September 2004 Announcements

Please click on the topic below to view the most recent announcements:

Applicants and members of the public can now view the SLD’s pilot Eligible Products Database.

The Database consists of products that participating manufacturers have indicated are E-rate eligible as Internal Connections.

The initial public interface provides a browse and search function to find specific product types (such as “router”) and to view products from specific manufacturers. Additional functionality is currently under development.

Twenty-five manufacturers are participating in the pilot program. Enrollment is now open for additional national manufacturers of E-rate-eligible internal connections products.

Go to further information.

On September 13, 2004, the FCC’s Fifth Report and Order (FCC 04-190) [PDF, 352kb] was published in the Federal Register. This order adopts measures to protect against waste, fraud and abuse. was published in the Federal Register.  This order adopts measures to protect against waste, fraud and abuse.  A summary of the order appears below.

The Fifth Report and Order was published in the Federal Register, Vol. 69, No. 176, on pages 55097–55111.  The effective date of the Fifth Report and Order is October 13, 2004, except for §§ 1.8003, 54.504(b)(2), 54.504(c)(1), 54.504(f), 54.508, and 54.516 which contain information collection requirements that have not been approved by the Office of Management and Budget.  The FCC will publish a document in the Federal Register announcing the effective date for those sections.

Following are direct quotes from the Order on these measures:

Framework for recovery of funds. …[F]unds disbursed in violation of the statute or a rule that implements the statute or a substantive program goal must be recovered. (para. 18)  On the other hand, … recovery may not be appropriate for violation of all rules regardless of the reason for their codification. (para. 19)

Amounts disbursed in violation of the statute or a rule that implements the statute or a substantive program goal must be recovered in full.  In situations where disbursement of funds is warranted under the statute and rules, but an erroneous amount has been disbursed, the amount of funds that should be recovered is the difference between what the beneficiary is legitimately allowed under our rules and the total amount of funds disbursed to the beneficiary or service provider.  [The FCC] set forth below a number of examples to illustrate the applications of this principle. (para. 20)

While [the FCC has] not, to date, enunciated a bright line standard for determining whether a particular funding request or activities related to it depart from this standard to a degree that constitutes waste, fraud or abuse, [the FCC] emphasize[s] that [the FCC], and USAC in the first instance, retain the discretion to make such determinations on a case-by-case basis in the course of examining specific factual circumstances. … [I]n specific cases where there is evidence of fraudulent conduct, it would be appropriate to refer such matters to law enforcement officials. (para. 30)

Administrative limitations period for audits or other investigations. … [The FCC] will initiate and complete any inquiries to determine whether or not statutory or rule violations exist within a five year period after final delivery of service for a specific funding year.  …  USAC and the [FCC] shall carry out any audit or investigation that may lead to discovery of any violation of the statute or a rule within five years of the final delivery of service for a specific funding year. (para. 32)

Recovery for de minimis amounts. … [I]t does not serve the public interest to seek to recover funds associated with statutory or rule violations when the administrative costs of seeking recovery outweigh the dollars subject to recovery.  Accordingly, [the FCC] direct[s] USAC not to seek recovery of such de minimis amounts.  [The FCC] direct[s] USAC to provide the Wireline Competition Bureau and the Office of Managing Director sufficient information regarding the administrative costs of seeking recovery of improperly disbursed funds so that a de minimis amount can be determined. (para. 35)

Pattern of rule violations. … USAC should subject any school or library that exhibits systematic noncompliance with governing FCC rules to more rigorous scrutiny in the subsequent funding years.  [The FCC] direct[s] USAC to implement this practice and to refer such situations to the [Wireline Competition] Bureau, as appropriate, for further consideration. (para. 36)

Offset options and booking of recovery amounts.  … [The FCC] eliminate[s] the offset options adopted in the Commitment Adjustment Implementation Order from the fund recovery plan. (para. 38)

… [R]ecovery amounts should be recorded in the accounting records for the Universal Service Fund consistent with Federal Generally Accepted Accounting Principles (GAAP). (para. 39)

