Universal Service Administrative Company Program Compliance Catriona Ayer

Universal Service Administrative Company Program Compliance Catriona Ayer Schools & Libraries Division Universal Service Administrative Company Washington Sept. 30, 2005 Chicago Oct. 6, 2005 Los Angeles Oct. 11, 2005 Newark Oct. 21, 2005

Universal Service Administrative Company • • • Agenda Top Denial Reasons – and how to avoid them Selective Review issues PIA Reminders Site Visits Audits 2

Universal Service Administrative Company Top Ten Denial Reasons • Ineligible products and services • 30% Rule countered by “When in doubt, break it out” • Contracts not signed or not in place • Make sure that you have a signed and dated contract in place when needed • Unauthorized consortium members • Make sure that you have Letters of Agency, that meet the requirements posted on the website 3

Universal Service Administrative Company Top Ten Denial Reasons • Insufficient documentation • Respond to PIA’s requests for documentation, and ensure that you meet the FCC’s document retention requirements. • Insufficient support resources • Secure access to, and document, sufficient resources to make effective use of the funds – money to pay your share, hardware, software, electrical capacity and maintenance. 4

Universal Service Administrative Company Top Ten Denial Reasons • Form 470 not filed • Don’t extend contracts without posting a Form 470 unless those extensions were already mentioned on the establishing Form 470. • Competitive bidding violations • Conduct a free and open competitive bidding process. The Applicant cannot turn over their responsibility for this to a service provider. Document your compliance! 5

Universal Service Administrative Company Top Ten Denial Reasons • 28 -Day Rule violations • Keep your dates in order – Allowable Contract Date → Contract Award Date → Application Signed → Application Received Date • Invalid telecom provider • Use the SPIN search tool on the website as a guide to determine if a provider is eligible to provide Telecommunications services. • Form 470 not certified or certified late • Certify online and by window close! 6

Universal Service Administrative Company Who Does What • Applicants • Write tech plan, file Form 470 and write RFP, evaluate bids, select provider, document the process, file Form 471, select invoice method • Service Providers • Respond to 470/RFPs, assist with preparing Item 21, provide answers on specific goods and services requested, but NOT on competitive bidding • Consultants • If separate from service provider, can assist applicants with their role once Letter of Agency (LOA) is in place. 7

Universal Service Administrative Company Competitive Bidding • Fair and open competitive bidding process • Avoid conflicts of interest • Independent consultant = Service Provider • Applicant = Service Provider • • Open competition and bid evaluation Follow the rules – FCC and state/local Beware of unusual contract clauses Applicants must document the process 8

Universal Service Administrative Company Form 470 • Based on, and in line with, tech plan • Service requested must tie to services requested on Forms 471. • Can’t have encyclopedic lists of services • Must be detailed enough so that bidders can formulate bids. • Must include all entities receiving services, including NIFs. • RFPs must be properly indicated on 470, and must be available for 28 days. 9

Universal Service Administrative Company Imposing restrictions • Applicants can set some requirements for bidders. • For example, applicants may require service providers to provide services that are compatible with one kind of system over another (e. g. Apple vs Windows) or compatible with one kind of hardware (e. g. Cisco switches). • Applicants must be prepared to explain if/how they disqualified bids. • Applicants must inform all bidders of any requirements that could lead to disqualification. 10

Universal Service Administrative Company Competitive Bidding • Selecting the winning bidder • Price must be the primary factor, considering only ELIGIBLE goods and services. • Solution must be cost-effective (not just the most cost -effective) • May not use E-rate to subsidize the procurement of ineligible or unrequested products or services because that constitutes a rebate of the non-discount portion of the costs, which is a violation of FCC rules. 11

Universal Service Administrative Company Contracts • Each FRN must be one of the following: • Tariffed services provided under contract are contracted services. • Month-to-month and tariffed services do not need contracts. • Internal connections and Basic Maintenance of Internal Connections are presumed to be contracted services. 12

Universal Service Administrative Company Contracts • Must a sign a contract after your 28 days has elapsed but before you file your 471. • Must contain two signatures and two dates (applicant and provider). • If contract was signed before 10/13/04, and only had applicant signature, can get signature of service provider now to come into compliance. • Include description of goods and services to be delivered. • Be prepared to explain documents that don’t look like a traditional contract. 13

