ERate

1
E-Rate
Overview, Update, and Key Issues Fall 2003
10/26/03
2
Workshop Agenda

• ER 101 Overview of E-Rate
• Basic application and funding process
• Technology plans and CIPA
• Summary of FY 2004 changes

3
Workshop Agenda, cont.

• ER 201 Tricks of the Trade
• Eligible services
• Discount rates
• Item 21 attachments
• Applicant reviews
• Deadlines, extensions, and changes
• Appeals
• SLD database resources

4
Workshop Agenda, cont.

• ER 301 Advanced Topics
• WANs and on-premise equipment
• Program compliance issues
• The cross hairs problem

5
ER 101Overview of E-Rate
6
General Framework

• 20-90 discounts on three types of services
• Telecommunications
• Internet Access
• Internal Connections (Networking)
• Annual applications for funding
• Annual cap of 2.25 billion PLUS!
• Priority 1 Telecom and Internet Access Full
  funding
• Priority 2 Internal Connections Allocated
  funding
• Basic SLD overview
• http//www.sl.universalservice.org/overview

7
Eligible Services

• Telecommunications
• Basic telephone (local, long distance, and
  mobile)
• Advanced telecom (Centrex, T-1, WANs, etc.)
• Internet access (not content)
• Internal Connections
• Network wiring
• Servers, routers, hubs, switches
• PBXs and key systems

8
E-Rate Opportunities and Issues

• Important source of technology funding (FY 1998
  2003)
• 11.5 billion nationwide 1.5 billion for
  NYS
• Time-consuming, bureaucratic, and confusing
  program
• Forms 470, 471, 472, 479, 486, and 500
• Service eligibility and discount rate issues
• Long lead time, competitive bidding procedures
• Strict application review process
• Additional procedures for consortiums
• Program may not be for everyone

9
Basic E-Rate CyclePre-Commitment

• Form 470 - Describes services required
• (fall) - Posted on SLD Web site
• Form 471 - Calculates allowable discount rate
• (winter) - Requests funding for specific services
• - Requires billing or contract documentation
• PIA - Detailed SLD review of applications
• (spring/summer) - Often requires additional
  documentation

10
Basic E-Rate CyclePost-Commitment

• Form 486 - Confirms use of approved services
• (summer) - Certifies tech plan and CIPA
  compliance
• - Appeals and SPIN Changes as required
• Funding Alternatives (throughout year)
• SPI - Service provider discounts bills
• (Form 474) - Schools pay only undiscounted
  amount
• BEAR - Discounts reimbursed after the fact
• (Form 472) - Based on actual bills paid

11
Form 470 Purpose

• Identifies applicant
• Describes services needed
• Must wait 28 days after filing
• Select vendors and sign contracts
• File Form 471

12
Form 470 Block 1

• FY 2004 July 1, 2004 June 30, 2005
• Contact Person For SLD and vendors
• Can use Item (11) for alternative vendor contact
• Do NOT let a vendor prepare Form 470 or act as
  applicant contact

13
Form 470 Block 2

• Item (7) Tariff, MTM, or contract
• Items (8) - (10) Services needed by category
• Can reference RFP if available
• List should be relatively detailed and
  consistent with technology plan

14
Form 470 Block 2 Examples
15
Form 470 Automatic Rejection

• Wrong version (should be May 2003 or April 2002)
• Missing applicant and contact information
• Other missing blocks/pages
• Missing or invalid certification
• Wrong program year specified
• Not many Form 470s are rejected, but many
• are filed too late for Form 471 filings

16
Form 470 Filing Online

• Assures earliest Allowable Contract Date
• Provides check on field information
• Direct entry or interview mode
• Important Must use electronic signature or mail
  signed certification page to SLD

17
Form 471 Purpose

• Calculation of discount rate(s)
• Requests specific discount on each tariffed,
  monthly, and contract service
• Separates eligible from ineligible costs
• An important and complex form

18
Block 4 Discount Rates

• Based on need
• Poverty
• Defined by National School Lunch Program
• http//www.fns.usda.gov/cnd/governance/iegs/i
  egs.htm
• Location
• Rural vs. Urban
• All flow from individual school data
• School districts use weighted average of school
  discounts
• Libraries use aggregate school district data

19
Discount Percentages
of Students Eligible for School Lunch Program
Discounts
20
School District
Complete Worksheet A, all columnsColumn (7)
gives site-specific discountsItem (10c) gives
the shared (weighted average) discount
21
Library within a School District
Library needs the basic student data from the
districts Worksheet A, but calculates its
discount differently
22
Library System
Complete Worksheet B, all columns Column (4)
provides site-specific discountsItem (10c) gives
the shared discount
23
Consortium
Complete Worksheets A or B, as appropriate
Complete Worksheet C to calculate consortium
discount(s).
24
Block 5 Funding Requests