Treatment of applicants subject to recovery.  Earlier this year … [the FCC] adopted a rule … providing that the [FCC] shall withhold action on any application or request for benefits made by an entity that is delinquent in its non-tax debts owed to the [FCC], and shall dismiss such applications or requests if the delinquent debt is not resolved … (… the “red light” rule) (para. 41) ...  [The FCC] amend[s its] rules to bring all E-rate beneficiaries and service providers within the ambit of the red light rule.  [The FCC] require[s] all entities that participate in the schools and libraries universal service support mechanism to obtain an FCC Registration Number.  This rule change shall go into effect pursuant to the DCIA Order, and shall apply to all applications and recovery actions pending at that time.  Thereafter, USAC shall dismiss any outstanding requests for funding commitments if a school or library, or service provider, as applicable, has not paid the outstanding debt, or made otherwise satisfactory arrangements, within 30 days of the date of the notice provided for in [the FCC’s] commitment adjustment procedures.  In this regard, [the FCC] expressly recognize[s] that a school or library’s ability to pay outstanding debts may be dependent on action by state or local officials on budgetary requests, and the timing of such budgetary action may be considered in determining satisfactory repayment options. (para. 42)

Applications will not be dismissed pursuant to [the FCC’s] red light rule if the applicant has timely filed a challenge through administrative appeal or a contested judicial proceeding to either the existence or amount of the debt owed to the [FCC].  [The FCC’s] recent DCIA Order expressly notes that appeals made to USAC shall be deemed administrative appeals. (para. 43)

Moreover, even if outstanding debts to the universal service fund have been repaid, [the FCC] think[s] it appropriate to subject subsequent applications from beneficiaries that have been found to have violated the statute or rules in the past to greater review. … Such heightened scrutiny could entail, for instance, requiring additional documentary evidence to demonstrate current compliance with all applicable requirements, or submission of a corrective plan of action to address past errors.  It may also include site visits or other investigatory activities.  Such heightened scrutiny could continue as long as necessary.  [The FCC] envision[s], however, that in most instances, such heightened scrutiny would no longer be necessary in subsequent years, after USAC determines that a pending application is compliant with the statute and [FCC] requirements. (para. 44)

Document retention requirements.  [The FCC] require[s] both applicants and service providers to retain all records related to the application for, receipt and delivery of discounted services for a period of five years after the last day of service delivered for a particular Funding Year.  This rule change shall go into effect when this order becomes effective and, as such, will apply to Funding Year 2004 and thereafter. (para.47)

… [The FCC] provide[s] for illustrative purposes the following description of documents that service providers and program beneficiaries must retain pursuant to this recordkeeping requirement, as applicable:

…[T]he rule … requires that program participants retain all documents necessary to demonstrate compliance with the statute and [FCC] rules regarding the application for, receipt, and delivery of services receiving schools and libraries discounts.  Thus, the descriptive list above is provided as a guideline but cannot be considered exhaustive. (para. 49)

… [S]chools, libraries, and service providers remain subject to both random audits and to other audits (or investigations) to examine an entity’s compliance with the statute and the [FCC’s] rules initiated at the discretion of the [FCC], USAC, or another authorized governmental oversight body. … [F]ailing to comply with an authorized audit or other investigation conducted pursuant to section 54.516 of the [FCC’s] rules (e.g., failing to retain records or failing to make available required documentation) is a rule violation that may warrant recovery of universal service support monies that were previously disbursed for the time period for which such information is being sought. (para. 50)

Technology plans.  … [A]pplicants with technology plans that have not yet been approved when they file FCC Form 470 must certify that they understand their technology plans must be approved prior to the commencement of service.  … [A]pplicants still are expected to develop a technology plan prior to requesting bids on services in FCC Form 470; all that [the FCC is] deferring is the timing of the approval of such plan by the state or other approved certifying body.  Second, [the FCC amends its] rules to require that applicants formally certify, in FCC Form 486, that the technology plans on which they based their purchases were approved before they began to receive service. (para. 56)

[The FCC] hereby grant[s] a waiver of section 54.504(b)(2)(vii) of [its] rules to all applicants that failed to have a technology plan approved at the time they filed their FCC Form 470 or that had obtained approval of a technology plan that covered only part of the funding year, but that obtained approval of a plan that covered the entire funding year before the commencement of service in the relevant funding year. … [H]owever, … this limited waiver does not extend to instances where the applicant failed to obtain an approval of a technology plan at all. (para. 57)

