Funding Status
The first funding wave for FY 2011 is still expected later this month following FCC approval of USAC's PIA review procedures. Assuming no significant FCC changes, the SLD expects to fund approximately 18,000 Priority 1 applications in Wave 1. Priority 2 funding is not expected to fall much below 90%.
No funding wave is scheduled this week for FY 2010. Wave 86 for FY 2009 will be released on Monday, May 23rd, for $2.7 million. Cumulative funding for FY 2009 stands at $2.79 billion.
PIA Questions on "Similar" Telephone Numbers
A number of applicants located in rural areas are receiving PIA inquiries concerning their establishing Form 470s and possible procurement violations identified by USAC. The key paragraph in the inquiries is based on the following template:
This Form 470 contains contact information associated with [service provider name and SPIN]. Program rules prohibit service providers from participating in the competitive bidding process other than as a bidder.
Confusingly, however, the Form 470s in question do not appear to have any service provider contact information. The only apparent links between Form 470s and the named service providers are that the telephone numbers of the Form 470 applicant contacts are "similar" to the telephone numbers of the named service providers.
In every case we've examined, the applicant/service provider telephone numbers differed only by the last two digits. The three-digit area codes are the same; the three-digit exchange codes are the same; and the following two digits of the telephone number are the same. For example:
School contact number: (XXX) XXX-XX04
Service provider number: (XXX) XXX-XX18
The PIA inquiries then go on to ask whether the Form 470s referenced are the correct ones. If so, PIA wants to know if the applicant contacts have "ever been employed by, or otherwise affiliated with" those service providers. PIA also wants to know whether the SPINs in question have incorrect contact information (and will be updated) or are no longer active (and will be deactivated) — hardly the applicants' responsibility.
This is truly bizarre. Apparently USAC is: (a) using system resources to identify these similar telephone number pairs; (b) postulating that there is a relationship; (c) asking PIA to inquire; and then (d) requiring applicants to show that there is no relationship. The only possible rationale we see for assuming a relationship between similar numbers like these would be if either the applicant or the service provider had a block of 100 DID numbers (likely meaning that the two numbers were extensions off the same system).
Based on the cases we examined, we noted the following:
- The similar number pairs arose in smaller towns or areas served by a single telephone exchange. This drastically increases the chances that an E-rate applicant and a local service provider might have telephone numbers differing only by the last two digits.
- It is relatively simple to do a reverse number search to determine that the two numbers are listed to two different entities at two different addresses.
- Although in some cases the applicants were actually using these local providers, this does not appear to be a criterion for the PIA inquiries. In fact, we found a couple of cases in which the applicants had never used those service providers, and the providers had not been active for years.
The worst case we encountered involved a small rural library that was just getting back into E-rate after a seven-year hiatus and was applying for less than $700 in telephone discounts. The "similar" number once belonged to a local computer service company, probably no longer in business, which had not had an E-rate customer since FY 2000 and was no longer listed in the SLD's SPIN Contact database. Given this type of review, we suspect that it is unlikely that the library will bother applying again. What a waste of time for both PIA and applicants.
CRN-Related Black Holes
The Clinton Herald in Iowa reported last week that a former Clinton Community School District business official had pled guilty to stealing over $1 million from the District (see story). Of more interest was the news that the employee owned a private company providing E-rate consulting services to various other school districts across the country, and had misappropriated approximately $49 thousand (presumably in BEAR reimbursement checks) from her client base.
Both the E-rate and non-E-rate aspects of this case are interesting. The money that was stolen from the Clinton CSD was largely not E-rate reimbursements. A comprehensive Iowa State audit, released last September identified 177 checks not properly deposited in District accounts, mostly from state, county, and city agencies (including Medicaid), other community school districts, student registration fees, and insurance companies. From the audit, we were able to identify one FY 2007 BEAR payment from Qwest. The majority of Clinton's E-rate funding in that year was done using the SPI process.
So far, the most important E-rate aspect of the case is what has happened to the consultant's E-rate clients. There is some confusion as to the name of the consulting company, initially called Camanche Consulting Services ("CSS"), and subsequently changed to Technology E-Rate Consulting Services ("TECS"). The firm's name apparently changed again when it applied with USAC for a Consultant Registration Number ("CRN") to Federal Funds Assistant ("FFA").
Since consultants are now identified on applications by their CRNs, we were able to identify 48 applicants who listed FFA as a consultant on their FY 2011 Form 471s. (Perhaps not surprisingly, Clinton itself was not a client in FY 2011.) FFA filed 58 applications requesting $1.26 million in E-rate discounts. The SLD Application Status Tool shows that many of these applications are under review, including some "Available for Quality Assurance," but a surprising number at this stage are still showing only "Certified-in-Window."
