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  • 1. E-rate Program Update, 2005 A Presentation for Schools and Libraries November 2004 This presentation may not be copied or presented without the express written permission of Funds For Learning, LLC
  • 2. What We’ll Cover Today
    • Review of Program Basics for Novices
    • A Review of What’s Eligible
    • Key Points to Remember at Each Stage of the Process
    • Important New Rule Changes
    • Answers to your Questions
    • Material is current today, but subject to change
  • 3. Background on Funds For Learning, LLC
    • Consulting firm based in Washington, DC, and Oklahoma City
    • Focused on the E-rate program since 1997
    • Hired by schools and libraries to prepare their applications
    • Provide independent consulting support to service providers
    • Participated on 2003 SLD Waste, Fraud and Abuse Task Force and FCC Forum on E-rate
  • 4. What Is the E-rate?
    • Designed to connect schools and libraries to the Internet
    • Still largest, most reliable, dedicated funding source for K-12 ed-tech
    • Not going away (entering 8th year)
    • Supported by assessments on telecom companies, not federal budget
    • Funding process difficult, but not subjective like competitive grants
  • 5. What Does Program Provide?
    • Discounts of 20 to 90 percent on the purchase of certain services and products
    • Available in these service categories
      • Telecommunications services
      • Internet access
      • Internal connections (Equipment and maintenance)
    • More than $2 billion worth of discounts can now be disbursed each year
  • 6. Who Is Eligible?
    • Virtually all public K-12 schools
      • Elementary/ secondary schools as defined by states under No Child Left Behind Act
    • Private schools
      • Must be operated on a non-profit basis
      • Endowment can’t exceed $50 million
      • Includes religious schools
    • Most public libraries
      • Budget must be separate from a school
  • 7. Consortia Can Also Apply
    • Some regional agencies (BOCES, ISDs, states) apply on behalf of members
    • Can include both eligible and ineligible entities, but discounts can only be applied to services for eligible entities
    • All program review requirements must still be met
  • 8. A Quick Guide to Acronyms
    • SLD—Schools and Libraries Division
      • Day-to-day administration of program
    • USAC—Universal Services Administrative Co.
      • Parent organization of SLD
      • Administers 4 Universal Service Fund programs
      • Disburses E-rate support
    • FCC—Federal Communications Commission
      • Sets overall program policy
      • Ultimate judge of appeals
  • 9. What Is Your Discount Rate?
    • Based on relative poverty of schools
    • Designated as “urban” or “rural” by federal government
    • Matrix derived from eligibility for federal school lunch program
    • If school doesn’t participate, other poverty measures can be used
    • Libraries derive their discount rates from school districts where branches located
    • Discount rate of individual school or whole district may apply, based on nature of service
  • 10. E-rate Discount Matrix
  • 11. Discount Matrix Could Be Revised
    • FCC considering various proposals
    • Some stakeholders have urged a revision to:
      • Address concerns about waste, fraud and abuse
      • Make more money available to more schools
    • Timetable for decision not clear
    • Monitor E-rate announcements
  • 12. How the Process Works
    • Applicants says what they want (Form 470)
    • Applicant must receive bids for 28 days
    • Applicant signs contracts or purchase agreements
    • Applicant submits funding requests (Form 471)
    • Funding requests reviewed for approval
    • Applicant and service providers follow up with payment paperwork (Form 486, BEAR, SPIs)
  • 13. Funding Priorities
    • Priority One services
      • Telecommunications services
      • Internet access
      • Everyone qualifies, no matter your discount rate
    • Priority Two services
      • Internal connections
      • New category: Basic Maintenance
      • Awarded, based on need, with funding left over after Priority One funding is awarded
    • New “2 out of 5 years” rule takes effect this year
  • 14. “ But I’m Not Poor Enough to Qualify for Internal Connections”
    • Maybe not. . .
