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April 20, 2015

Introduction

The E-Rate Central News for the Week is prepared by E-Rate Central. E-Rate Central specializes in providing consulting, compliance, and forms processing services to E-rate applicants. To learn more about our services, please contact us by phone (516-801-7804), fax (516-801-7814), or through our Contact Us web form. Additional E-rate information is located on the E-Rate Central website.

The FY 2015 application window closed last Thursday, April 16, 2015. A very early comparison of initial demand of FY 2015 versus FY 2014 is shown in the table below. In both cases, the demand figures are as of the day after the window closed. Most importantly, the FY 2015 numbers do not yet include completed applications for which certifications have not yet been processed. When the yet-to-be-certified applications are added in, we would estimate an increase of roughly 10% in FY 2015 demand — low enough to assure Category 2 funding at all discount levels. USAC’s more formal preliminary demand estimate for FY 2015 is expected to be released within the next few weeks.

Very Preliminary Funding Demand Comparison

  FY 2014
As of 3/27/14
  FY 2015
As of 4/17/15
 
Applications Received 47,023   43,540  
Priority 1 Requests $ 2.643 Bil. $ 2.043 Bil.
Priority 2 Requests 2.225   1.511  
Total $ 4.868 Bil. $ 3.554 Bil.

Wave 50 for FY 2014 will be released on Wednesday, April 22nd. 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 $2.19 billion.

Wave 87 for FY 2013 will be released Friday, April 24th. 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 $2.15 billion.

The Form 471 application window for FY 2015 is closed. Applications completed online after the close will be treated as being received outside the filing window and will not likely be funded without an FCC waiver.
Applicants who successfully submitted their Form 471 applications by the April 16th deadline should do the following:

  1. If you mailed your certification by express mail service, track the shipment online and make a copy of the successful delivery notification. If you used the Postal Service’s return receipt service, retain a copy of the receipt when it’s returned. If you faxed your certification, retain a copy of your fax transmittal confirmation.
  2. Periodically check the status of your application on the SLD’s website (see Application Status). At this stage in the application process, the status indicator might read:
    Incomplete: The application was started online, but not completed; this would not be a valid application.
    Complete: The application was successfully submitted online, but has not yet been certified (or the mailed- or faxed-in certification has not yet been data entered).
    Certified – In Window: The application was successfully submitted and certified within the window.
    Certified – Out of Window:  The application was submitted on time, but the certification was received (or postmarked) after April 16th. As long as the application itself was submitted on time, USAC will provide additional, albeit limited, time to submit the certification (see below).
    Initial Review: The application has already been entered into the review process. Applicants may begin receiving questions on these applications.
    Final Review or Available for Quality Assurance: The application has already been through the initial review process. This is the first year that we’ve seen a number of applications in the final stages of review at this early of a date. Most are likely to be in the first funding wave expected by May.
  3. Applicants should pay particular attention to the Form 471 Receipt Acknowledgment Letters (“RALs”) that are mailed to applicants who have submitted Form 471s. The RAL process may be used by applicants to correct ministerial and clerical (“M&C”) errors that were made in their initial filings. Importantly, allowable corrections include adjustments — even increases — in discount rates and funding requests.
  4. Applicants, who did not use a Block 4 template to upload their discount rate data, may wish to capture their FY 2015 data in an Excel file to simplify data entry next year. Although we expect that USAC’s online Form 471 system for FY 2016 will permit applicants to copy and modify their Block 4 data from FY 2015, spreadsheet updates of templates may be easier. To do this:
    1. Display the FY 2015 application online, and expand the discount rate section.
    2. Highlight and copy the entity listing column headings and data, and paste the information into an Excel worksheet. Note that the paste command will magically create both school- and library-related columns.
    3. Highlight and copy the discount rate calculation column headings and data, and paste the information into to the same Excel worksheet to the right of the previously pasted data. Note that pasting school data in this step will create duplicate columns for entity numbers, names, and U/R status (check to make sure that the entity data is consistent on a row-by-row basis).
    4. Consortium application data will have to be expanded, copied, and pasted on a member-by-member basis, and an additional column will have to be inserted (a new Col. A) and populated with the member BENs.
    5. Copy and paste (using the “Paste Value” option) into the appropriate school or library Block 4 template on a column-by-column basis, from left to right.

