A national program created to give poor children access to the Internet has become so bogged down in mismanagement and waste in Chicago that the public school system is two years behind in wiring classrooms and has forfeited more than $50 million earmarked for projects here.
A Tribune investigation of thousands of pages of government records shows a program fraught with disorganization, billing irregularities and politically connected no-bid contracts.
And with new deadlines looming, Chicago Public Schools must spend tens of millions of dollars more or risk losing the progress that has been made.
Six years after the Clinton administration launched “E-rate”–taxing phone customers across the nation on their monthly bills to pay for computer and communications technology in schools and libraries–Chicago school officials say that the program has been a success locally, and that 85 percent of schools have “every classroom, lab and library fully connected to the Internet.”
But the district’s records for 544 schools show that only 274, just over half, have Internet access in every one of those rooms.
Even as the federal technology funds go unspent, some school principals say they have had to scrape together money to wire their schools, while a handful of elementary schools have no Internet access at all.
At Wentworth Elementary School in the impoverished Englewood neighborhood, no classroom has Internet access. Frustrated, the school’s principal, Effie P. McHenry, found money elsewhere in her budget to wire a makeshift computer lab.
“I’m hoping that my children will eventually come not into the 21st Century but into the 20th Century,” McHenry said.
Problems throughout U.S.
In the last year, E-rate has come under scrutiny nationwide, with Congress holding hearings on abuses ranging from fraud in San Francisco to waste in Puerto Rico, where $30 million in Internet equipment went unused. Nationally, the program has committed $10.5 billion since 1998, but only $6.5 billion has been spent so far.
In the first five years, Chicago had the worst spending record of the five school districts approved for the most E-rate money, including New York City, Los Angeles, Philadelphia and Houston.
Congressional investigators visited Chicago last month to look into irregularities, including $8 million in computer-related equipment that sat unused in warehouses for years.
They also asked questions about the firing of the former schools technology chief, Elaine Williams, in 2003 shortly after she criticized the performance of SBC Communications Inc., the district’s main contractor.
A subcommittee of the U.S. House Energy and Commerce Committee is expected to hold public hearings in Washington in late September to question Chicago school officials.
Since E-rate began, the federal government has approved $389 million for telecommunications and Internet wiring projects in Chicago schools. But the district has spent only $269 million so far, according to a Tribune analysis of federal records.
Over several years, the district forfeited $51 million by failing to spend the money within the deadlines set by the government.
School officials dispute the word “forfeited,” saying the money remains in the E-rate program. But for Chicago schools to benefit, the district must go through the entire application process again, competing with schools and libraries across the nation.
The district also received extensions to keep from losing another $33 million. And Oct. 29 and Nov. 11 deadlines are approaching for spending $36 million.
Despite the problems, schools chief Arne Duncan said E-rate has been invaluable in bringing technology to disadvantaged children. He said that 85 percent of city school children are poor, and that 90 percent are minorities.
“Without this access, they would be denied the opportunity to compete with their peers everywhere else,” Duncan said. “This, in a real and concrete way, has bridged that digital divide.”
Bridging a gap
That was the noble promise made when E-rate began under the Clinton administration, which sought to bring the technological advantages wealthy schools enjoy–especially the use of the Internet–to children in poor communities.
In Chicago, documents reviewed by the Tribune under the state’s Freedom of Information Act show that E-rate ran into problems from the beginning.
In 1998 and 1999, Chicago Public Schools allowed principals to apply for their own technology money and to hire their own contractors.
One Chicago contractor, LS International Inc., billed for $1.3 million in work at Marshall Metro High and Lawndale Elementary that “was never legally authorized” and “was never completed,” according to school documents.
LS International returned the $1.3 million to the federal government and has been prohibited from doing any work with the district for three years. Lee Lu, president of LS International, said that at the time, he believed contractors could bill the full amount before the job was done.
“There was a processing mistake,” Lu said. “There was no intention to defraud money.”
Another contractor, Solai & Cameron, was paid twice after duplicate paperwork was sent to the government, prompting a review by the district’s inspector general’s office.
Company president Mallar Solai said that after the company received the duplicate payment, executives talked with federal officials and expanded the project at Gladstone Elementary School to account for the additional $107,300 paid.
In an attempt to save money and reduce confusion, district officials moved in 1999 to centralize the E-rate program and awarded SBC a contract for up to $154.7 million to oversee work districtwide.
But still the program was saddled with disorganization and delays.
Company spokesman Dave Pacholczyk said SBC lost $2.6 million on its wiring work because of delays it blames partly on school officials.
“As the projects got delayed and pushed back and subcontractors’ hours kept mounting. The bills added up,” Pacholczyk said. “So while SBC anticipated making money, it lost money” on that part of the program.
Chicago Public Schools, however, has faulted SBC for many of the problems it has encountered. This year the district replaced the San Antonio-based telecommunications giant with a new contractor, Blackwell Consulting Services of Chicago.
The district also has replaced some personnel and now conducts quarterly audits to uncover billing irregularities, abuse and fraud.
Behind schedule
The E-rate program has been in such disarray, and the backlog of work so great, that Chicago Public Schools did not apply in 2003 for new money to wire schools. This spring, the district completed the projects funded in 2001-02; officials are starting work on projects funded in 2002-03.
As problems mount, the cash-strapped school system has reached into its operating budget and awarded contracts for nearly $2 million to auditors, consultants and lawyers, including the Washington firm Hogan and Hartson, which is charging up to $425 an hour to help the schools with the congressional investigation.