• Separate Block 5 for each
• Service category
• Service provider
• Sites (aggregate or separate)
• Key Block 5 links and dated
• Form 470 and Allowable Contract Date
• Discount rate worksheet or entity number
• Vendor SPIN
• Contract and service dates

25
Form 471 Block 5 Examples

• Local telephone
• Internet access
• New LANs
• PBX maintenance

• tariff (monthly)
• month-to-month billing
• contract (non-recurring)
• 2nd year of multi-year contract

26
Local Telephone (tariff)
Description
Form/Item
27
Internet (month-to-month)
Form/Item
Description
28
LANs (new contract)
Form/Item
Description
29
PBX Maintenance (2nd Year)
Form/Item
Description
30
Form 471 Automatic Rejection

• Wrong version (should be Oct. 2002 or 2003)
• Missing applicant and contact information
• Other missing blocks/pages
• At least one Block 4 worksheet
• At least one valid Block 5 funding request
• Invalid certification
• Filed after the window closes (February 4, 2004)

Form 471s can be rejected completely, or funding
can be reduced or denied on individual FRNs
31
Form 471 Filing Online

• Promotes early SLD processing
• Provides check on field information
• Use Form 471 Application to resume data entry
  at any point before submission
• Important Must use electronic signature or mail
  signed certification page to SLD within the
  application window
• Attachments must be mailed to SLD

32
Form 471 Review Process

• Data entry of mailed applications
• Problem resolution review
• Receipt Acknowledgment Letter (RAL)
• Program Integrity Assurance (PIA)
• Requests for supporting documentation
• Seven day response cycles
• Separate 471 for Priority 1 may speed approval
• Item 25 and Selective Reviews
• Funding Commitment Decision Letter (FCDL)

33
Post-Commitment Form 486

• Confirmation of service usage and start date
• The SLD wont process any E-rate invoices on any
  FRN without a valid Form 486
• Certification of technology plan and CIPA
• Before consortium can file Form 486
• Must collect Form 479s from all members
• or reduce funding accordingly
• Filing deadlines are critical

34
Post-Commitment Changes

• Can change services/equipment/terms
• Requires Service Substitution letter
  (http//www.sl.universalservice.org/reference/S
  erviceSub.asp)
• Tip Keep contract specifications flexible
• Can change service provider (SPIN)
• Requires SPIN Change Request letter
  (http//www.sl.universalservice.org/reference/Spin
  Change.asp)
• Use Form 500 to cancel or reduce funding

35
Funding Vendor Discounts
Service Provider

• Discounts applicant bills and files Form 474
  (SPI) with SLD
• May ask applicant for applicable account and
  eligible usage data
• Must pay non-discounted amount
• Should carefully review discount calculations

Applicant
36
Funding Discount Reimbursements
Applicant

• Pays bills in full and summarizes eligible
  payments
• Files Form 472 (BEAR) with SLD
• Must acknowledge BEAR before submission
• Is paid by SLD, then must pay applicant

Service Provider
37
BEAR Payment Issues

• After processing, SLD sends BEAR Notification
  Letter to vendor and applicant
• Approval is on individual FRN basis
• Denials or rejections may require resubmission or
  appeal
• Checks sent to vendors approximately 20 days
  later
• Vendors should pay applicants within 20 days of
  receipt
• No standard vendor practices on applicant
  payments
• Applicants must carefully track BEAR payments
• Bankruptcy of vendor may require Good Samaritan

38
Technology Plan

• Five SLD technology plan criteria
• Goals and Objectives
• Needs Assessment
• Professional Development
• Budget
• Evaluation
• No Tech plan required for basic phone service
• Tech plans approved for no more than 3 years
• Forms 470/471 should be consistent with plan

39
Childrens Internet Protection Act (CIPA)

• Requires technology protection measures
• Applies to all Internet-connected computers
• Libraries are no longer exempt
• Requires Internet Safety Policies
• Need for public hearing
• Does not apply to telecom-only applicants

40
New FY 2004 Developments

• Increased funding opportunities
• New Forms 470/471(2002 versions still OK)
• Increased compliance focus on
• Technology plans
• Competitive procurement practices
• Legally binding contracts

41
New FY 2004 Developments, cont

• Newly eligible services
• Expanded definition of educational use
• All employee cellular and paging services
• Alarm lines, firewalls, NIC cards
• Voicemail
• Web hosting
• Newly ineligible services
• Dark fiber
• VoIP service
• Tightened eligibility
• Basic maintenance
• UPS, storage, and file servers
• http//www.sl.universalservice.org/data/pdf/Eligib
  leServicesList101003.pdf