    • Program changes may make more funding available for applicants that have fallen below threshold in the past
  • 15. Threshold for Internal Connections (“Priority Two”)
      • Support awarded on the basis of need, as long as funds are available
      • Most years’ discount “threshold” has been between 70%-85%
      • Currently it’s at 90% -- but could go down to 70% or lower for 2004 funding year
    All Requests Funded
  • 16. New Rule Changes That Should Impact Demand
    • Can’t transfer E-rate-supported equipment for three years unless facility closes temporarily or permanently
    • Sites can “receive commitments” in only 2 out of every 5 years
      • Will count when commitment is approved
      • Districts should plan and aggregate work
      • Should tend to discourage district-wide funding requests for internal connections
    • Priority 2 funding available every year for network maintenance IF school is poor enough
  • 17. Some Basic Requirements
    • Must have approved tech plan
    • Must be able to pay non-discounted portion of price
    • Must comply with state and local procurement rules
    • Must be able to certify that you have sufficient funds for other necessary tech components (desktop computers, staff development, network maintenance, etc.)
    • May have to comply with Children’s Internet Protection Act (CIPA)
  • 18. Eligible Services: Basic Concepts
    • Key Reference: Each year’s update of Eligible Services List
    • Services must be used for “educational purposes”
    • Eligibility ultimately depends on who uses it, where and for what purposes
    • Services cannot be sold, resold or transferred in return for compensation
    • End-user devices and content generally not eligible
  • 19. Internal Connections: Eligible Services
    • If it can be owned, it has to be internal connections
    • Routers, switches, firewalls
    • NICs if separately priced
    • Wiring and Wireless networks
    • Operating Software (NOS, e-mail, etc.)
    • PBXes (but not handsets)
  • 20. Internal Connections: Network File Servers
    • Eligible uses
      • DHCP servers
      • Domain Name servers
      • E-mail servers
      • Firewall servers
      • Terminal server
      • Proxy server
    • Allocation required if used for combination of eligible and ineligible purposes
    • Ineligible uses
      • Caching server
      • Print server
      • Database/archive server
      • Application server
  • 21. Internal Connections: Cost-Allocated Services
    • Eligible to the extent they support eligible equipment
    • Uninterruptible Power Supplies
    • Racks
    • Taxes, shipping and installation costs must be allocated based on product eligibility
  • 22. Tougher Standards for Maintenance, Tech Support
    • Must be cost-effective
    • Must identify specific products, models to be maintained and sites
    • Generally Eligible
      • Repair and upkeep of eligible hardware
      • Wire and cable maintenance
      • Basic tech support and configuration changes
    • Ineligible
      • “ On-site” duty station when off-site could provide “as needed”
      • 24-hour network monitoring
      • Network management
      • Help desks and tech support contracts covering more than basic maintenance
      • Broader tech support contract
  • 23. Internal Connections: Other Things to Remember
    • Ineligible services
      • Desktop computers, faxes, modems, control devices
      • Network management or monitoring software
    • Wide Area Networks only eligible when leased from a telecommunications carrier
    • Internal connections in admin buildings must be part of instructional network (e.g. a hub) to qualify
  • 24. Eligible Services: Telecommunications Services
    • Basic telephone service
    • Long distance service
    • Cellular services
    • Paging services
    • Data lines
    • High-speed transmission (ISDN, DSL, Frame Relay, etc.)
    • Satellite transmission service
    • Voice mail
  • 25. Telecommunications Services: Things to Remember
    • Must be purchased from a common carrier
    • Break out cost of handsets, directory advertising, other ineligible items from amount you request
    • Review bills to exclude any ineligible users, facilities and services
    • Does not have to be under contract
    • But if not under contract, must file a Form 470 every year
      • No exceptions—even when only one telephone carrier is available
    • Purchased PBX equipment is not a telecom service
  • 26. Eligible Services: Internet Access
    • Basic Internet access service charges
    • Data links provided to Internet gateway
    • E-mail service
    • Web hosting (excluding content creation or data storage)
    • Firewall service
  • 27. Internet Access: Things to Remember
    • Does not have to be under contract
    • But if purchased under month-to-month arrangement, a Form 470 must be filed every year
    • Content priced separately is not eligible for support
    • “ Bundled” content not eligible unless service was the “most cost-effective” Internet access
    • Filtering software ineligible
  • 28. When in Doubt. . .
