[Erate] E Rate Central News for the Week of April 10, 2006

Tue Apr 11 20:33:51 PDT 2006

E‑Rate Central News for the Week of April 10, 2006

*        Wave 43 Funding for FY 2005

*        New Selective Review Procedures for FY 2006

*        FCC Waiver Decision on Contract Requirements

*        NSLP Income Guidelines for 2006-2007

*        USAC Issues 2005 Annual Report

The E‑Rate Central News for the Week is prepared by E‑Rate Central.  E-Rate Central specializes in providing consulting, compliance, and forms processing services to E-rate applicants and service providers.  To learn more about our services, please contact us by phone (516-832-2880) or by e-mail <mailto:services at e-ratecentral.com>  (services at e-ratecentral.com).  Additional E-rate information is located on the E‑Rate Central Web site <http://www.e-ratecentral.com/>  (http://www.e‑ratecentral.com <http://www.e%1eratecentral.com/> ).

Wave 43 Funding for FY 2005

Wave 43 for FY 2005 is scheduled to be released on Wednesday, April 12th, for an estimated $24 million.  Total FY 2005 funding is now $1.53 billion.

Internal Connections funding remains at the 88% discount threshold level, although there is growing optimism that the funding threshold will be reduced to 80%.

New Selective Review Procedures for FY 2006

This week’s SLD News Brief includes an important discussion of the FY 2006 Selective Review process which will begin this month.  The previous years’ 19 page request form has been replaced with a new 9 page version.  It is better organized than the older version, but requires more information.  A blank copy of the new Selective Review Information Request (“SRIR,” pronounced “sir”) is available online at http://www.universalservice.org/_res/documents/sl/pdf/selective-reviews/srir-sample.pdf?WT.mc_id=sl-newsbrief-20060407 <http://www.universalservice.org/_res/documents/sl/pdf/selective-reviews/srir-sample.pdf?WT.mc_id=sl-newsbrief-20060407> .  We intend to provide a more complete analysis of the Selective Review process and the new SRIR in next week’s newsletter.

FCC Waiver Decision on Contract Requirements

The FCC issued a decision last week waiving its requirement that an applicant have a "signed contract" or "legally binding agreement" prior to submitting the Form 471.  By doing that, it undid a Commitment Adjustment that SLD had issued.  We have a number of observations about this decision, but first the facts.

The Illinois School for the Visually Impaired filed a Form 471 on February 4, 2004.  The particular Funding Request Number (FRN) indicated a contract award date of February 3, 2004, and SLD funded the request.  On April 14, 2005, the Illinois School requested a delivery deadline extension and, in its request, indicated that it had not signed the contract with the service provider until April 1, 2005.  By doing so, the school admitted that it had not had a contract in place at the time it filed its Form 471 as required by the E‑rate rules.  The SLD, therefore, issued a Commitment Adjustment (“COMAD”) letter rescinding the funding award.  The Illinois School appealed to SLD and was denied.  It then appealed to the FCC.

In its appeal to the FCC, the Illinois School indicated that it had identified the successful bidder on February 3, 2004, but that it must follow state regulations with respect to contracting with a service provider, and those regulations required it to wait to sign the contract until it had official notification from USAC of funding.  The funding commitment was not issued until January 11, 2005.

The FCC observed in the decision that the Illinois School "technically missed the program deadline for having a written contract in place before filing its FCC Form 471,"  but that was "because it had to adhere to state procurement laws."  The FCC also observed that "while it missed the deadline, the Illinois School had a legally binding contract in place during the funding year and before the vendor began providing services."  It then concluded "that in these cases the policy behind the rule was satisfied even if the Illinois School did not technically meet the requirements of the rule."  It warned that there was no evidence in this case that the Illinois School intended to defraud or abuse the E-rate program, but that the FCC retains "the discretion to evaluate the uses of monies disbursed through the E-rate mechanism and to determine on a case-by-case basis whether waste, fraud, or abuse of program funds occurred and whether recovery is warranted."  It directed USAC to reinstate the funding commitment within 30 days of the order's release.

Observations

The FCC found that the spirit of the rules had been met, even if the letter of the rules had not.  Note, however, that the FCC only waived the contract rule; it did not change the contract rules.  This means that the SLD has to continue to treat similar situations the way it did this one -- by denying funding.  While the Illinois School will retain its funding, many other applicants will continue to be denied by SLD for failure to have contracts in place at the time of the 471 filing with two signatures and two dates!

