News of the Week

Wave 43 for FY 2014 will be released on Wednesday, March 4th. 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 $2.14 billion.

Wave 83 for FY 2013 will be released Friday, March 6th. Funding for FY 2013 is available for Priority 1 services only. Priority 2 funding is being denied at all discount levels. Cumulative funding for FY 2013 is $2.14 billion.

Update on Districts and Charter Schools:

Our newsletter of February 16, 2015 discussed the calculation of discount rates for public school districts and for the charter schools located within their boundaries. At the time, the unresolved issue was the requirement to either exclude or include both the public and the charter schools in the Block 4 of either a school district’s or a charter school’s application.

In last week’s News Brief (discussed below), USAC effectively punted this issue to the states by advising:

USAC will follow the lead of the State Education Agency in determining which schools belong to a public school district, which may mean that certain charters are considered part of a public school district and would get the public school district’s discount rate, instead of calculating their own discount rate.

Absent explicit state guidance to the contrary, — which we are not expecting from NYSED — we believe that the practical effect of USAC’s current position is that most public school districts and charter schools should apply has they have in past funding years.

Educational Service Agencies:

The calculation of discount rates for education service agencies (“ESAs”) is another issue involving the interpretation of “central administrative agency” as set forth in Para. 220 of last July’s E-rate modernization Order (FCC 14-99). Until USAC provides further guidance on this issue, please understand that the views expressed in this article are those of E-Rate Central.

ESAs, in one form or another, are deemed eligible to receive E-rate discounts in a number of states. In New York, the eligible ESAs are the Boards of Cooperative Educational Services (“BOCES”) and/or the associated Regional Information Centers (“RICs”). A complete list of eligible ESA types is available by state in USAC’s Eligibility Table for Educational Service Agencies.

There are two primary unresolved questions concerning the calculation of discount rates for ESAs. The first is how to best calculate the discount on an individual ESA application. The second is how to calculate the discount of an ESA in a consortium for services shared by both the ESA and its member districts.

Discount Rates for Individual ESA Applications:

For E-rate discount rate purposes, it is useful to distinguish between two types of ESAs — those that do or do not operate schools of their own.

An ESA without schools has only non-instructional facilities (“NIFs”). As such, the ESA may receive E-rate discounts only on Category 1 services. Because the ESA sites are all NIFs, not schools, none are eligible for Category 2 funding. For discount rate purposes, ESA NIFs (even “NIFs with classrooms”) have no reportable students. The only way to calculate a discount rate for a non-school ESA, therefore, is to include all of the ESA’s member district schools in its Block 4. Effectively, the ESA submits what we’ll call a “large district” application listing all the schools in its region.

An ESA with schools can, at least theoretically, be treated as a “small district” or a “large district” with a Block 4 listing either:

1. Only the ESA’s own NIF(s)/school(s) — a “small district;” or
2. The ESA’s own NIF(s)/school(s), and all regional district schools — a “large district.”

Pending any specific guidance from USAC, an ESA without schools should use all of its districts’ schools in an individual ESA application. To be consistent, it might be more appropriate for an ESA with schools to also include all of its districts’ schools rather than to list only its own schools (and NIFs). As discussed below, however, ESA consortium applications are more complex.

Discount Rates for Consortium ESA Applications:

If an ESA is sharing services with its districts, the ESA would file a consortium application for discounts on those services using the consortium’s average discount rate. The Block 4 discount rate worksheet for a consortium application typically includes multiple rows of data starting with each member’s billed entity number (“BEN”) and individual school (or NIF) site entity numbers (“SEN”). The first two columns of the Block 4 would be in the following template format:

In an ESA consortium, for example, the ESA might be Member A and its districts might be Members B, C, D, etc. The Form 471 system would calculate the average consortium discount by: (1) calculating the “district” discount of each member based on each of its sites; and (2) averaging the member “district” discounts.

Unfortunately, the way USAC’s Form 471 system is currently designed, this calculation will fail if the ESA’s discount rate relies on district school data — i.e., if the ESA is portrayed as a “large district.”  If, as in the format example above, Sites A1, A2, A3, etc. are district schools, those same schools will be listed again as sites under their respective district BENs. The Form 471 system does not allow duplicate entities — or put another way, the system does not permit an individual entity to have two “parents.”

This is a major problem for an ESA without schools whose entire discount rate is based on its districts’ schools. An ESA without schools cannot simply list its NIF sites as its entities; the school data is needed to generate the ESA discount rate.