    • Check out SLD’s formal eligible services list at Reference/eligible.asp
    • 2005 list issued on October 14
    • Additional FAQs and eligible services framework available
    • Break out questionable items separately
      • Be mindful of “30 percent rule”
    • Seek help from KNOWLEDGEABLE Vendors
  • 29. New Pilot Online Eligible Services Data Base
    • Only for internal connections equipment
    • Manufacturers volunteered to participate
    • Participation lower than SLD had expected
    • Eligibility of listed products is always conditional on use
    • Non-inclusion does not mean product is ineligible
    • SLD hopes to implement mechanism for generating paper Description of Services documents this year
    • Many projects will require additional items to be cited
  • 30. The Most Important Rules
    • Applicants must accept bids for 28 days
    • Applicant must not sign a contract or final application before the 28 days have passed
    • Applicants must meet ALL the deadlines
    • Applicants must be careful not to request support for ineligible services
  • 31. Key Parts of the Process
  • 32. A New Number This Year: Another “FRN”
    • Federal Communications Commission Registration Number
    • Designed to facilitate “Red Light Rule” of Debt Collection Improvement Act
    • Go to and click on link at top left
    • Will need Taxpayer ID Number (typically Employer Identification Number for firms)
    • Supposed to get by Nov. 1, but not yet required on an application—PIA will request
    • Applicants must obtain one for every school or branch
  • 33. Form 470 Application
    • Applicant explains what it wants to buy
      • Must reference an RFP if there is one or will be one
    • Applicant is supposed to provide enough specificity that a vendor can bid
    • Filed by entity that will sign the contract and negotiate with vendors
    • Applicant needs to manage state and local procurement rules at the same time
  • 34. Form 470 Revisions for 2005
    • More clarity about whether an RFP is available
      • Released or “intend to release”
      • Must make available to all interested bidders
    • Must briefly describe what RFP is seeking
    • New category of “basic maintenance of internal connections”
    • Applicants can designate billing preference method
    • Applicants must certify that they will consider all bids and choose the most cost-effective one for meeting educational goals and tech plan
  • 35. How Much Help Can a Vendor Give?
    • FCC/SLD very concerned about maintaining fair and open bidding process
    • No longer considered appropriate to get an RFP from a vendor
    • Applicants can specify brands (“compatible with”), but govt. is wary of too much upfront advice from single company
    • Key is for applicant to provide all vendors with the chance to bid
    • Must retain documents detailing vendors they heard from and how they made their choice
      • May be asked to provide bid analysis when application reviewed
  • 36. 28-Day Posting Period
    • Pay attention to “Allowable Contract Date”
    • DON’T sign a contract before that date
    • DON’T sign a Form 471 before that date
    • Communicate with all responsive bidders
    • Vendors may report applicants to SLD if they feel they are violating competitive bidding requirements
    • Keep good records on vendor contacts and how you reached your decision
    • Don’t have to choose lowest bidder, but must be able to demonstrate that cost was given the greatest weight
  • 37. After Allowable Contract Date
    • Contract or purchase agreement required for internal connections
    • Priority 1 services can be purchased at tariffed rates or month-to-month basis, if desired
    • When contract required, both parties must sign and date before Form 471 is filed
    • Contracts can be made contingent on receiving E-rate support
  • 38. Other Contracting Issues
    • Pre-existing contracts bid outside E-rate rules only eligible if signed before July 10, 1997
    • All E-rate eligible contracts must be able to point to a Form 470 that started the procurement
    • Multi-year contracts permissible (but must file for funding each year)
    • E-rate-eligible contracts may only be “extended” if original contract included an extension clause
    • If willing to do multi-year contract, inform all bidders through Form 470/RFP
    • Know the history of your contracts
  • 39. Form 470 Mistakes That Could Be Avoided
    • RFP occurs early in school year?
    • Form 470 not filed in right categories
    • Contract signed before Allowable Contract Date
    • Contract not signed
    • Form 470 certification not filed before filing window deadline. (Double-check online)
    • “ We’ve already decided” - That’s a rule violation
  • 40. Form 471 Application
    • Most important application—take time to do it right
    • Funding requests and service details are critical
    • What you request is the most you can get
    • But you must be able to justify your request
    • Can do online but must follow up with Description of Services paper attachment
    • Pay close attention to the filing deadline!