… [T]echnology plans should continue to focus on ensuring that technologies are used effectively to achieve educational goals rather than assuming a greater role in monitoring the procurement process. … [T]he technology plan should focus on “research and planning for technology needs ” rather than act as preliminary RFPs. (para.58)

[The FCC] agree[s] … that the [FCC’s] technology plan requirements should be harmonized with the technology planning goals and requirements of the U.S. Department of Education and the U.S. Institute for Museum and Library Services.  In fact, USAC has already been treating technology plans approved under the Department of Education’s Enhancing Education Through Technology (EETT) as acceptable technology plans subject to one qualification.  Consistent with the [FCC] requirement that program applicants demonstrate that they have the necessary resources required to utilize [E]-rate discounts, USAC has required that the EETT technology plans be supplemented by an analysis that indicates that the applicant is aware of and will be able to secure the financial resources it will need to achieve its technology aims, including technology training, software, and other elements outside the coverage of the [FCC’s] support program.  … [The FCC] adopt[s] a rule that codifies this method of compliance with the technology plan requirement. (para. 59)

[The FCC] also adopt[s] a rule that applicants that do not have EETT technology plans, must demonstrate that their plans contain the following elements:

… [T]he ability of an entity whose technology plan complies with the criteria in the preceding paragraphs to order services is only limited by the scope of its technology plan’s strategy for using telecommunications services and information technology to meet its educational goals. … [A]pplicants are free to switch from wireline to wireless technologies, from high to even higher speed transmission speeds, and to make other similar changes in the services they order as long as those services are designed to deliver the educational applications they have prepared to provide.  Onlyif an applicant desires to order services beyond the scope of its existing technology plan does it need to prepare and seek timely approval of an appropriately revised technology plan. (para. 61)

… [T]o address non-public schools that are not eligible to secure approval of their technology plan from their states … USAC has been … permitting such schools to obtain approval of their plans from entities that USAC has certified as qualified to provide such evaluations and approval.  [The FCC] amend[s its] rules to codify this practice. (para. 63)

Certifications – Form 470.  [The FCC] revise[s] the current language of section 54.504(b)(2)(v) to require applicants to certify that support under the support mechanism is conditional.  [The FCC] replace[s] the current language of section 54.504(b)(2)(v) with the following sentence:  “Support under this support mechanism is conditional upon the school(s) and library(ies) securing access to all of the resources, including computers, training, software, maintenance, internal connections, and electrical connections necessary to use the services purchased effectively.” (para. 66)

[The FCC] will require applicants to certify on the Form 470 that the services for which bids are being sought are the most cost effective means for meeting their educational needs and technology plan goals.  Therefore, [the FCC] modif[ies] section 54.504(b)(2) to add a new certification, section 54.504(b)(2)(vii), which states the following:  “All bids submitted will be carefully considered and the bid selected will be for the most cost-effective service or equipment offering, with price being the primary factor, and will be the most cost-effective means of meeting educational needs and technology plan goals.” (para. 67)

Certifications – Form 471.  [The FCC] amend[s] section 54.504(c) of the [FCC’s] rules by adding a new subsection (1) which will state that the FCC Form 471 shall be signed by the person authorized to order telecommunications and other supported services for the eligible school, library, or consortium and shall include that person’s certification that the entity(ies) is/are eligible to receive support and has/have secured access to all of the resources necessary to make effective use of the service purchased; the entity(ies) is/are covered by technology plans that have been or will be approved by a state or other authorized body; the entity(ies) has/have complied with program rules as well as all state and local laws regarding procurement of services; the services will be used solely for educational purposes and will not be sold, resold, or transferred; the applicant understands that the discount level used for shared services is conditional; and the applicant recognizes that its application may be audited. (para. 68)

... [The FCC] will require applicants to certify on the Form 471 that the selection of services and service providers is based on the most cost effective means of meeting educational needs and technology plan goals.  Therefore, [the FCC] modif[ies] section 54.504(c)(1) to add a new certification, section 54.504(c)(1)(xi), which states the following:  “All bids submitted were carefully considered and the most cost-effective bid for services or equipment was selected, with price being the primary factor considered, and is the most cost-effective means of meeting educational needs and technology plan goals.” (para. 69)

