A former Chicago schools official raised concerns more than a year ago that millions of dollars in computer equipment meant to help connect cash-strapped schools to the Internet sat in warehouses for years, according to an internal probe by the firm that oversees the program.
A report obtained by the Tribune indicates that Elaine Williams, the district’s one-time chief technology officer, wrote a memorandum in December 2002 that questioned the ability of SBC Communications Inc. to manage the federally funded program for the district.
Weeks later, she was out of a job.
Chicago schools officials have insisted her departure was unrelated to her warnings. But a congressional committee investigating possible fraud and mismanagement in the technology program nationwide said Friday that it finds her dismissal troubling.
“Clearly, we are deeply concerned about the circumstances surrounding her termination and we are looking into this,” said Ken Johnson, communications director for the House Energy and Commerce Committee.
The report, produced by the Chicago-based law firm Mayer Brown Rowe and Maw, also distributes blame for the mix-up, saying missteps and miscommunications by many of the entities involved–including SBC–prevented the equipment from reaching schools in a timely manner.
According to the report, Williams sent her memo to schools chief Arne Duncan and school board President Michael Scott, alleging that “SBC amassed approximately $8,000,000 in material and equipment inventory in violation of [federal] program rules.”
The memo prompted Scott to contact SBC President William Daley, younger brother of Mayor Richard Daley. He ordered employees to review the matter, and that review eventually led the company to commission the law firm’s investigation.
The Mayer Brown report is dated Jan. 14, 2004. Two days later, SBC refunded $8.8 million in federal money received through the E-rate program, which finances the wiring of the nation’s schools and libraries to the Internet.
“All the players involved in this bear some of the responsibility,” said Selim Bingol, an SBC spokesman. No money was lost or stolen, and no equipment misplaced, he said.
“We are talking about a small percentage of network gear that did not get installed by a certain due date,” Bingol said. “We discovered it. We took it to the authorities and we reported on it.”
The program, supervised by the Federal Communications Commission, raises its $2.25 billion in annual funding from fees tacked onto consumer telephone bills. The House committee has been investigating E-rate because of concerns that millions of dollars may have been misspent since the program began in 1999.
Committee members this month sent a letter to Chicago schools officials requesting audit records and other documents related to the district’s E-rate participation.
Peter Cunningham, a spokesman for the Chicago Public Schools, said Williams resigned from her job for a “host of management reasons” unrelated to the E-rate program. He said she was provided a confidential settlement when she left.
Williams was out of the country Friday and could not be reached for comment, according to a man who identified himself as her husband.
Although the report doesn’t suggest criminal wrongdoing by the Chicago schools or by SBC, it does point to a troubling level of confusion and missteps that E-rate program critics believe are not unique to Chicago.
“The E-Rate program has been riddled with problems,” Johnson, of the congressional panel, said. “Some people will blame the schools. Others will blame the vendors. But in reality the [Federal Communications Commission] is responsible for this boondoggle.”
Insufficient administrative oversight by the FCC and the other agencies it has delegated to administer the E-rate program has created a “recipe for disaster,” Johnson said.
The picture painted by the Mayer Brown report, which relied heavily on interviews with SBC employees, including William Daley, is of federal and school bureaucrats as well as corporate officials who failed to understand the rules of the program.
The report says some problems occurred simply because SBC employees weren’t adequately trained in the requirements of “contractor obligations in a federally-funded program.”
The report spreads the blame around, faulting federal officials, Chicago schools, SBC and TeamWerks, an SBC subcontractor hired to assist the telecommunications company in managing the project and to meet Chicago Public Schools requirements that a minority- or woman-owned firm get a piece of the project.
Under the E-rate program, started during the last years of the Clinton administration, needy schools and libraries receive monetary assistance in buying computer equipment needed for Internet access at significant discounts.
The program’s rules generally require school districts to buy the equipment in the same year the money is received. The equipment must be installed the same year as well.
But Chicago Public Schools hit snags early. Delays occurred as 250 city schools individually applied for and received E-rate money, frustrating SBC as district officials repeatedly revised the lists of schools needing installations.
“We understand from the distributors that some schools were canceled after materials were packaged and waiting on the loading dock for shipment to schools,” the report said.
By early June 2000, only $12 million of the year’s $66.7 million in E-rate money had been spent. Facing a use-it-or-lose-it deadline, district officials appeared determined to find ways to spend the balance by the end of September of that year.
According to the report, Williams recommended to Paul Vallas, then Chicago schools chief, that the unspent money be returned to the federal government. “That recommendation was rejected,” the report said.
Instead, Chicago schools approved SBC’s purchase of material in bulk in July 2001. SBC was paid for the purchases, and under its contract with the city schools received a 9.5 percent management fee as well.
But much of the computer-related material–including network routers, switches and cables needed to link computers–was never shipped to schools, instead piling up in three warehouses.
Complicating matters, subcontractor TeamWerks sent an e-mail to the federal agency in 2001 asking if it was all right to use items in a later year if they had already been purchased but not installed. Federal bureaucrats essentially said yes, though it appears that was the wrong answer, the report said.
Cunningham of the Chicago schools declined to respond to specific findings in the report, including that the schools were responsible for a number of the delays in wiring buildings. But he said the school system has made changes in the last year to address problems.
Chicago Public Schools now requires quarterly reports and internal audits of all its technology programs funded through E-rate, as well as requiring program managers locally to undergo training on federal programs’ rules and regulations.
In addition, Cunningham said, the schools have selected a new contractor to manage the program, Chicago-based Blackwell Consulting Services.
The six-year-old E-rate program has provided city schools with about $310 million for technology upgrades at all 600 of the city’s public schools. “At the end of the day,” Cunningham said, “the money got paid back and the schools got wired.”