Duplicate entities are also a problem for a consortium including an ESA with schools, but only if that ESA’s discount rate relies on district school data — i.e., an ESA using the “large district” model discussed above. Alternatively, if the discount rate for an ESA with schools is based solely on the ESA’s own schools, there is no duplication. Unless and until USAC advises differently, we suggest that an ESA with schools use this “small district” model.

Duplicate Entity Workaround:

If an ESA’s discount in a consortium application is based on its districts’ schools (i.e., the “large district” model), a system workaround is required to avoid duplicate entry errors. One way to do this is to separately calculate school enrollment and student eligibility totals for all the ESA and district schools, but to include that data on a single ESA row in the consortium Block 4. For that single row, use the ESA’s billed entity number as both the BEN and the SEN. This approach allows the system to calculate the correct discount for the ESA without actually duplicating school entity numbers.

One other problem may arise using this approach, also requiring a workaround. The total student count for all of an ESA’s district schools may be a large number. The student count fields for both the Block 4 template (if used) and the online 471 system have digit limitations. The “Number of Students – Full or Part-Time” in the Block 4 template, for example, must be less than 10,000. Suppose, for example, that an ESA’s total district enrollment is 50,000 students of which 30,000 are eligible. The online Form 471 will not accept numbers this large on a single line. The workaround for this problem is to use artificially lower numbers, but to maintain the same eligibility proportion (e.g., use 5,000 students enrolled and 3,000 students eligible).

The entire workaround process may ultimately have to be carefully explained during PIA review. In the meantime, however, it permits an ESA consortium application based on member school data to be filed with the correct discount rates.

Community Eligibility Provision Schools:

USAC distributed Excel spreadsheets to state education departments last week requesting school NSLP (and CEP) data to be used for PIA review of FY 2015 applications. The format of the data requested was significantly revised from previous years to reflect the new method for calculating discounts for schools or school districts participating in the Community Eligibility Provision (“CEP”) program. Eligible students in CEP schools are now calculated by applying the 1.6x USDA multiplier to the number of students identified by direct certification.

As a part of its request, USAC provided sample data in the desired format clarifying the treatment of CEP data for both individual CEP schools and for groups of CEP schools. The table below is a modified version of one of USAC’s examples for a school district with both CEP and non-CEP schools. The columns have been reorganized to make the calculation process clearer, and the CEP group average percentage has been recalculated consistent with CEP procedures.

As a part of the Form 471 filing process, the applicant would provide:

• Total student enrollment
• Percentage of directly certified students identified for individual CEP schools
• Group average percentage of directly certified students for grouped CEP schools
• Number of NSLP-eligible students for non-CEP schools

Note that the table also shows the percentage of directly certified students identified for grouped CEP schools. This data is shown in brackets because USAC is asking the states for this data. For discount rate purposes, however, student eligibility of grouped CEP schools is calculated using only the group average percentage (a student-weighted average).

Based on the applicant-supplied data, the online Form 471 system calculates:

• Percentage of NSLP-eligible students for non-CEP schools
• Total number of eligible students for each school
• Aggregate percentage of eligible students for the district and, by extension, the E-rate discount rate for the district

The sample table above shows the following:

1. School 1 is a standalone CEP school. 65% of its students have been identified as eligible for free or reduced-priced meals through the direct certification process. For both E-rate and meal program reimbursement purposes, the total number of eligible students is calculated using the 1.6x multiplier, capped at 100%. In this example, therefore, all 400 students at School 1 are eligible.
2. Schools 2–4 are grouped for CEP purposes, with a CEP group average of 49.09%. Again, for both E-rate and meal program reimbursement purposes, the total number of eligible students is calculated using the 1.6x multiplier (e.g., 1.6 x 49.09% = 78.54%). The Form 471 system applies this group to the enrollment numbers for each school in the group (e.g., eligible students for School 4 is 300 x 78.54% = 236).

Note that the direct certification percentage for School 2 is 35%. A school with a percentage under 40% is not individually eligible for CEP, but can be included in a group of schools whose aggregate group percentage is 40% or more (as in this example). The same grouping rule is built into the Form 471 system. The system will not accept a CEP percentage of less than 40%, but allows multiple schools to use a higher group percentage (e.g., 49.09%).

