In a report to its governing board last July, prior to Wave 34, the SLD had announced that there were approximately 1,000 FY 2003 Form 471s pending, including 600 that were awaiting FCC policy decisions. A sizeable number of FY 2003 applications, therefore, remain outstanding.

This is the first real wave of funding (aside from a few appeal-related commitments issued last week) since August 3rd. Funding for FY 2004 is expected to resume with Wave 10 this week. Although these waves technically mark the end of the funding freeze, the underlying accounting problem has not been solved. Without a change in procedures or law, the pace of future funding will be limited to the accumulation of new and unobligated cash either from additional carrier contributions or from the cancellation of existing commitments.

As initially stated by the SLD, the purpose of these visits is two-fold. First (and, we believe, foremost), the visits are designed to provide a "[r]obust after the fact physical site review to help curb waste, fraud and abuse." Second, the visits are to provide "[e]nhanced outreach to the school and library community."

The most recent announcement by the SLD (see Contractor Chosen) focuses on the outreach objective. Of the five bullet points listed, only the fifth - "verify the receipt and function of invoiced E-rate products and services" - deals with the primary program review issue.

Although nowhere in the announcement does the word "audit" appear, we suggest that site visits be treated as serious examinations of applicant E-rate practices. Several points should be noted.

(1) Visits will reportedly be triggered randomly on the basis of recently received invoices. As such, the SLD will assume that the product or service has been installed and/or used, and that this can be confirmed during the visit.

(2) If the past is any guide, "random" does not mean that any invoice is as likely to be selected as any other. We would expect that the randomizing function will give added weight to: (a) the amount of the invoice; (b) Internal Connections FRNs; and (c), applicant- and vendor-specific factors.

(3) Visits are intended to be short and focused, typically to be completed in one day. By focusing on specific invoices, the visits are expected to be less comprehensive than the full "beneficiary" audits that the SLD and FCC have conducted in the past and that will continue again this year as well.

(4) Applicants will be notified one to two weeks prior to the visits and will be given lists of documentation required relating to procurement, deployment, and usage of the technology services. Since these are on-site audits, applicants should assume that their visitors will be assessing the level of supporting resources required by the E-rate program including the availability of computers and the adequacy of staff development.

Our best "Emily Post" advice to applicants faced with visits from the Bearing Point consultants is to graciously put out the best china and silverware, but to be sure to remember that their guests may be peeking into their medicine cabinets.