    • Proofread, don’t leave blanks—you could fail “Minimum Processing Standards” for paper
    • SLD recommends separate applications for Priority One and Priority Two services to speed approval
  • 41. Form 471: Revisions for 2005
    • New category of “Basic Maintenance of Internal Connections”
    • Flag state master contracts, continuation of FRN under previous multi-year contract
    • One discount worksheet for all entities
      • Doing it wrong no longer grounds for automatic rejection
      • Requires NCES codes for schools, FSCS code for libraries
      • Flag Pre-K, Adult Ed or Juvenile Justice facilities
      • Flag Alternative Discount Calculation
    • Must flag “duplicate funding requests” (e.g. not yet approved, under appeal) and supply FRN(s)
    • Change in “Impact of Services Ordered” data
  • 42. Reviewing Applications
    • Receipt Acknowledgement Letter provides a chance to correct some kinds of clerical mistakes (but not revision upwards)
    • Problem Resolution and Program Integrity Assurance
    • SLD reviewers may call with questions
    • It’s important to be responsive
    • Can request additional time if necessary
  • 43. Funding Commitment Decisions
    • Don’t count on the money until it is approved
    • At least one Funding Commitment Decision Letter (FCDL) issued per application
    • Applications for Priority One services likely to get approved first
    • Vendors are notified at the same time
    • Don’t start projects before July 1 if you want them to remain eligible for support
    • If you can’t do project without E-rate discounts, don’t start it before your funding has been approved
  • 44. Newly SLD Priorities for Issuing Commitments
    • 1 st priority given to commitments for earlier funding years that are ready to be issued (late approvals, appeals, etc.)
    • Priority 1 before Priority 2
    • Then based on date application review was finished
    • Promotes early filing
  • 45. Payment Paperwork Requirements
    • Applicant must file Form 486 within 120 days of date of funding commitment letter or service start date, whichever is later
    • Starting July 1, 2004, applicant can choose preferred billing method
      • Service Provider Invoice filed by service provider
        • Applicant must pay its share within 90 days of project completion
        • Service certification may be requested of customer
      • BEAR Form
        • Applicant prepares, service provider signs
        • Payment must be remitted to applicant within 20 days
    • Once used for a funding request, must use all year long
  • 46. Understanding the E-rate Calendar
    • Can now apply for funding for July 1, 2005 to June 30, 2006 (September 30 in some cases)
    • Form 471 is due February 17, 2005
    • Applications reviewed, starting in spring
    • Commitments may or may not be approved by funding year start
    • Funding commitment approval on hold since August, but should be temporary
  • 47. Spotlight on Waste, Fraud and Abuse
    • Convictions for fraud, obstruction of justice, bid-rigging
    • Individuals debarred from program participation
    • Ongoing investigations by Antitrust Division, FBI, FCC’s inspector general
    • House Commerce oversight and investigations subcommittee hearings on program waste
    • Media reports focused on excessive purchases
  • 48. Important New Compliance Requirements
    • E-rate-supported equipment must not be moved for three years
    • Rule can be waived only when a facility is closed, either permanently or temporarily
    • New asset inventory requirement for tracking where equipment is installed and located
  • 49. Important New Compliance Requirements
    • All E-rate documentation must be retained for 5 years after last date of service or installation
    • All stages of the process from bids, applications, installation, invoices, etc.
    • Failure to produce records can lead to Commitment Adjustment order to return funds
  • 50. What’s Different Now?
    • Actions that may not have been rule violations in the past now looked upon critically
    • Sloppy procedures no longer tolerated
    • Toughening up of SLD rules with force of law
    • Applicants can be penalized if they are at fault
    • SLD planning 1,000 site visits in coming year to assess program, evaluate compliance and outreach needs
  • 51. If Something Goes Awry. . .
    • Don’t wait forever to inquire about status
    • If application is rejected
      • Are there valid grounds for appeal?
      • Must respond within 60 days
      • Don’t appeal to the SLD and FCC at the same time
    • Very important to keep good records to make your case (or in case of an audit)
  • 52. Available Resources: E-rate Manager SL
    • Free Web-based tool created by Funds For Learning
    • Sign-up details at
    • Review your funding requests and available funding
    • Details of contracts that were reported to SLD
    • Stay on top of payment deadlines
    • Program updates
    • Searchable Eligible Services List and appeals decisions
    • Particularly useful if taking over E-rate from someone else
  • 53. Available Resources
    • Submitting questions to the SLD
      • Email is recommended approach
      • Click on “Contact Us” on SLD home page or
      • Go to
    • Answers should be backed up with research on SLD Web site
  • 54. E-rate Program Update, 2005 A Presentation for Schools and Libraries November 2004 This presentation may not be copied or presented without the express written permission of Funds For Learning, LLC