More telling is the FY 2010 status of applications associated with the 48 applicants. Of these applicants, 14 did not file applications in FY 2010. Two applicants have already been funded for FY 2010, but FFA was not the contact on their applications. Of the remaining 22, nonehave yet been funded. We suspect that few or none of these applicants have been told if and/or why their applications are on hold, but we can make an educated guess.
This appears to be a classic "black hole" situation; the only question is the depth of the hole. Historically, we have seen applications for a number of applicants, all with at least one FRN associated with a given service provider, held up for two or more years while USAC investigates
purported E-rate violations by the provider. Typically, applicants in this situation are told only that their applications are "under review."
Although USAC has been able to identify most applications associated with a given consultant in the past (based on application contact information) the assignment of CRNs will make this process a lot easier. Hopefully, because we believe most E-rate consultants are both qualified and ethical, we won't see a number of CRN black hole situations. But USAC now has an easier tool to explore consultant situations.
In fairness to FFA, it should be noted that the current contact for FFA has reported that she bought the business from the guilty party, and that that party is no longer involved in the business. Unfortunately, until funding is resumed, USAC most likely has some more work to do before concluding that FFA and its clients are in full E-rate compliance.
E-Rate Updates and Reminders
Recent FCC Appeal Decisions:
The FCC released three individual applicant appeal decisions, each of which contains at least a small lesson. The new decisions are summarized briefly below.
| DA 11-895 |
Denied an appeal of a USAC decision rescinding an earlier funding commitment and seeking a recovery of funds for a competitive bidding violation. The applicant admitted making several mistakes in taking services under a state master contract before filing a Form 470 and, alternatively, was unable to show that the state had competitively bid the service. (Indeed, the applicant supplied a Form 470 for a master contract from another state.) The applicant argued, however, that these were unintentional clerical errors that should be forgiven. The decision seems to indicate that there is a limit to how many mistakes the FCC can overlook. |
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DA 11-896
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Denied another appeal of a USAC decision rescinding an earlier funding commitment and seeking a recovery of funds for a competitive bidding violation. In this case, the applicant had filed proper Form 470s, and had elected to select a vendor covered by a state master contract, but had been unable to document the vendor selection process. An applicant filing a Form 470 is free to select a vendor off a state master contract list, but must follow all prescribed bidding rules — and be able to document doing so. |
| DA 11-897 |
Granted an appeal for which an applicant's discount rate was reduced to 20% when USAC rejected survey data that did not include all required student information, but provided no opportunity for the applicant to correct its errors. The decision gave the applicant a limited 60-day window to provide the additional data. |
E-Rate Regulations in Plain English:
The Associated Press ran an interesting story last week entitled "Feds must stop writing gibberish under new law". It concerns the new Plain Writing Act signed by President Obama last fall. When the Act takes full effect in October, "federal agencies must start writing plainly in all new or substantially revised documents produced for the public" (although, as AP notes, the "government will still be allowed to write nonsensically to itself"). "By July, each agency must have a senior official overseeing plain writing…"
It will be interesting to see how the Plain Writing Act affects the E-rate rules. We have never been particularly bothered by the language used in FCC or USAC E-rate documents. Much of it is pretty good. What makes E-rate difficult is finding the actual regulations and/or interpretations thereof. Many of the FCC rules are set forth (and/or changed) in a series of Orders, but there is no easy index to the Orders or to the often important footnotes. Other FCC rules are promulgated in an even less accessible series of appeal decisions. (See FCC Orders and Appeals).
Most of the E-rate rules and the critical interpretations can be found on USAC's E-rate Web site, but not all in one place. The four areas we find most useful are:
What would really be helpful would be a consolidated E-Rate Manual setting forth all rules, regulations, and implementing interpretations and procedures. Perhaps what we need is a new "All-in-One Place Regulation Act."
The SLD's News Brief for May 20, 2011, focuses on the way applicants can check for non-regular funding waves, but also includes a list of the PIA team managers, the states their teams cover and a hot link to the managers' e-mail addresses. The News Brief suggests that applicants e-mail their PIA managers to provide updated or additional summer contact information. It should also be noted, however, that applicants have the right to contact these managers to resolve any issues they might be having with PIA review of their applications.
The News Brief also reminds applicants of the fall training schedule, noting that it has already had to start waiting lists for a few of the sessions (including the ever-popular one in Washington, DC).
Regular funding waves are easy to track on the SLD Web site using the Automated Search of Commitments tool. These are the almost weekly waves that are issued for funding years still under active review (at the moment FY 2009 and FY 2010).
Non-regular waves are released less frequently on no particular schedule. They include:
- Generally smaller waves for previous funding years (currently FY 2008 or earlier).
- Appeal waves correcting FCDL information for successful appeals.
- Post-commitment FRN splits which require the issuance of new FRNs.
Information on these non-regular waves is more difficult to find on the SLD Web site, but the News Brief provides pretty clear and complete instructions for applicants seeking to confirm funding in these situations.