FCC Appeal Decision Watch:

The FCC issued the following two orders last week denying a series of appeals dating largely to 2010:

  1. Achieve Telecom Networks et al (DA 15-463):  In a detailed and blistering decision, reflecting an intensive investigation, and repeated rebuttals of factual misstatements made by Achieve’s principals under penalty of perjury, the FCC denied a request by Achieve Telecom Networks of Massachusetts (and four of its customers) for review of USAC Commitment Adjustments (“COMADs”) based on alleged violations of the competitive bidding process. The case involved commitments of $10.2 million, and disbursements of $2.9 million, dating to funding years 2004-2008.

    At issue was Achieve’s creation and control of educational grant organizations (and/or associated individuals) to pay the non-discounted portion of their customer’s Eā€‘rate purchases. E-rate rules permit “…applicants to use grants to help pay for their non-discount share so long as the grants do not come from the applicant’s selected service provider, or from any entity not independent of the service provider.”  The availability of grant funding that is not independent, but is effectively controlled by a vendor, is deemed to provide an unfair competitive advantage — particularly if the vendor’s customer can obtain equipment at a zero net cost from that vendor, and that vendor only.

    Evidence of Achieve’s control of the grants, which the FCC obtained in part through subpoenas of bank records and emails, included a foundation controlled by an Achieve employee (who happened to be the husband of Achieve’s president) and numerous requests for guidance on the grant and payment processes (including one message from another associated foundation employee who admitted knowing “zip”).

    One interesting aspect of the FCC’s decision was a finding that the districts were unaware of the grant deception. As a result, the FCC directed USAC, which had originally initiated recovery of disbursed funds from both Achieve and the school districts, to discontinue recovery efforts against the districts. The FCC did, however, “…encourage applicants to remain vigilant with respect to identifying unlawful schemes and to extricate themselves immediately in instances where they could be implicated in rule violations that result in the improper disbursement of funds.”
  2. Iberia Parish and South Pike SD (DA 15-464):  The FCC denied requests for review by two districts that had been found to violate the FCC’s equipment transfer rule requiring that equipment purchased with E-rate funds not be moved from a school within three years of purchase — unless that school was being closed. This restriction was initially enacted to prevent “…the practice of purchasing equipment with universal service funds, then transferring that equipment to other schools and libraries with lower discount rates…” [FCC 03-323].

    These decisions are interesting in several respects, namely:
    1. Neither district disputed the transfer of equipment, but both justified the moves on the grounds of technical efficiency. In one case, the district had transferred a 48-port switch to the school in question from another school that was being closed. The problem arose when the district then moved a displaced 24-port switch for use in another school. In the other case, the district was centralizing equipment into a network operating center.
    2. Neither case appeared to involve waste, fraud, or abuse. Most specifically, all transfers occurred from and to schools at the same 90% discount level.
    3. The FCC’s strict interpretation of the equipment transfer rule in these two cases may reflect, at least in part, the fact that the violations were uncovered during 2008-2009 audits (roughly two years after the initial equipment installation). Had the districts notified USAC of the transfers as required by the rules, the FCC might have been inclined to consider rule waivers in these two situations.

The S&L News Brief of April 17, 2015, discusses a few steps applicants may need to take now that the FY 2015 application window is closed. It includes instructions to:

  • Certify your Form 471, if necessary.
  • Certify any Form 470 that you cited on a funding request, if necessary.
  • Review your RAL and submit any allowable corrections.
  • Organize and store your documents.
  • Prepare for PIA review.
  • Monitor your contact email address.