42
ER 201Tricks of the Trade
43
Discount Rate Documentation and Optimization

• NYS Web site NSLP data
• Student eligibility vs. participation

44
NYSED Web Site for School NSLP Enrollment Data

• http//portal.nysed.gov/pls/cn_port/mel3_pkg.elig_
  enroll_query
• Features
• Search feature for individual school or group
• Data available on month-by-month basis
• Pro forma enrollment numbers for Provision II
  schools
• Note Must use with Internet Explorer, not
  Netscape

45
Eligibles to Enrollment
46
Comparison of Free/Reduced
47
Participation vs. Eligibility Alternative
Measures

• Comparable measures (milk/breakfast programs,
  Medicaid/public housing data)
• Sibling searches
• Survey (can extrapolate from 50 response rate)
• Feeder system not approved
• Note SLD reviews using state lunch program
  participation
• data, so document all higher eligibility data

48
Item 21 Attachments

• Required to describe and document actual services
  requested on Block 5
• Types of documentation
• Copy of contract
• Vendor quote or bill
• Applicant-provided description
• Warning greater detail greater review
• http//www.sl.universalservice.org/reference/Form
  471item21Attachments.asp

49
SLD Telecommunications Example
50
SLD Internet Access Example
51
SLD Internal Connection Example
52
Eligible Services

• New Eligible Services List
• http//www.sl.universalservice.org/reference
  /eligible.asp
• Eligibility Allocation
• SLD will consider any rational allocation
• Guidelines may or may not exist
• Servers used for eligible and ineligible
  functions
• WANs provided by non-telecom providers
• Vendors/manufacturers can assist
• Beware of 30 Rule

53
30 Rule Warning

• If more than 30 of requested amount is
• Ineligible The entire FRN may be denied
• Not Priority 1 The entire FRN may be
  re-categorized as Priority 2
• Hint When in doubt break it out!

Or unsupported
54
Applicant Reviews

• Increasing review of all E-rate forms
• Data entry of mailed applications
• Problem resolution review
• Minimum processing standards issues
• Program Integrity Assurance (PIA)
• Requests for supporting documentation
• Seven day response cycles
• Selective (or Item 25) Reviews
• On-site audits

55
Selective Reviews

• Special PIA review team
• Typically initiated with 14 page fax of questions
  and instructions. Sample available at
• http//www.sl.universalservice.org/dat
  a/pdf/MegaFax.pdf
• Target criteria Large requests or suspected
  vendor problems
• Areas of concern
• Technology plans
• Budget to cover all needed resources (see Form
  471 Item 25)
• Competitive procurement (bids and evaluations)
• Consultants
• Contracts

56
On-site Beneficiary Audits

• In-depth, on-site audits
• USAC staff or FCCs OIG staff
• Professional outside auditors (e.g. KPMG)
• Approx. 80 last year, 100 this year
• Target criteria Random (with weighted
  probabilities) or suspected problems
• Areas of concern
• Technology plans Supporting resources
• Discount rate Invoices
• Competitive procurement Equipment
  verification
• http//www.sl.universalservice.org/reference/Audit
  FactSheet.asp

57
Suggested Recordkeeping

• Support of Form 471 calculations
• Discount percentages
• Requested dollar amounts
• Bids received (incl. losing bids or no bids)
• Bid evaluation documentation
• Contracts
• Delivery, testing, and inventory documents
• Bills and proof of payment

58
Critical Deadline Issues
59
Critical Deadline Issues, cont.

• Consequences of missed deadlines
• Denial or loss of funding
• Partial year funding
• Deadline extension requests
• Service delivery (or FRN) extensions
• http//www.sl.universalservice.org/refere
  nce/ServiceDeliveryDeadlines.asp
• Invoice deadline extension requests
• http//www.sl.universalservice.org/referen
  ce/InvoicingDeadlines.asp
• PIA response exceptions

60
Supplier and Service Changes

• SPIN change requests
• Corrective changes http//www.sl.univer
  salservice.org/reference/CorrectiveSpin.asp
• Operational changes http//www.sl.univers
  alservice.org/reference/OperationalSpin.asp
• Deadline last invoice date
• Special case Good Samaritan changes
• Service substitution requests
• http//www.sl.universalservice.org/reference
  /ServiceSub.asp
• Deadline last service date

61
SLD and FCC Appeals

• Must be filed within 60 days of decision
• Appeal cycle is lengthy
• Post-decision procedures, if successful
• SLD decisions have two-steps Decision FCDL
• FCC decisions often referred back to SLD for
  resolution
• When in doubt, appeal

