E-Rate Central News for the Week of October 5, 2009

· FY 2008 and FY 2009 Funding Status

· SLD Fall E-Rate Training: Part 2 — Facility Closings

· E-Rate Updates and Reminders

· Schools and Libraries News Brief dated October 2^nd — Eligibility

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. Additional E-rate information is located on the E‑Rate Central Web site (http://www.e‑ratecentral.com). To learn more about our services, please contact us by phone (516-801-7804) or through our Contact Us Web form (http://www.e-ratecentral.com/contactUs/contactForm.asp).

FY 2008 and FY 2009 Funding Status

Wave 21 for FY 2009, which had not been mentioned in the SLD’s previous week’s News Brief, was released on October 1^st for $40 million. Wave 22 is scheduled for release on October 6^th for $14 million. This brings cumulative FY 2009 funding to $1.04 billion. Priority 2 funding is still being provided for discounts of 85% or more, but may ultimately be available at or below 80%.

Wave 68 for FY 2008 will be released on October 7^th for $10 million; the cumulative funding year total is currently $2.34 billion. Priority 2 funding at 87% is still pending.

SLD Fall E-Rate Training: Part 2 — Facility Closings

Slide #6 from the Advanced PIA Review session of the SLD’s fall training (see http://www.universalservice.org/_res/documents/sl/ppt/2009-training/2009%20Advanced%20PIA%20review.ppt#273) notes that, when a school or library is closed, PIA will request:

Revised student enrollment count & discount percentages
Closing/merger effective dates
A cost allocation to remove services and funding from shared FRNs or a list of FRNs that should be canceled
A statement from a school official (e.g., Superintendent, Board of Directors)
Equipment transfer notifications for equipment purchased within the last three years

We have recently noticed an increase in PIA requests for information regarding actual or possible closing or mergers of schools or libraries. These requests are occurring not only during, but outside of, the normal PIA application review process. There is some indication that the SLD is using Google searches or other Internet news monitoring services to track such activity. One can only envision some Homeland Security-like group — perhaps called the “School Yard Security Department” — hard at work on this process.

There was a suggestion during training that an applicant has an affirmative responsibility to alert the SLD whenever a facility is closed. As indicated in the last bullet of the afore mentioned slide, E-rate rules on equipment transfers do require applicants to notify the SLD when discounted equipment, less than three years old, is moved from a closed school to another eligible facility. But we are aware of no general rule or procedure requiring applicant notification of school or library closings. For large city school districts, in particular, this would require constant attention.

Nevertheless, when such a facility is closed, it is important to understand the SLD’s intentions with regard to discount rate adjustments and cost allocations. The following guidelines would appear to apply:

1. If a school is closed before the start of a funding year, but after the application has been filed, it makes sense to revise the associated Block 4(s). For a school district, this may or may not result in a slight change in the aggregate discount rate. For a library located within that district, whose discount rate depends on total district student numbers, there should be no effect on the discount rate.

2. If a school is closed in the midst of a funding year, technically changing the aggregate discount rate of a district, we presume that the SLD would not try to apportion the district’s discount rate accordingly (i.e., not try to calculate discounts based on 65% for five months and 64% for seven months).

3. E-rate expenses related to a specific facility that is closed should clearly be removed from a pending application. Technically, for an application which has already been funded, such expenses could be removed by an applicant-filed Form 500 or by a USAC-initiated commitment adjustment (“COMAD”). More practically, the applicant and/or the service provider must simply be careful to ensure that projected, but not incurred, expenses not be included in USAC invoices.

4. One controversial issue involves the proper treatment of expenses contractually incurred for a group of schools or libraries when one facility within the group is closed. This issue relates to the cost allocation bullet on the SLD’s slide. Consider the following example: a school district is in the third year of a five-year contract for a wide area network initially serving four schools. The cost is $1,000 per month. One school is closed half-way through the year. Under the assumption that E-rate discounts can be provided only on services received, USAC would argue that WAN expenses for the second-half of the year must be cost allocated. On a simplistic basis, this would mean only $750 per month would be eligible for the last six months. The district, however, remains contractually obligated to pay $1,000 per month for its WAN, regardless of whether it services three or four schools. Ultimately, this issue may have to be addressed in an FCC appeal.