The school district has paid $410,000 for audits by accounting firm KPMG, hired shortly after questions cropped up about SBC’s performance in the E-rate program.
And $240,000 in no-bid work was awarded to the Barrett Group Inc., a politically connected consulting firm in Alexandria, Va., in part to help school officials obtain extensions and avoid forfeiting funds.
Andrew Barrett, the firm’s managing director, is a former commissioner for the Illinois Commerce Commission and the Federal Communications Commission, which oversees E-rate. Barrett declined to discuss specifics of his work but said he was giving the district a break: Instead of charging his usual $400 an hour, he is only charging $300 an hour.
In another no-bid contract, the school district awarded about $905,000 to Minnesota-based JDL Technologies Inc. for work, including research on the risks and benefits of wireless technology, and development of a district plan for making the most of E-rate funding opportunities.
School Board President Michael Scott acknowledged that he had recommended JDL Technologies in July 2002 and helped arrange meetings with school officials at the request of his longtime friend, businessman Dwain Kyles.
Kyles, son of a renowned civil-rights figure and lifelong friend of Rev. Jesse Jackson’s family, made headlines as owner of the E2 nightclub, where 21 people died in a stampede in February 2003.
When JDL won the contract, it hired minority subcontractor Phoenix Co., a small technology company run by Kyles’ close friend Donna Gaines.
Gaines said that school officials were familiar with JDL, which had $12,000 in Chicago schools’ contracts in 2000 and 2001, before Scott made his recommendation.
She added that Scott works hard to assist small and minority businesses with government contracts, which was a reason why Scott helped her and Kyles.
“He’s trying to level the playing field for minority-owned firms,” Gaines said. “And for that he should be applauded.”
Scott said that during his three years as school board president he has referred “hundreds of vendors” for school business.
“I’m in a position to refer people for business all the time,” Scott said.
Tom Lapping, JDL Technologies’ president and chief executive officer, did not comment.
Practice worries some
While no-bid contracts often are legal and warranted in certain circumstances, they still bear close scrutiny, said David Morrison, deputy director of the non-partisan Illinois Campaign for Political Reform.
“There’s a history in the state and in the city of abuses of no-bid contracts,” he said.
JDL also got a push from the schools’ chief technology officer, Elaine Williams. She recommended in December 2002 that JDL Technologies replace SBC–then run by Mayor Richard Daley’s younger brother, William–as the main contractor.
However, she noted, “There may be significant political pressure to retain SBC.” JDL did not win that contract.
Williams wrote a Jan. 23, 2003, memo to Scott criticizing SBC’s performance, sending copies to Duncan and other high-level school officials. Within a week, Duncan fired Williams.
Four months later, Williams landed a consulting job with JDL and was hired full time in November as the company’s vice president for government programs and legal counsel.
Duncan said Williams’ criticism of SBC had “absolutely zero” influence on her departure.
“I was looking for someone to take the department to the next level, a new direction,” Duncan said. “It’s not a critique of Elaine. Elaine did not have a technology background.”
But even as the district seeks that new level, it is busy accounting for the past.
In documents school officials provided to congressional investigators in August, the district boasts that 85 percent of elementary and high schools have Internet access in every classroom, library and lab.
To arrive at that figure, the district took the total number of rooms with Internet access–18,180–and divided it by the total number of classrooms, labs and libraries citywide.
But an analysis of the 544 schools for which the district supplied records shows that only 274 meet the criteria officials cited.
And in 75 schools, mostly elementaries, fewer than half of the classrooms have Internet access.
As an alternative to expensive, hardwired networks, Chicago Public Schools plans to provide wireless Internet connections in the coming months to several schools that still do not have full access, officials said.
They said a limited budget for building projects hurts the district’s ability to take full advantage of the federal technology program.
Although E-rate pays substantially for Internet-access projects–such as high-speed transmission lines and cable modems–school districts still have to come up with funds to cover a host of other expenses, including personal computers and electrical upgrades needed in aging school buildings.
A wealth of blame
In discussing delays, city school officials put some of the blame on the federal government, which has had trouble processing applications quickly.
Other big cities face similar obstacles, both in the bureaucratic process and in unexpected failures.
In Los Angeles, for instance, the school district fell behind schedule in 2000 when a major contractor went bankrupt, according to James Alther, chief technology director for Los Angeles Unified School District.
Still, Alther said, 623 of the district’s 660 schools have Internet connections in every classroom–94 percent–and the remaining schools should be fully connected within the next year.
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Half of Chicago schools not yet fully wired
Six years after a federal program began to equip schools and libraries nationwide, about 50 percent of the city’s schools do not have Internet access in all rooms.
CHICAGO SCHOOLS WITH INTERNET ACCESS
By percent of wired classrooms, libraries and labs
Less than half wired: 75
50-99% wired: 195
100% wired: 274
Of the nation’s five largest E-rate school districts, Chicago Public Schools has spent the smallest portion of its allocated money to provide technology for students.
MONEY SPENT ON WIRING AND COMMUNICATIONS PROJECTS
Between July 1, 1998, and June 30, 2003
%% DISTRICT PERCENT SPENT TOTAL AVAILABLE
ON TECHNOLOGY FROM PROGRAM
New York City Dept. of Edu. 83.4% $730 million
Los Angeles Unified School Dist. 83.1% $410 million
Chicago Public Schools 72.7% $292 million
Philadelphia School Dist. 92.3% $131 million
Houston Indep. School Dist. 77.3% $145 million
%%
Sources: Chicago Public Schools, Universal Service Administrative Company
Chicago Tribune
