News of the Week

Wave 45 for FY 2014 will be released on Wednesday, March 18th.  Funding for FY 2014 is available for Priority 1 services only.  Priority 2 funding is being denied at all discount levels.  Cumulative funding for FY 2014 is $2.17 billion.

At the urging of a number of applicants, led by the Council of the Great City Schools (“CGCS”), and with concurrence from the FCC, USAC extended this year’s Form 471 application window by three weeks.  The new filing deadline is now 11:59 pm EDT on Thursday, April 16, 2015.

CGCS’ request for a deadline extension cited a number of factors including the late release of state NSLP and CEP data, the need to align funding requests with the new E-rate rules, extreme winter weather, and spring break scheduling conflicts.  For large applicants, however, the primary factor is the added complexity and data entry requirements of the new Form 471.  Although the Form 471 itself shows an estimated average burden of 4 hours per application, CGCS properly notes that many large applications can take days — not hours — to prepare.  A large application may entail thousands of line items, each requiring manual identification of the associated entities.  The new filing process is further complicated by the limitations of the pre-submission (or even post-submission) printing of a completed application, making data entry verification difficult.

In its Special Edition News Brief dated March 12, 2015, announcing the deadline extension, USAC encouraged applicants to file their applications in a timely manner, indicating that applications submitted earlier are likely to be approved first.

The extension of the Form 471 deadline also extends the Form 470 deadline by three weeks to March 19, 2015.  Although it would mean last minute contracting and application work at the end of the extended Form 471 window, the Form 470 extension allows applicants a few more days to initiate procurements for new products and services.

Our newsletter of March 9, 2015, discussed the problem inherent in requesting discounts on Basic Maintenance of Internal Connections (“BMIC”) with a Form 471 that separately assigns funding amounts for all equipment listed on a school-by-school or library-by-library basis.  Although such a breakdown might be useful in estimating total maintenance expenses for a year, it is impossible to know which pieces of equipment, at which sites, are going to break during the year.  As a result, administering funding at this level of detail severely limits an applicant’s ability to recoup discounts on incurred maintenance expenses.

To address this problem, USAC issued a Special Edition News Brief dated March 10, 2015, providing an Alternative Data Entry (“ADE”) process for BMIC requests.  The ADE approach, similar in nature to the workaround proposed in our newsletter, permits an applicant to apply for maintenance discounts on a package of eligible equipment rather than on individual pieces of equipment.  To take advantage of ADE, the News Brief’s instructions must be followed carefully.  In particular, note:

1. The Narrative section for a BMIC funding request must indicate that the ADE process is being used.
2. Applicants with multiple schools or libraries must file separate line items for BMIC expenses at each site.  As such, unless USAC subsequently permits applicants to revise funding commitments on a site-by-site basis as actual maintenance expenses are incurred, the ADE option only solves half of the maintenance problem.
3. Because ADE must work within the existing online Form 471 system, some of the required data entry responses are not always obvious.  In Item 21, for example:
   • Under “Type of Internal Connections Being Maintained,” choose “Miscellaneous.”
   • Under “Type of Product Being Maintained,” choose “Installation, Activation and Initial Configuration.”
   • Under “Quantity,” enter the total quantity of the equipment covered at the entity.
   • Under “Unit,” choose “Hours.”
   • Under “Make of Covered Equipment,” choose “Other.”
   • Under "’Other’ Make," enter "Various Eligible E-rate Equipment."
   • Under “Model of Covered Equipment,” enter "Various."
   • Enter the appropriate “Total Monthly Recurring Eligible Cost.”
4. Because the Item 21 does not show details on the equipment being maintained, clear and accurate documentation of the equipment being covered, and the BMIC work ultimately performed, must be kept for invoice review and audit purposes.

ADE use is optional.  Although we believe it to be disadvantageous, applicants can still request BMIC on an item-by-item basis as was the case earlier in the filing window.  Indeed, USAC indicates that applicants, who have already filed BMIC applications, “do not have to” submit new forms or RAL corrections.  However, because we do not yet know how invoicing will be handled for BMIC funding awarded on an item-by-item basis, applicants may wish to refile using the new ADE guidance and cancel the original BMIC FRN(s) via the RAL correction process. 