62
SLD Online Database Resources

• Service Provider names, SPINs, and contacts
• Form 470s and Form 471s
• Funding status information
• FRN Extension Table
• Detailed FRN Data Requests
• Funding
• Form 486 filing
• Authorized disbursements

63
Portal to the SLD Databases

• Detailed Form 470 and Form 471 data
• Local, state, and national funding data
• Detailed FRN funding data
• Billed entity numbers
• Form 471 application status
• Service provider information
• FRN extension status

64
ER 301Advanced Topics
65
WANs and On-Premise Equipment

• On-premise equipment is Priority 2, unless
• Integral component of Telecom/Internet service
• Provided by same vendor
• Maintained by same vendor
• Ownership will remain with vendor
• Installation lt 67 of total charges
• Used only for eligible Priority 1 service
• Independent of applicants internal network
• Non-exclusive usage
• http//www.sl.universalservice.org/reference/OnPr
  em1.asp

66
WANs and On-Premise Equipment, cont.

• WAN eligibility requirements
• Service of eligible telecom provider (with a Y)
• Not purchased (or equivalent)
• Installation charges gt500K amortized
• WAN eligibility issues
• Exclusive use (non-rural)
• Dark fiber systems
• Internet allocation
• On-premise equipment
• http//www.sl.universalservice.org/reference/wan.
  asp

67
Program Compliance Issues

• Greater focus on waste, fraud, and abuse
• PIA scrutiny, including selective reviews
• Audits by SLD, FCC, and contractors
• Vendor investigations by SLD, FCC, DOJ, etc.
• Consequences for applicants and vendors
• Denied or reduced funding
• Delayed funding decisions
• Retroactive commitments (COMAD)
• Criminal indictments

68
Prohibited Applicant/Vendor Practices

• Vendor involvement in the selection process
• Vendor can not be involved with the Form 470
• FCC expects fair and open bidding process
• Applicants not paying non-discounted portion
• Vendor cannot forgive or offset with free
  services
• Vendor-arranged grants are suspect
• Non-competitive pricing or excessive services
• Service cost must be primary factor in selection
• Increasing requests for bid documentation

Primary Targets Small 90 schools
69
Specific Vendor Prohibitions

• Competitive Bidding Process General
• SP cannot be involved in competitive bidding
  process except as bidder
• SP must remain NEUTRAL at all times
• SP may not interfere with applicants affirmative
  duty to conduct a fair and open bidding process
• SP may not exert undue influence over an
  applicant
• Competitive Bidding Process Funding
• SP may not provide funding for applicants
  undiscounted portion
• SP may not waive applicants undiscounted portion

70
Specific Vendor Prohibitions, cont.

• Competitive Bidding Process Form 470
• SP or its consultant may not complete the Form
  470
• SP or its consultant may not sign the Form 470
• SP or its consultant may not file the Form 470
• SP may not prepare the RFP
• Technology Plans
• SP may not act as technology plan approver
• Roles for Independent Consultants
• Independent consultants cannot also be service
  providers bidding on the Form 470
• Beware of service providers acting as independent
  consultants

71
Bid Assessment Matrix
http//www.e-ratecentral.com/applicationTips/bidAs
sessment/FRN_Bid.xls
72
Contracts

• Required for all services except tariff and MTM
• Must be legally binding (under state law)
• Cannot be verbal
• Quotes are not sufficient
• Must be signed at least by applicant
• State master contracts are acceptable
• Many New York OGS contracts available
• http//www.ogs.state.ny.us/purchase/snt/wired
  index/nywired.asp
• Can reference OGS Form 470
• http//www.ogs.state.ny.us/purchase/snt/wiredinde
  x/default.asp
• FY 2004 Form 470 420390000462667 AC
  D 11/19/2003
• OGS contracts and E-rate rules may require mini
  bids

73
The Cross Hairs Problem

• Most applications are reviewed expeditiously
• 80 by July 1 for FY 2003
• 90 by July 1 for FY 2004
• Delayed application processing
• Larger and/or more complex applications
• Summer deferments
• Targeted application reviews
• Larger funding requests (incl. consortia)
• High visibility services (e.g. WANs)
• FRNs involving questionable vendors

74
SLD Help

• Web www.sl.universalservice.org
• Help lines 888-203-8100 (General)
• 888-276-8736 (Fax questions)
• question_at_ universalservice.org

NYSED Help

• Web www.e-ratecentral.com/us/nys
• Weekly news (via e-mail)
• Help lines -- Fax [phone] --
  E-mail question_at_ e-ratecentral.com
• OGS www.ogs.state.ny.us/purchase