The approach in this order -- of waiving rules rather than changing them -- has characterized other recent FCC decisions.  If the FCC intends to review these situations on a "case--by-case basis" as it suggested in this order, it is going to need a much larger staff.  There is already a backlog of hundreds of appeals at the FCC, some many years old.

On the other hand, perhaps the FCC is keeping track of these decisions and intends to change the rules to be more applicant-friendly, but is waiting to do that in the rulemaking that should eventually come out of the broad NPRM on Universal Service that the FCC issued in July 2005.

In this case, the appeal to SLD was denied on February 24, 2006.  Even if the appellant submitted then submitted the appeal to the FCC within a week, it's amazing that this decision came out about a month later -- while hundreds of appeals have been waiting for years.  The FCC is not processing these appeals on a FIFO basis!

This order also takes the unusual step of directing USAC to restore the funding within 30 days.  That may indicate FCC impatience with delays at USAC (although we note that the FCC itself is not exactly a model of timely decision making).

NSLP Income Guidelines for 2006-2007

The Department of Agriculture’s annual adjustments to the Income Eligibility Guidelines for student participation in the National School Lunch Program (“NSLP”) for the 2006-2007 school year were published in the Federal Register on March 15th.  The family income thresholds for reduced-price lunches, which are key to the determinant of school E-rate discount levels, were raised from 2.4% to 4.3% (depending upon household size) for schools in the 48 contiguous states.

A copy of next year’s NSLP income level guidelines can be found at http://www.fns.usda.gov/cnd/governance/notices/iegs/IEG06-07.pdf <http://www.fns.usda.gov/cnd/governance/notices/iegs/IEG06-07.pdf> .

USAC Issues 2005 Annual Report

On March 31, 2006, USAC issued its annual report for 2005.  The report is available at http://www.universalservice.org/_res/documents/about/pdf/annual-report-2005.pdf <http://www.universalservice.org/_res/documents/about/pdf/annual-report-2005.pdf> .

By way of introduction, Chairman Brian Talbott (who also serves as Executive Director of the Association of Educational Service Agencies) writes: "Board members have a tremendous responsibility to the American public and a fiduciary duty to the USF to ensure that administration of the USF is sensible, systematic, and service-oriented.  At the same time, USAC, as the administrator, must ensure that its program procedures are suitable, streamlined, transparent, and in compliance with Federal Communications Commission rules."

With respect to recent E-rate accomplishments, the report discusses the upgraded Personal Identification Number (PIN) system that SLD put in place in 2005, the new online Item 21 attachment made available for FY 2006 applications, and USAC's implementation of the special Katrina relief provisions that the FCC promulgated in 2005.

The report also contains extensive information on USAC itself.  For the year ending December 31, 2005, here are a few interesting statistics:

1.	$55.8 million owed to USAC for Commitment Adjustments (most of which is likely attributable to the E-rate program), and $71.0 million in debts have been referred to the FCC under the Debt Collection Improvement Act (which probably includes debts from unpaid collections and other USF programs). 
2.	USAC had 143 employees, a 21% increase over 2004 which was largely attributable to expanded audit initiatives, to the in-house transfer of the FCC Form 499 Data Collection function, and to the creation of an External Relations Division.
3.	Based on 2005 invoice payments, 4,349 service and equipment providers participated in the E-rate program.
4.	Of USAC's total administrative budget of $85.2 million in 2005, E-rate accounted for $61.4 million, or 72%.
5.	USAC's total assets at the end of 2004 were $3.9 billion, of which $3.2 billion was attributable to E-rate.  By the end of 2005, total assets had grown to $4.5 billion of which $3.6 billion was attributable to E-rate.

One other point of interest, at least to those more familiar with public corporation annual reports, is that the 2005 USAC report contains audited financials only for calendar years 2003 and 2004.  All financial and other statistics for the year ended December 31, 2005, are labeled unaudited, projections or estimates.

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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 Management Office Manager and

State E-Rate Coordinator 

Department of Administrative Services

Information Resources Management Division

c/o 530 Airport Road SE

Salem, OR 97301

503.373.1365

pat.middelburg at state.or.us

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