Updated Information on CEP:

The Center on Budget and Policy Priorities recently released a Community Eligibility Provision (“CEP”) “Take Up” report indicating that more than six million children now have better and easier access to free school meals through the CEP program.  Putting E-rate aside, we believe that USDA’s CEP program is an effective way to increase NSLP participation in high-poverty schools.  The program is particularly effective at the secondary school level by providing free meals to all students without identifying — and thus socially stigmatizing — low-income students.

Under CEP, direct certification is used to identify students automatically qualifying for free meals — largely those whose families qualify for the Supplemental Nutrition Assistance Program (“SNAP”).  Schools, or groups of schools, with Identified Student Percentages (“ISPs”) of 40% or more qualify for CEP if they are willing to provide free breakfast and lunch to all of their students.  Meal reimbursements up to 100% are currently provided to CEP schools at a rate of 1.6x times the schools’ ISPs.  For higher-poverty schools, with ISPs of roughly 63% or more, this means reimbursement rates at the full 100% level.

CEP was first rolled-out in a pilot program for 2011-2012.  It became available nationwide for 2014-2015, and has already been widely adopted.  The Center’s report indicates that in the 46 states for which data are available, 63% of the eligible high-poverty schools are now participating in CEP.  As shown below, however, participation is far from uniform.

From an E-rate perspective, CEP may provide an incremental discount rate advantage.  As of FY 2015, discount rates for applicants with CEP schools are calculated using the ISP figures and the 1.6x multiplier.  For most high-poverty schools, this means that 100% of their students may be counted as eligible.  This tends to have little effect on single-school applicants, many of whom were already at 90% discount rates before the CEP multiple was adopted.  School districts, on the other hand, may see increases in student eligibility counts for groups of CEP schools which, at the margin, may also increase the districts’ overall eligibility percentage and, in some cases, their E-rate discount rates.

The Center also provides nationwide ISP data for individual schools and/or school groups.  Our initial analysis of this database suggests that the percentages may not be fully up-to-date, but it does provide a relatively comprehensive list of schools and districts participating in CEP.  We expect participation to grow year-by-year.  Enrollment in the CEP program during its pilot phases had to be done by April of the preceding school year.  To encourage greater participation, last year’s deadline was extended through August.  A recent USDA memo has again extended the deadline for LEAs to elect CEP for the next school year until August 31, 2015.  We encourage all eligible schools and districts not already using CEP to seriously consider joining the program.

The S&L News Brief of March 13, 2015, poses and answers a series of frequently asked questions (“FAQs”) on category 2 budgets.  The following questions are addressed:

• How do budgets for Category 2 work?
• What are the Category 2 budgets for schools?  Short answer: $150 per student.
• What are the Category 2 budgets for libraries?  Short answer: $2.30 or $5.00 per sq. ft.
• Is the budget pre-discount or post-discount?  Short answer: Pre-discount.
• Does E-rate funding received prior to FY 2015 count against the five-year budget for Category 2 purchases?  Short answer: No.
• How long will the Category 2 budgets be in effect?  Short answer: At least until FY 2019.
• The cost to update the network and maintain eligible equipment exceeds my budget.  If I spend more than my budget, will that affect my E-rate request?  Short answer: No.
• Are contracts for Managed Internal Broadband Services limited to one-fifth of the five-year budget?  Short answer: No.
• What happens if my plans change and I can’t use all of the Category 2 funding committed in a year?  Can I reduce or cancel funding that USAC has already approved for the current funding year to “free up” money for the next funding year’s request(s)?  Short answer: Yes, but not necessarily easily.  (This is one reason some multi-site applicants are filing FRNs on a site-by-site basis.)
• How do I indicate which products and services should be counted against which budgets?  Short answer: Item 21 allocations.
• Can school districts or library systems shift funds or average costs between their schools and libraries?  Short answer:  No.  Equipment can be shared, but budgets cannot.
• Is the three-year non-transferability of equipment rule still in effect?  Short answer: Yes.
• If a school or library receives Category 2 items that were purchased from another school or library that is closing, would that have any effect on that school’s five-year Category 2 budget?  Complete answer: No.
• Are the service substitution requirements — which permit applicants to replace an approved purchase with a similar purchase, under limited conditions — still in effect?  Short answer: Yes.