Report 2005-116 Summary - January 2006

California K-12 High-Speed Network:

The Network Architecture Is Sound, but Opportunities Exist to Increase Its Use

HIGHLIGHTS

Our review of the California K-12 High-Speed Network (High-Speed Network) found that:

  • The State most likely spent less on the building and operation of the High-Speed Network by expanding the existing infrastructure used by the University of California and other higher education institutions than it would have spent for a separate network with comparable services.
  • A study conducted by our technical consultant in 2005 found that the High-Speed Network has adequate bandwidth for potential growth but is not overbuilt. Furthermore, our technical consultant found no compelling technical or financial reason to abandon the existing High-Speed Network.
  • Because of the lack of specific performance measurements in state law and because the Imperial County Office of Education (ICOE), which currently administers the project is in the early stages of developing a suitable plan for measuring the success of the High-Speed Network, it is difficult to determine whether the network accomplishes the Legislature's goals.
  • As of June 30, 2005, the Corporation for Education Network Initiatives in California (CENIC) the nonprofit that built and currently operates the network, held $13.6 million in High-Speed Network Funds and it expects to receive an additional $3.6 million related to telecommunication discounts in fiscal year 2005-06. These funds are being used to keep the network operating in fiscal year 2005-06 or are held for future equipment replacement.
  • Opportunities exist for ICOE to strengthen its agreements with CENIC to better protect the State's interests. Specifically, its agreements lack detailed service-level agreements, do not ensure that it retains ownership of tangible nonshared assets, and do not ensure that interest earned on advance payments made to CENIC or funds held by CENIC on its behalf accrue to the benefit of the High-speed Network.
  • Our legal consultant reviewed the expenditure of funds by CENIC for the High-Speed Network and found that CENIC did not develop or acquire any assets that would have been eligible for protection under patent, copyright, or trade secret law.

RESULTS IN BRIEF

This audit supports the basic conclusion that the State most likely spent less on the building and operation of the California K-12 High-Speed Network (High-Speed Network)1 by expanding the existing infrastructure used by the University of California (UC) and other higher education institutions than it would have spent for a separate network with comparable services. It is also clear that, based on a study conducted by our technical consultant in 2005, the current High-Speed Network provides ample bandwidth to support current applications used by the K-12 education community, but it is not overbuilt. Furthermore, our technical consultant found no compelling technical or financial reason to abandon the existing High-Speed Network.

The High-Speed Network connects the vast majority of kindergarten through 12th grade (K-12) schools, school districts, and county offices of education statewide to each other, to California's universities and community colleges, and to the Internet. During fiscal years 2000-01 through 2003-04, the Legislature appropriated more than $93 million to UC for the High-Speed Network. UC then contracted with the Corporation for Education Network Initiatives in California (CENIC), a nonprofit corporation that it helped create, to implement the project. In fiscal year 2004-05, the Legislature switched the funding over to the California Department of Education (Education), appropriating $21 million in that year for the project. Education then selected the Imperial County Office of Education (ICOE) to act as lead agency for the High-Speed Network, and ICOE also contracted with CENIC. For fiscal year 2005-06 the Legislature did not appropriate any additional funding to the High-Speed Network.

The Legislature provided no specific goals to UC in spending the appropriations for the High-Speed Network project during fiscal years 2000-01 through 2003-04. Because both UC and CENIC stated that they intended to enter into an agreement that was a contract for services and not to acquire tangible equipment, UC did not include in its agreement with CENIC certain provisions. For example, the agreement between UC and CENIC did not contain provisions to address the ownership of tangible, nonshared assets, such as the equipment located at the county offices of education and school districts. Additionally, UC did not include a provision to limit the use of the interest earned on state appropriations for the High-Speed Network. Because CENIC views its agreement with UC as a contract for services, it considers the $1.5 million in interest earned on these funds available to use for its other activities.

Although the Legislature shifted control of this project from UC to Education and ultimately to ICOE, it still has not enacted legislation that clearly prescribes the goals to be accomplished with these funds. Moreover, ICOE entered into agreements with CENIC under terms that were substantially similar to those contained in UC's agreement. Specifically, ICOE's agreements continue to lack detailed service-level agreements, which would state the specific level of service CENIC is required to provide. Additionally, its agreements do not ensure that ICOE retains ownership of tangible, nonshared assets, or that interest earned on advance payments that it makes to CENIC or funds that CENIC holds on ICOE's behalf accrue to the benefit of the High-Speed Network. As of June 30, 2005, the amount of funds available for the High-Speed Network, according to CENIC's accounting records, was $13.6 million. In addition, in fiscal year 2005-06, CENIC expects to receive an additional $3.6 million related to telecommunication discounts.

The variability in the level of state funding for the High-Speed Network project has negatively affected the efforts of the ICOE to expand network use in the K-12 education community. Specifically, ICOE has been unable to fund its Advancing Network Uses Grant Program. Finally, although it states that the 58 county offices of education, 887 school districts, and 7,039 schools are currently hooked up to the High-Speed Network, ICOE's and CENIC's success in promoting network use is impossible to measure because neither entity has set up a process to do so.

RECOMMENDATIONS

To ensure that the High-Speed Network meets its expectations, the Legislature should consider enacting legislation that prescribes the specific goals and outcomes it wants from the High-Speed Network project.

To ensure that the High-Speed Network is appropriately managed, Education should ensure that ICOE includes the appropriate service-level agreements in its ongoing contracts with CENIC and other service providers for the High-Speed Network project.

To ensure adequate protection of the State's interest in tangible, nonshared assets, Education should direct ICOE to transfer ownership of these types of assets to the State.

To ensure that the interest earned on advance payments made to CENIC, or funds that CENIC holds on ICOE's behalf are used to benefit the High-Speed Network, Education should direct ICOE to amend its agreement with CENIC to stipulate the allowable use of the interest earned.

Finally, Education should ensure that ICOE develops a method to measure the success of the High-Speed Network.

AGENCY COMMENTS

UC indicated that it is pleased with the overall conclusions of our report. Education and ICOE stated that they look forward to working with the other segment partners and CENIC to fully address the recommendations of the State Auditor. CENIC believes that the report provides useful information that highlights its value to the educational institutions it serves and that the report supports its belief that it can serve the unique needs of the education community more cost effectively than any other public or private organization.


1The California K-12 High-Speed Network was originally named the Digital California Project: K-12 Statewide Network when it was started in fiscal year 2000-01. In fiscal year 2004-05, when stewardship of the network was given to the Imperial County Office of Education, the aspects of the network applicable to K-12 participants were then titled the K12HSN. We call it the High-Speed Network throughout this report.


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