• First Funding Wave Released for PY2 Out-of-the-Window Applications
• Timing Flexibility for PY3 Service Substitution Filings
• Mini Item 25 Reviews

The following is a summary of the E-rate News for the Week of April 23, 2001, prepared by E-Rate Central.  Official SLD news appears in the "What's New!" section of the SLD's Web site .  Additional and archived information appears elsewhere on this Web site.

First Funding Wave Released for PY2 Out-of-the-Window Applications

The first - and largest - of funding waves for applications accepted outside the normal PY2 Form 471 window was released on Friday, April 27.  PY2 was an anomaly in the history of E-rate; it was the only year in which the demand for funds received during the regular application window did not exceed the annual funding level.  As a result, the SLD not only ultimately accepted late applications that had just missed the normal window, but opened a supplementary window March 2-31, 2000.

Wave 21 - so numbered because it is in addition to the 20 original waves covering PY2 in-window applications - provided funding of over $163.3 million for 2,318 applications.  New York State's share was $17 million for 181 applications.  Details on this wave will be posted this week on the SLD's Web site.

Wave 21 brings total PY2 funding to over $2.1 billion ($208 million for NYS)for over 30,100 applications.  We expect a few smaller waves to provide at least an additional $30-40 million in funding.  Wave 22 is expected next Friday.

The one-year delay in the funding of out-of-the-window applications was due in large part to the SLD's concern with prioritization issues if the remaining PY2 funding had not been enough to cover all supplementary applications.  This was a potential problem, not unlike the one now being faced by the SLD and FCC to allocate PY4 funding for internal connections to 90% discount applicants.  In the PY2 case, the SLD was ultimately able to resolve this issue by recapturing unused funds awarded to earlier applicants so that all additional applications could be fully funded.

Discounts awarded for out-of-the-window applications can be applied retroactively to recurring services (e.g., monthly telephone or Internet access) actually received during PY2 (7/1/99 to 6/30/00).  Funds awarded for non-recurring services (e.g., LAN installations) can be applied to work performed any time from the beginning of PY2 (7/1/99) until later this summer (9/30/01).

Since a considerable period of time has elapsed since out-of-the-window applications were filed, successful applicants may be required to file several additional forms, namely:

• If funding is provided for a service that is not going to be used, or used at less cost, a Form 500 should be filed to cancel or reduce the awarded amount.
• If funding is to be used, a Form 486 must always be filed to indicate receipt of service.
• BEAR forms (Form 472s) must be filed for retroactive discounts.  For sequencing purposes, it is recommended that a BEAR form not be filed until the associated Form 486 has been on file with the SLD for several weeks.
• If funding is provided for non-recurring services, to be received after the contract termination date shown in the original application, a Form 500 must be filed to indicate that the contract has been extended.
• If, as a result of the delay, the service to be provided is different than the one represented in the original application, the applicant must file a modified Form 471 requesting approval for a service substitution see the SLD Web site for details.

Timing Flexibility for PY3 Service Substitution Filings

The SLD service substitution rules, referenced above see last week's News of the Week, indicate that the required Form 471 modification be submitted at least 90 days before the end of the service period.  Since the current year ends June 30, 2001, this would mean that any PY3 service substitutions should have been submitted by April 1.  This is prior to the date the new rules were posted.  We have been assured by the SLD that service substitution requests for PY3 will be accepted now and that the deadline, as posted on the SLD Web site, will be modified "slightly."  PY3 applicants, seeking approval for contract modifications, should file the requisite Form 471 as soon as possible.

Mini Item 25 Reviews

Several applicants have reported receiving "Mini Item 25 Reviews" from SLD Program Integrity Assurance reviewers.  Item 25 refers to a Form 471 certification whereby an applicant attests to having all necessary resources to properly utilize the services on which discounts are being requested.

Although the SLD will not disclose what factors in an application will trigger an Item 25 review, the most likely cause are requests for large discounts relative to the size of the applicant.  During PY3, the Item 25 review took the form of a twelve-page questionnaire that was faxed to the targeted applicant.

The new "Mini Item 25 Review" - more formally designated an "E-rate Information Fax Request" - is just over three pages long.  It contains the following five requests:

• Please provide all contracts related to your Form 471, if any.
• Please provide all related RFPs, if any
• Please provide complete copies of all bids that were received.
• Please provide complete documentation indicating how and why you selected the service provider(s)
• Document your ability to pay your share.

As with normal Item 25 reviews, we recommend that applicants treat the "mini" reviews in a serious and timely manner.  Before beginning work on any Item 25 review, it is advisable to contact the SLD reviewer involved to inquire if there are any issues that need to be addressed in specific detail.