Certifications – Form 473.  Service providers receiving funds through the E-rate program accordingly now must make the following certifications with respect to their participation in the competitive bidding process of the E-rate program in the Service Provider Annual Certification Form, FCC Form 473:

Resolving audit findings.  As modified above, USAC shall continue to recover funds whenever it discovers a statutory or rule violation, as described above.  The standard for determining such a violation is the same standard that [the FCC] use[s] in [FCC] enforcement actions:  specifically, whether a party has willfully or repeatedly failed to comply with any provision of the Act or any rule, regulation, or order issued by the [FCC], based on a preponderance of the evidence. (para. 73)

… [The FCC] direct[s] USAC to submit, no later than 45 days from the publication in the Federal Register, a proposed plan for resolving audit findings.  USAC’s audit resolution plan should detail USAC’s proposed procedures for resolving all findings arising from audits conducted by USAC’s internal audit department, independent public accounting firms under contract with USAC, or government audit organizations.  In addition, USAC’s audit resolution plan should specify deadlines to ensure audit findings are resolved in a timely manner. (para. 74)

[The FCC has] set forth … a general framework for what amounts should be recovered in specific situations, and [the FCC] expect[s] future audits to be resolved consistent with that framework.  To the extent audits in the future raise issues not addressed herein, [the FCC] provide[s] a limited delegation to the Wireline Competition Bureau to address such matters. (para. 75)

USAC shall maintain records of the status of all audit reports and any recommendations made therein, and make such records available to the [FCC] upon request.  USAC also shall submit a report to the [FCC] on a semi-annual basis summarizing the status of all outstanding audit findings.  To the extent findings cannot be resolved within six months, USAC shall describe the status of its efforts, and provide a projected timeframe for completion.  … USAC’s determination concerning the resolution of audit findings does not limit the Enforcement Bureau’s ability to take enforcement action for any statutory or rule violation pursuant to section 503 of the Act. (para. 77)

… [A] number of audit reports have contained findings that indicate noncompliance with USAC administrative procedures.  Consistent with its obligation to administer this support mechanism without waste, fraud and abuse, [the FCC] expect[s] USAC to identify for [FCC] consideration on at least an annual basis all findings raising management concerns that are not addressed by the [FCC’s] existing rules and precedent, and, as appropriate, identify any USAC administrative procedures that should be codified in [FCC] rules to facilitate program oversight. (para. 78)

[The FCC] direct[s] USAC to submit to the [FCC] within 45 days from publication in the Federal Register, and annually thereafter, a list summarizing all current USAC administrative procedures identifying, where appropriate, the specific rules or statutory requirements that such procedures further, and those procedures that serve to protect against waste, fraud and abuse.  [The FCC] shall review those procedures to determine whether action is needed to ensure appropriate recovery, and shall determine whether such procedures should be adopted as binding rules.  Thereafter, USAC and the [FCC] will generally seek recovery of funds disbursed in violation of the statute or a rule that implements the statute or substantive program goal or that serves to protect against waste, fraud and abuse.  USAC and the [FCC] will not seek recovery of funds disbursed in violation of other rules, except to the extent that such rules are important to ensuring the financial integrity of the program, as designated by the agency. (para.80)

Service Providers and Consultants for Service Providers will be able to attend via WebEx the annual SLD TTT Workshop that will be held on September 27-29, 2004. Registration will be available after 3:00p.m. on September 13, 2004 at universalservice.webex.com. Registration will be limited to 98 participants and SLD may need to limit the number of participants per company based upon interest and number of registrations received. Registration will close after the limit has been reached for each session. WebEx will provide notification via e-mail to those registrants accepted to participate in the TTT workshop. For consultants who represent service providers, please use the following SPIN Number 143000000. Please note that all fields must be properly filled out before SLD can review a request to participate. If you have any questions, please send an e-mail to sldwebextraining.

The Schools and Libraries Client Service Bureau will be closed on Monday, September 6, 2004 in observance of Labor Day. The Client Service Bureau will resume normal operations on Tuesday, September 7, 2004 at 8:00 a.m. EDT.