3. Schools 5-8 are all regular NSLP participants reporting the number of students eligible for free or reduced-priced meals.
4. The Form 471 system calculates the number of eligible students based on the applicable CEP and NSLP data. This, in turn, determines the district’s total eligibility percentage (e.g., 71.83%) and districtwide E-rate discount rate (e.g., 80%).

FY 2015 Form 471 Application Window:

The FCC Form 471 application filing window for FY 2015 opened on Wednesday, January 14, 2015. It will close at 11:59 pm EDT on Thursday, March 26, 2015. Based on last Friday’s count, the number of FY 2015 applications filed to date is roughly 28% below the comparable FY 2014 filings at this time last year.

As previously noted, the last possible date to file a valid FY 2015 Form 470 was last Thursday, February 26th. Form 470s for FY 2015 filed at this point would be useful only if the Form 471 application window is extended or if an applicant plans to request an FCC waiver of the Form 471 deadline.

NYS Webinar on Form 471 Completion:

E-Rate Central will be conducting a webinar for NYS applicants interested in reviewing the online Form 471 process. The webinar will be held at 10:00 – noon on Thursday, March 12, 2015. The presenter will be Michael Andrews. Please register online.

FCC Appeal Decision Watch:

The FCC issued another set of precedent-based waiver decisions in Public Notice (DA 15-261), including:

1. Two requests were dismissed as moot; USAC had already approved the underlying funding requests.
2. Waiver request approvals for:
   1. One applicant for the correction of a service start date.
   2. One applicant for utilizing a multi-year contract.
   3. Two applicants for late-filed Form 471 applications.
   4. Three applicants for ministerial and/or clerical errors.
   5. One applicant for vendor selection where price was not the primary factor.
   6. One applicant (with multiple applications) for 1-3 day violations of the 28-day bidding rule.
   7. Three applicants for failing to deduct ineligible costs.
3. Denials of waiver requests or petitions for reconsideration for:
   1. Three applicants for late-filed Form 471 applications.
   2. Two applicants for ministerial and/or clerical errors.
   3. Two applicants for not having signed contracts or legally binding agreements.
   4. Four applicants for untimely filed requests for waivers or review.
   5. One applicant for vendor selection where price was not the primary factor.
   6. Four applicants for requesting support for ineligible entities.
   7. Seventeen applicants seeking SPIN changes.

The S&L News Brief of February 27, 2015, poses and answers a series of frequently asked questions (“FAQs”) on the FY 2015 application process. It also provides an update on the eligibility of multi-year licenses sold in connection with certain Internal Connections equipment. The following questions are addressed:

District-wide Discount - Schools:

• How does the First E-rate Modernization Order change the way schools calculate their E-rate discounts?
• How does a school district calculate its discount?
• What if some or all of the schools in my district participate in CEP? Does that change the way that I calculate my school district discount?  (See discussion above.)
• When does the district-wide discount rate requirement go into effect?
• How does the district-wide rule affect districts that use alternative means to determine their discount percentage?
• How does the E-rate program define "school district?"  (See district and charter school discussion above.)
• Can a district seeking Category Two purchases for only its most disadvantaged schools (i.e., those with more than 75 percent of their students qualifying for NSLP) apply on behalf of only those schools and get an 85 percent discount rate?
• What is the definition of rural for purposes of the E-rate program?
• If half of the schools in a district are rural and the other half are urban, is the district considered rural?
• How has the FCC Form 471 Discount Calculation section been changed to accommodate the new district-level calculations?
• Now that all schools in a district are subject to the same discount rate, does the 3-year prohibition on transfers between schools within a district still apply?
• Now that all schools in a district are subject to the same discount rate, can schools share their budget with other schools in their district if they have money left in their budget?

District-wide Discount - Libraries:

• How does the First E-rate Modernization Order change the way libraries calculate their E-rate discounts?
• How do the urban/rural designations apply to libraries and library systems?
• What is the definition of rural for purposes of the E-rate program?
• Does the library always get the urban/rural status of the school district in which the central library outlet or main administrative office is located?
• How should a library system with branches in more than one public school district calculate its discount?
• How should a library system determine the central library outlet or main administrative office?
• If the library system is applying as a system or an individual branch within that system is applying on its own, should it use the NSLP data for the public school district in which the library system main branch is located?
• How do I calculate the discount rate for my bookmobile?

District-wide Discounts - Consortia:

• How does the district-wide rule affect consortia applications?
• If a consortium wants to purchase an eligible service on behalf of only some of its members, can they use the discount rate for just those members or do they have to use the discount rate for all consortium members?