the recovery of the 
people most affected, and I would urge you all to do that.
    Mr. Whitfield. Mr. Pickering, thank you very much. And I 
would, after listening to all of this today, one thing that is 
clear is that all of us have the best intentions, but we know 
that the school systems in Mississippi, Alabama, and Louisiana 
are now going to be rebuilt without assistance from this 
program, and not going to be reconnected. And I think Chairman 
Martin acted with all good intentions, but I think it is very 
clear from this hearing today that there has been--there is no 
final order. We don't know when the final order is going to be. 
There has been a lack of communication between the FCC and 
USAC, and vice versa, and certainly there has been a lack of 
communication between Mr. Rawson, as the contact person for the 
government of Mississippi, and I guess he submitted a report 
and request for Alabama and Louisiana as well.
    And so despite all of these good intentions, it appears 
that we are not very far down the road when it comes to really 
offering relief to the needed school systems, and recognizing 
that some of the schools have already been destroyed, some of 
them are in makeshift schools, temporary schools, where they 
are meeting now, and I recognize the complexity of the issue, 
but it is quite clear from the hearing that we are a long way 
from delivering much of anything, to be truthful about it. And 
I would hope that within the next 2 weeks, that Chairman Martin 
and others, Mr. Navin, maybe you could get this information to 
them, that we would like an opportunity, Mr. Pickering and 
others on the Oversight Committee, and other affected members 
on the Energy and Commerce, to have a meeting and maybe you all 
could give us a more precise update on what is taking place, 
when do we expect some action on it? So if you all would take 
that back and get back in touch with us, we would appreciate 
it.
    I would also say that we are going to leave this record 
open for 30 days. Mr. Stupak may have some additional 
questions. We found out that there was an avian flu briefing 
going on by Secretary Leavitt. It started at 3:15 and he had to 
get up for that. So we are going to leave it open for any 
additional questions that someone may have for the panel.
    And I do thank you for being here. We appreciate your 
sincerity, and I think you would agree with us that we are a 
long way from being very effective at fulfilling the commitment 
that we have made to the people and school children of 
Mississippi, Louisiana, and Alabama.
    With that, the hearing is adjourned.
    [Whereupon, at 4 p.m., the subcommittee was adjourned.]

                                 
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