[Erate] E Rate Central News for the Week of August 8, 2005
MIDDELBURG Pat * DAS IRMD PMO
Pat.Middelburg at state.or.us
Mon Aug 8 11:10:27 PDT 2005
E-Rate Central News for the Week of August 8, 2005
* Wave 7 Funding for FY 2005
* Poorly Understood E-Rate Topics: Part 2
The E-Rate Central News for the Week, prepared by E-Rate
Central, is sponsored by the State E-Rate Coordinators' Alliance
("SECA"). Official SLD news is provided in the "Important Notices"
section of the SLD's Web site <http://www.sl.universalservice.org>
(http://www.sl.universalservice.org). Additional E-rate information and
archived copies of this newsletter are located on the E-Rate Central Web
site <http://www.e-ratecentral.com> (http://www.e-ratecentral.com).
* Wave 7 Funding for FY 2005
Wave 7 is scheduled for release on Wednesday, August 10,
2005. Funding in this wave is estimated to be about $28 million for 600
applicants. Total funding for FY 2005 is now $487 million, about 36%
below total FY 2004 funding as of this date last year.
Two weeks ago, we outlined a number of operational PIA
review factors which may be delaying the issuance of FCDLs in FY 2005
asp#b1). Another important factor that is now at work is that the SLD
has been reviewing, but is not yet formally approving, funding for
Internal Connections services (see
Effectively, this means that the SLD has a backlog of
reviewed and "approved" funding requests that can be released as a part
of the first funding wave to include Internal Connections. Last year,
Internal Connections at the 90% level were first funded in Wave 8 dated
July 20, 2004. We cannot accurately estimate how much could be
immediately funded in the first Internal Connections wave, but we would
expect it to be at least $200-300 million. The release of this funding
would go a long way to eliminate the apparent delay.
A key question then is: When will the FCC approve
Internal Connections funding, at least at the 90% level? Based on the
decrease in the demand for Internal Connections funding in FY 2005,
particularly at the 90% level, the SLD should have a much clearer
picture of high discount Priority 2 funding this year than it did at
this point last year. We hope - and expect - that the SLD will be able
to begin funding Internal Connections within the next couple of waves.
It should also be noted that FY 2004 funding was frozen
last year from early August until early December because of
complications imposed by the Anti-Deficiency Act ("ADA"). Since E-rate
funds are exempt from this Act this year, funding comparisons for the
next few months can only improve.
* Poorly Understood E-Rate Topics: Part 2
This is the second of a two-part series discussing 13 topics
which are frequently misunderstood or ignored by E-rate applicants. The
topics have been identified by BearingPoint, the SLD's consulting
contractor, in a series of 290 site visits to schools and libraries. An
updated report on this outreach effort was made to the USAC Board in
July and is summarized on the SLD Web site at
Five of these topics were discussed in Part 1 last week. The
remaining topics are discussed below.
1. Applicants are unaware of the FCC five year document retention
2. Applicants do not have a Universal Service record keeping
E-rate rules require applicants to keep copies of all
documents related to their applications and funding use for at least
five years, in part to support potential audits of previous funding
years. Document retention applies not only to E-rate forms, but to all
supporting information such as technology plans, discount rate support,
competitive bids received, bid selection results, inventory records,
invoices, and payments. A more complete list of suggested documentation
is incorporated in the Form 471 Instructions (see pp. 6-7 at
For retention purposes, the five-year requirement is
calculated from the last date to receive service in the funding year in
question. In many cases, this means that documents must be retained for
six or seven years after their initial creation. Competitive bid
information generated during 2004 in preparation for a FY 2005
application, for example, must be retained at least until the summer or
fall of 2011.
As we've helped applicants prepare for BearingPoint site
visits, we too have experienced problems finding all relevant documents
-- even those less than one year old. Problems attributed with not
having a well-thought out E-rate record system are often compounded by
the turnover of applicant personnel and/or the responsibility for
different types of information by different departments.
We recommend that a separate E-rate filing system be
established, carefully laid out by funding year. (Color-coded files,
matching the SLD's yellow-pink-blue designations are considered a "best
practice.") The files should include all related information, even if
it means duplicating information (such as invoices) typically maintained
by other departments.
Applicants using consultants should insist that they are
provided with copies of all relevant documents generated by the
consultants, and that backup information is properly maintained by the
Applicants should be aware that their inability to find
critical E-rate documents during audits may result in more than a
scolding. The inability to support previous funding can lead to
retroactive commitment adjustments ("COMADs") and demands for the return
3. Applicants do not use a tracking system for invoices and bills.
In addition to maintaining an E-rate record retention
system, it is important to have a system to track: (a) discounts that
are being provided by service providers; (b) BEAR payments pending for
reimbursed discounts; and (c) applicant payments of the non-discounted
share of services.
When service providers discount bills, there are at
least two potential problems. First, it is important for applicants to
check that the discounts being provided are correct. For non-recurring,
one-time charges, discounts are usually easy to spot. The most
important points to check are that the discount percentage is correct,
and that it has been applied to the proper eligible charges. Discounts
applied to variable monthly recurring charges are often more
challenging. The discounts on cellular bills, for example, often appear
one month in arrears and are sometimes associated with individual user
records. This makes it impossible to verify one month's credits
without, at the same time, reviewing the previous month's usage.
