In This Week's Issue:
»	FY 2007 Funding Status and the Internal Connections Dilemma
»	Applicant Review of FY 2006 BEAR Invoicing
»	Schools and Libraries News Brief for February 15th

E-Rate Central News for the Week
February 18, 2008

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 (516-832-2880) or by e-mail. Additional E-rate information is located on the E-Rate Central Web site.

FY 2007 Funding Status and the Internal Connections Dilemma
Wave 38 for FY 2007 is scheduled to be released on Tuesday, February 19th. Funding in this wave is expected to be about $18 million. This will bring the cumulative national FY 2007 funding total to $1.95 billion. Internal Connections are still being funded at discount rates of 83% and above, and are being denied at 79% and below.

The decision on Internal Connections funding in the 80-82% discount range appears to hinge on an interesting issue. Last summer, when the FCC decided to roll-over an additional $650 million in previously unused funds into FY 2007, the size of the available fund rose from the normal $2.25 billion to $2.9 billion (less unspecified amounts for expenses and reserves).

Offsetting the increased fund size has been a significant reduction in funding denials. This has been the result of the more applicant-friendly review procedures implemented in 2006 as the result of the FCC's Bishop Perry and related orders. As a simple indicator of this change we calculated the approved funding for the last three years as a percentage of original funding requests (excluding still pending applications). The trend (which may be augmented somewhat by funding cancellations in the earlier years) is striking.

      FY 2005       69% of original requests approved
      FY 2006       79%
      FY 2007       86%

The net result is that the Internal Connections funding threshold, which observers had originally thought might drop to a relatively low level for FY 2007, has been stuck at 83% since last August — a level which, by our current estimate, is about as low as it can go with the existing $2.9 billion.

We suspect that the SLD's calculations are similar. Indeed, until halted by the FCC last December, the SLD was prepared to start denying Internal Connections funding at the 80% level. The most likely reason the FCC acted to forestall these denials was to consider if funding could be provided down to 80% if additional unused funds were rolled-over into FY 2007. At the time, another $300 million from earlier years had been designated as available — a number that has since grown to $450 million.

As of Wave 37, there was $342 million in Priority 2 funding requests pending in the 80-82% discount range for FY 2007. Getting to the 80% funding level with an additional $300 million is possible, but still uncertain. Getting there with an additional $450 million appears very feasible.

The dilemma for the FCC is whether to commit the additional funds to FY 2007 or to hold them for use in future years. The argument to add funds to FY 2007 is as follows:

Our sympathies lie with the "Pro" argument, but this is the FCC's decision. What and when that decision will be is still uncertain.

Applicant Review of FY 2006 BEAR Invoicing
Having just barely finished filing applications for FY 2008, applicants may not realize that this is an important time to make sure that funding awarded for last year's services was properly utilized. Too often, we find applicants who have not used the funding they were awarded in earlier years. The problems are usually one or more of the following:

1. Not all service providers discount their E-rate customers' bills, particularly for telecommunications and Internet Access services. In FY 2005, for example, only about 45% of Priority 1 funding was received via discounted bills. If bills are paid in full, it is up to the applicant to file a BEAR form (FCC Form 472) to receive a discount reimbursement.
2. Even if a BEAR is filed, reimbursements may not be received because:
   1. The BEAR was rejected by USAC for what, in some cases, could be a simple applicant error. If the applicant doesn't notice the rejection — a so-called "Pass Zero" condition — and doesn't correct and re-file the BEAR, no payment will be forthcoming.
   2. BEAR reimbursement payments, even when made by USAC, are sent to the applicant's service provider, not directly to the applicant. It is then the service provider's responsibility to remit the payment to the applicant. Although most service providers handle this remittance process smoothly, a mistake may mean that the applicant is never paid.