E-Rate Updates and Reminders

Key October Filing Deadlines:

Less than one month remains to file invoices with USAC for discounts on recurring services received during the 2008-2009 fiscal year. The October 29th invoice deadline applies to both applicant BEARs (Form 472s) and service provider SPIs (Form 474s).

The deadline for filing a Form 486 (containing the necessary certifications on technology plan approval and CIPA compliance) is the later of 120 days from either the funding date or the start of services. The Form 486 filing deadline for FY 2009 funding awarded in waves 1-10 (with a service start date of July 1, 2009) is October 29, 2009.

Fall E-Rate Training:

The fifth of the eight SLD training sessions will be held this week in Orlando on Thursday. Schedules and registration information for the remaining three one-day SLD workshops are available on the SLD’s Web site. Copies of the 2009 Training Slides are available at http://usac.org/sl/about/training-presentations/training-presentations-archive/training-2009/fall/materials.aspx.

Schools and Libraries News Brief dated October 2^nd — Eligibility

http://www.universalservice.org/sl/tools/news-briefs/preview.aspx?id=259

The SLD News Brief for October 2, 2009, appears to be the first in a series on the E-rate application process. This one discusses the eligibility of both applicants and service providers to participate in the E-rate program.

As a general rule, K-12 schools providing primary and secondary education, as defined by state law, and recognized by their state departments of education, are eligible applicants. Similarly, public libraries eligible to receive LSTA assistance from their state library administrative agencies are also eligible for E-rate.

One unique aspect of E-rate is that, because the program is not funded with tax dollars, school eligibility is not limited to public schools. Private and parochial schools are also covered. The only limitation for schools is that they be non-profit — although they can be managed under contract by a for-profit company — and that they not have an endowment greater than $50 million.

On a state-by-state basis, governed by individual state education laws, the following types of students and/or educational facilities may also be eligible:

Educational service agencies (BOCES, IUs, ESCs, etc.)
Pre-K and/or Head Start
Juvenile justice
Adult education (referring to secondary education programs, not community continuing education programs)

The eligibility of these students and/or facilities is reviewed by USAC at least every two years in consultation with state education departments. State eligibility lists are available on the SLD Web site in the Eligibility Table for Non-traditional K-12 Students and Facilities (http://www.universalservice.org/sl/applicants/step01/non-traditional-K-12/) and in the Eligibility Table for ESAs (http://www.universalservice.org/sl/applicants/step01/esa-guidelines/esa-eligibility-table.aspx). The following two points are important in dealing with non-traditional students and facilities:

If non-traditional students are ineligible, such students shouldn’t be included in the school’s or school district’s discount rate calculations; and
To the extent that non-traditional students, and/or facilities devoted to such students, are ineligible, a corresponding portion of school- or district-wide E‑rate expenses must be allocated out of each associated funding request.

With only a few restrictions, any company (or individual) can be an E-rate service provider. To do so, however, they must have registered with USAC by filing a Form 498 and have been assigned a Service Provider Identification Number (“SPIN”). For each funding year in which they are participating, they must also file a Form 473 Service Provider Annual Certification (“SPAC”). Applicants can determine service provider SPINs, and confirm annual SPAC filings, by using the SLD’s SPIN Contact Search (http://www.universalservice.org/sl/tools/search-tools/spin-contact.aspx).

The two most important restrictions are as follows:

Providers of telecommunications services (including VoIP) must be registered as contributors to the Universal Service Fund by filing a Form 499-A with the FCC. Form 499-A status is indicated by a “Y” in that column in the SPIN Contact Search database.
Subject to certain limitations, designed to prevent conflicts of interest and “double-dipping,” eligible ESAs can be both applicants and service providers (see Educational Service Agency Guidelines or http://www.universalservice.org/sl/applicants/step01/esa-guidelines/default.aspx).

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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.