Additionally, if discounts are not initiated until midway into a funding
year, it is important to check that retroactive credits are given for
usage during the first part of the year.
A second issue with discounted bills is that applicants
must be able to document the payment of their undiscounted share. This
is a critical E-rate requirement. If applicants don't pay their share
within 90 days of receiving service, the SLD will assume - although this
can be rebutted - that the applicants were not paying their share.
When service providers are not discounting bills, and
applicants are filing BEAR forms to get their discounts retroactively,
it is important to make sure that the BEAR payments are actually
received. There are two stages in the process. When a BEAR is
submitted to the SLD, it is first reviewed and (hopefully) approved.
The target for this stage is 20 days, but it can take longer if
additional information is needed. Once a BEAR is authorized for
disbursement, a notification letter is sent to both the applicant and
the service provider. The actual payment, however, is not sent until
about 20 days later. And, when it is sent, it goes to the service
provider, not directly to the applicant. Technically, the service
provider is then given 20 days to pay the applicant. One further
problem with the BEAR process is that the Form 472 has no place for
applicants to specify contact and address information that the service
providers can use when mailing reimbursement checks.
At best, BEAR reimbursements are a two-month process.
This process can go easily awry if the applicant has no way to track
expected payments and to follow up with vendors if checks are not
4. Applicants are unaware that there is a Universal Service
Most applicants know that the SLD maintains a helpline
(888-203-8100) for E-rate questions. Less commonly known is that the
same number can be used to report alleged violations of program rules.
The SLD encourages anyone aware of such problems to use the same number
to make a hotline call. Callers, who may remain anonymous, will be
referred to a special "Code 9" group. The SLD maintains that all
reports will be investigated.
5. Applicants are unaware of the ease of online filing.
Since over 96% of all Form 471 applications were filed
online for FY 2005, it's difficult to understand why applicants would
express their unawareness of online filing. Perhaps, to be a bit
cynical, applicants were expressing disagreement with the "ease" of
In any event, to review, applicants can file Form 470s,
Form 471s, and Form 486s online. Form 472s (BEARs) and Form 500s can be
filed only on paper. When available, online filing is recommended for
most applicants as a way to cut down on form errors and to speed form
submission and processing.
One warning about online filing should be stressed.
Most applicants are still not taking advantage of the SLD's Personal
Identification Number ("PIN") system that permits electronic
certification of online forms. Without PINs, applicants must make sure
to print out, sign, and mail the associated certification pages
associated with each form in a timely manner. To encourage broader
acceptance and use, the SLD plans to revise the PIN process to make it
easier for applicants.
6. Applicants could not describe the competitive bidding process.
Depending upon the dollar amount and nature of services
being procured, most public schools and libraries are subject state or
local procurement rules that require formal bidding procedures. The key
distinction for E-rate purposes is that FCC rules require competitive
bidding for all E-rate services by all E-rate applicants (including
private schools). At a minimum, applicants must post their service
requirement needs for new contracts, or tariff and month-to-month
services, in a Form 470. They must wait at least 28 days, and provide a
fair opportunity for service providers to bid on their services, before
selecting their vendors.
Applicants are not required to select the lowest cost
vendors, but they are required to select the "best values." The E-rate
rules provide that factors other than price may be considered, but that
the greatest weight must be given to price. Ideally, applicants will
assess competing service provider bids using a bidding matrix such as
the one provided on E-Rate Central's Web site at
If service requirements are posted in a Form 470, but
only one bid is received (possibly by a current service provider whose
existing rates may be treated as a bid), a memorandum to file should be
generated to document this situation.
7. Applicants are unaware of their discount level.
Most applicants should be aware of their E-rate discount
levels, or should be able to get a quick approximation of current levels
by looking at a previous Form 471 application. At a minimum, applicant
business and technology personnel should know that E-rate provides
20-90% discounts based on the income levels of their student base as
determined by the percentage of students eligible for free or reduced
price lunches under the National School Lunch Program ("NSLP"). The
calculation and optimization of discount rates is discussed in more
detail by E-Rate Central at
8. Applicants did not have an understanding of the repercussions
for falsely certifying application forms.
Two words of warning: "Martha Stewart." Over the past
year, there have been several stories in the press about individuals who
were sentenced to jail for false testimony. Although the E-rate program
employs various review and audit procedures to check on the validity of
application requests and invoices, it relies heavily on applicant and
service provider certifications. Both the SLD and the FCC take these
certifications seriously; so should applicants and service providers.
Many E-rate forms include the following explicit
warning: "Persons willfully making false statements on this form can be
punished by fine or forfeiture, under the Communications Act, 47 U.S.C.
Secs. 502, 503(b), or fine or imprisonment under Title 18 of the United
States Code, 18 U.S.C. Sec. 1001."
Disclaimer: This newsletter may contain unofficial information on
prospective E-rate developments and/or may reflect E-Rate Central's own
interpretations of E-rate practices and regulations. Such information is
provided for planning and guidance purposes only. It is not meant, in
any way, to supplant official announcements and instructions provided by
either the SLD or the FCC.
Patricia K. Middelburg, MEd, PMP
Project Manager and State E-rate Coordinator
Department of Administrative Services
Information Resources Management Division
955 Center Street NE, Room 470
Salem, OR 97301-2556
pat.middelburg at das.state.or.us
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