Educational service agencies (“ESAs”), in one form or another, are deemed eligible to receive E-rate discounts in a number of states. A complete list of eligible ESA types is available by state in USAC’s Eligibility Table for Educational Service Agencies.
One of the vexing problems in the FY 2015 application process has been the proper form of a Block 4 for calculating an ESA’s discount rate. The basic problem, last discussed in our newsletter of March 2, 2015, involves the two types of ESAs and the two types of applications, namely:
- ESAs with or without their own schools (the latter being NIFs only); and
- ESA district or consortium applications.
USAC recently adopted new guidelines to calculate ESA discount rates in any combination of the above ESA types or applications. Although these guidelines have not yet been published in an S&L News Brief, the information has been made available selectively to major applicant groups and internally to the Client Service Bureau (“CSB”) and Program Integrity Assurance (“PIA”). The following discussion is based on our understanding of the new guidance.
District ESA Applications:
The E-rate eligibility of an ESA is derived not only from its own schools, if any, but more broadly from the services it provides to its component school districts. As such, USAC indicates that the discount rate for an ESA’s own E-rate services should be determined as if the ESA was a “large district” encompassing its entire service region. The Block 4 should list the ESA’s own sites (NIFs and/or schools) and all of its districts’ schools. If a Block 4 template is used, this would mean that each row would start with the ESA’s BEN under Column A; Column B would list all the ESA entity numbers (NIFs and/or schools) and all the component district school entity numbers. Component school district NIFs will not affect the discount rate and need not be included.
To more clearly distinguish actual ESA sites from the district schools, we recommend — and this is not included in the USAC guidelines — that the ESA sites (NIFs and/or schools) be marked with the “ESA” school attribute code (Column J of the template, if used).
Consortium ESA Applications:
If an ESA is sharing services with its districts, requesting E-rate discounts in a consortium application, the process becomes more complex.
Consortium discount information can be entered online into the Form 471 system on a member-by-member basis, or uploaded in its entirety using a pre-populated Block 4 template. In either case, the system first calculates the individual member district discounts. Second, the system calculates the overall consortium discount rate by averaging the member district discounts.
If an ESA is a consortium member, however, there is a problem. The ESA’s “district” discount cannot be calculated as indicated above because that would mean that the consortium Block 4 would list district schools twice, once as components of the ESA, and again as components of their home districts. USAC’s system — at least as currently configured for FY 2015 — does not permit duplicate entities. A consortium Block 4 must list all member sites (NIFs and schools) — but the system requires each site to be listed only once!
USAC’s solution to this problem is two-fold, depending upon whether an ESA has schools of its own or does not. The solution is not intuitive — so ESA consortium applicants need to be careful — but it does provide a work-around of the online system’s current limitation.
Case #1 – Consortium applications for ESAs with schools:
For an ESA with one or more of its own schools, the solution is to list only the ESA’s own schools and NIFs under the ESA’s BEN. Unlike the “large district” approach discussed above (i.e., including all the district schools), think of this as a “small district” solution (i.e., including only the ESA’s own sites). Listing only the ESA sites under the ESA BEN, and the district sites under the member district BENs, achieves the objective of listing each site only once.
Note that the ESA’s discount calculated as a “small district” (with only its own schools) may be different from the ESA’s discount calculated as a “large district” (with all the member district schools). As a practical matter, assuming the consortium has a number of members, there is likely to be little difference in the overall consortium average discount.
Case #2 – Consortium applications for ESAs without schools:
For an ESA without schools, the Case #1 solution does not work. To calculate an ESA discount, there must be students. USAC’s solution in this case is to add the ESA’s NIF(s) to the entity list of any one of the member districts’ entity list. Since there are no students involved, doing so does not change that district’s discount rate, nor does it change the average consortium discount. The solution is simply a contrivance to avoid a system problem and to make sure all entities are listed somewhere in the consortium Block 4.
Because the addition of an ESA’s NIF(s) to a district’s entity list may not be obvious to a PIA reviewer, USAC’s guidelines ask the applicant to include an explanation in the Narrative section of the first FRN involving services shared by the ESA. The explanation should identify the district used for this purpose and the ESA NIF(s) added. For additional clarity, we again recommend that the ESA sites be marked with the “ESA” school attribute code.
Other Considerations:
It is not yet clear how USAC will review ESA district or consortium applications that do not follow the new guidelines. We would recommend that ESAs, which have not yet filed, use the new guidelines. ESAs, which have already filed applications using a different approach, should adopt a “wait and see” attitude.
Longer-term — meaning FY 2016 and beyond — we believe that USAC will revisit ESA application issues. For consistency, which may mean resolving the duplicate entity problem, we hope that ESA discounts will be calculated the same way for ESAs with or without schools, and/or for district or consortium types of applications.