Universal Service Administrative Company State Master Contracts • Single winner • Applicants do not need to justify the selection of the winning bidder • Multiple winners • Applicants must be able to document why they selected the specific provider off the master contract. • Multiple Award Schedules • Applicants must be able to document why they selected the specific provider off the multiple award schedule. • Only Terms and Conditions, not prices • These contracts do not meet FCC contract requirements. 14

Universal Service Administrative Company Selective Review • Selective Review Information Request is available on the website. • Requests information about the competitive bidding process, and • Requests information about the necessary resources (Item 25 certification). • Retain documentation needed to be able to answer these questions. • Be careful to answer questions COMPLETELY and FULLY. USAC will evaluate answers as they are given and will not reach out to seek clarification. 15

Universal Service Administrative Company Selective Review • Can you pay your share? • Final budget or draft budget with letter explaining budget process • Cannot rely on grants that you have applied for but haven’t received • Funds cannot come from the service provider or an entity controlled by the service provider where funding is contingent upon selecting that provider. • Service provider bills can’t be ignored or waived. 16

Universal Service Administrative Company Payment Plans • Applicants are required to pay their share at the same time that USAC pays the discounted amount. • Service Provider certifies that the invoices they submit are for services that “have been billed to service provider’s customers. ” • Therefore, deferred payment plans that allow the applicant to pay after USAC has paid will jeopardize a funding request. • FCC Rules include a presumption that the nondiscounted share will be paid within 90 days. 17

Universal Service Administrative Company Selective Review • Do you have the other necessary resources? • Are there end user computers? • Must have reasonable plans to fully utilize all internal connections for which they are requesting discounts (e. g. 2 year plan to get computers for all network drops). • Do you have software to run on the computers? • Staff trained on how to use the technology? • Electrical capacity? • Can you maintain your eligible and ineligible equipment? 18

Universal Service Administrative Company Selective Review • Resource Deficiency Advisory • Possible outcome – no impact on funding • Highlights areas that we think are of concern • PIA may follow up in the future. • Funding Denials • Can result when applicants can’t show they: • Have the money to pay the non-discounted share • Had a fair and open competitive bidding process • Have the necessary resources to make effective use of the services. 19

Universal Service Administrative Company Antitrust Violations • Federal and state laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, resulting in higher prices for inferior products and services. • Beware of: • Applicants having an interest in a company that is listed on their Form 471 • Kickbacks and bribes • Bid rigging (criminal) • Price fixing (criminal) 20

Universal Service Administrative Company Suspension & Debarment • Individuals that are civilly liable or convicted of criminal offenses related to the E-rate will be suspended and then debarred from the program, thereby prohibiting them from consulting, assisting and advising applicants or providers, and receiving funds or discounted services from E-rate. • List maintained on website. 21

Universal Service Administrative Company Documentation • Retain documents to show your compliance: • Letters of agency and any agreements with all consultants • Technology Plan and CTPA Plan Approval letter • RFP, including evidence of publication date • Any and all bids (winning and losing) • Documents describing bid evaluation criteria and weighting • Any correspondence with potential bidders • Documents related to the selection of the service provider(s) • Signed and dated copies of contracts. 22

Universal Service Administrative Company Whistleblower Hotline • USAC maintains a national Hotline in an effort to curb waste, fraud and abuse. • Hotline accepts information on possible rule violations. • Callers can remain anonymous if they wish. • Investigated by Special Program Compliance team • 888 -203 -8100 23

Universal Service Administrative Company Check and Recheck • Requests for information • Answer by the deadline or ask for an extension • Failure to respond means SLD will act based on information that is available. • Double check your work • SLD assumes all data on forms is correct • Use RAL to verify your Form 471 data including all information in Blocks 4 & 5 of your Form 471. • Provide full and complete answers in response to requests for information. 24

Universal Service Administrative Company 30% Rule • FCC Rules specify that if 30% or more of an FRN is ineligible, then the entire FRN is denied. • Applicants must be able to support the dollars requested by showing either contracts or bills. • Fudge factors are not allowed. • Some increases can be explained – increased use, lines, service, etc. 25

Universal Service Administrative Company 2 in 5 Rule for IC • Determined on an entity basis (ie each school, library or NIF) • 2006 is the second year for the rule • All entities on a Block 4 worksheet that received a positive commitment for IC, are counted as taking a year • Check with consortia and districts to ensure that you know the status of your entities. • If you receive IC funding in 2005 and 2006, you are not eligible again until 2010. 26

Universal Service Administrative Company Consortia • Letters of Agency • Follow standards listed on website • Name of consortium leader, consortium member name, type of service, signature, date and title of people signing document and timeframe covered by agreement. • Sample LOA available for review • Must be dated before filing of Form 471 • Avoid common pitfalls: • Didn’t specify type of service (can’t just say “E-rate eligible services”) • Forgot to sign and/or date LOA. 27

Universal Service Administrative Company ESAs • Eligibility is based on state law definition of school • Should be careful to avoid Conflicts of Interest (serve as applicants, providers, tech plan approvers, etc). • ESAs can be applicants and service providers at the same time, but cannot double dip. • ESAs should carefully read the guidance that will be posted soon on the website. 28

Universal Service Administrative Company FCC RNs • All entities doing business with the FCC must have an FCC Registration Number (FCC RN). • Apply through FCC website. Click on CORES. • Need one per BEN or SPIN. • Linked to Tax ID, and used for Red Light Rule implementation. 29

Universal Service Administrative Company Red Light Rule • If an entity does not pay its debts to the government or USAC in a timely manner, then the entity is placed under “Red Light”. • The purpose of the “Red Light Rule” is to get entities to pay their bills on time • Entities that are under “Red Light” are subject to disbursements and applications being held and/or denied. 30

Universal Service Administrative Company Red Light Rule • If a service provider is on Red Light: • No effect on Forms 471 processing. • For SPI and BEARS, payments are netted for USAC debt and held for FCC debt. • If an applicant is on Red Light: • Applicants with 2005 and beyond Forms 471 are given notice and 30 days to pay the debt. After that, any pending applications are denied. • BEARs to RL applicants are held. SPI are unaffected by the applicant’s Red Light. 31

Universal Service Administrative Company Red Light Rule • FCC considers Red Light information to be proprietary and will, therefore, not publish a list of Red Lighted entities. • Entities that know their FCC Registration Number and CORES password can check their status by going to the Red Light Display System at www. fcc. gov/redlight. 32

Universal Service Administrative Company NIFs • Non-instructional Facilities (NIFs) • Buildings, occupied or owned by eligible entity, but doesn’t meet definition of “school” or “library” • NIFs are not schools, but some NIFs can have classrooms. • Need entity number (many now have them) • If NIF with no classroom, use district/system average for discount. • If NIF has classroom, use snapshot to determine discount. • All eligible for Priority 1, must meet test for Priority 2 for “essential for transporting data to the classroom”. 33

Audits Universal Service Administrative Company • Why me? • Applicants and service provider certify that acknowledge that they may be audited. • Some are random… • Some are not. • You will receive some advance notice of the audit • Auditors can be from USAC, the FCC or either one’s external auditors 34

Universal Service Administrative Company Audits • Make sure that your documentation is in order. See website for complete list of documents that you should have available to support your applications. • Make sure that your physical inventory lists are in order so that you can quickly identify equipment • You will have an opportunity to respond to the audit report. 35

Universal Service Administrative Company Audits • Findings • An internal control or other observation that is not a program rule violation. • Exceptions • A program rule violation. This can result in taking back a commitment 36

Universal Service Administrative Company Audits • Classifications of Audits • Compliant • No rule violations • Generally compliant • Limited violations • Not compliant • Significant violations 37

Site Visits Universal Service Administrative Company • Why does USAC conduct Site Visits? • Provides USAC an opportunity to see E-rate funds in use; • Assesses USAC’s outreach and education efforts; • Opportunity to observe best practices in the field, and • Ensures that program funds are being used in compliance with regulatory requirements. 38

Universal Service Administrative Company Site Visits • 1, 000 site visits were randomly selected for the first year of this initiative. • You will receive advance notice that we are coming and what to prepare. • We will interview staff to find out their experiences with the program. • USAC is obligated to follow up on instances of non-compliance with FCC rules. • More information, including tips for preparing for our visits are available on the website. 39

Universal Service Administrative Company Questions? 40