The BEAR invoicing deadline for recurring FY 2006 services was late last October. By now, most BEARs that had been properly submitted on time should have been processed and applicant payments should have been received. It is important to check that this has occurred. Here's the best way:

1. Check the "Authorized Disbursement" history for each funding request by using E-Rate Central's online funding search tool.
   1. Start at State Information; click on the applicant's state.
   2. Enter the applicant's Billed Entity Number ("BEN") in the Funding Quick Search field in the upper left-hand corner. The result of this search will be a complete funding history table by year for that entity.
   3. To check FY 2006 disbursements, click on "2006." This will produce a list of all funding requests for that year.
   Although not all funded Internal Connections requests may have been used yet, there should be disbursements listed for most other funded FRNs. If any amounts "Disbursed" are shown as zero, discounts were not received on these services, either because no invoices (applicant BEARs or service provider SPIs) have been filed and/or because the invoices were rejected.
2. To determine whether an invoice for a specific FRN has been filed (and/or rejected), click on the associated FRN number in the table to review the FRN Detail.
   1. If the Disbursed Amount is zero and the Payment Mode is "NOT SET," most likely no invoice was filed.
   2. If the Payment Mode is "BEAR" or "SPI", but there has been no disbursement, most likely an invoice was filed, but rejected.
3. Once a BEAR has been filed and processed, USAC sends a Form 472 (BEAR Form) Notification Letter (or electronic notification) to the associated service provider. A copy of this letter is mailed to the applicant. It needs to be reviewed carefully.
   1. Page one of this letter shows the Total Amount of Reimbursement Approved for Payment. If the amount is zero, the BEAR was rejected.
   2. Additional detail on the funding (including any reduction) or rejection is provided on page three. If additional explanation is needed, call the SLD's Client Service Bureau (888-203-8100).

If an applicant finds that a BEAR needs to be submitted (or to be corrected and resubmitted), the next step is to make sure that the SLD's invoice deadline has not passed. Although the normal deadline for submitting invoices for recurring FY 2006 services was October 29, 2006, there is a chance that late funding, SPIN changes, or service substitutions has extended that deadline. The invoice deadline for any FRN is shown in the FRN detail page discussed in Step 2 above.

If the invoice deadline has passed, an extension must be requested and approved before a BEAR can be filed. It is important to check for undisbursed funds now, because the SLD has indicated that it will be more flexible in approving extensions if the requests are received within 120 days of the original deadline. Although this does not appear to be a hard and fast rule, 120 days from the October 29th deadline would be February 26, 2008.

Requesting an extension requires only an explanatory letter to the SLD. For instructions on the information to be included and how to file a request, see Invoice Deadline Extension Request.

Checking that discounts have been properly received for non-recurring (or installation) services is similar, but a little more complicated. The following additional points should be noted:

1. In most cases — representing approximately 85% of the funding for FY 2005 — non-recurring services are discounted by the vendors. In such cases, it is the vendors, not the applicants, filing invoices (Form 474s, also called Service Provider Invoices or "SPIs").
2. The invoice deadline for non-recurring services that had to be received by September 30, 2007, was January 28, 2008. Invoices that were filed close to that deadline may not have been processed yet. If this is the case, the Disbursed Amount may still show zero in the funding history.
3. The last date to receive a non-recurring service may often be extended one or more years (again as a result of late funding, SPIN changes, and service substitutions). It is important, therefore, to check for unused non-recurring service funding for both FY 2006 and earlier funding years. In most cases, non-recurring service funding is associated with Internal Connections requests, but could include the installation portion of Telecommunications or Internet Access services.
4. Besides the funding histories described above, another way to check to see whether the last date to receive services and/or the invoice deadlines have been extended is to use the SLD's FRN Extension Status database. This tool is particularly useful when investigating a number of FRNs from a specific funding year. The database can be accessed by funding year at FRN Extension Table. The data is presented in FRN sequence and includes only FRNs that have been extended. If there is no entry for an FRN, the normal service and invoice deadlines apply.

Schools and Libraries News Brief for February 15th
The SLD's February 15th News Brief focuses on the submission of Item 21 Attachments and Problem Resolution of certifications and/or Form 471 applications submitted by mail. The following points should be noted:

1. The SLD recommends that applicants who filed their applications online, but who have not yet filed their attachments, also use the online system to construct and file their Item 21 Attachments - at least for Priority 1 services. We note, however, that applicants are continuing to report problems with the online Item 21 Attachment system, and that even the SLD suggests that it may be easier to submit Priority 2 attachments off line.
2. Item 21 Attachments can be submitted off line by e-mail (using the SLD's Submit a Question feature on its Web site), facsimile, or actual mail. Whatever approach is used, applicants must make sure to clearly identify their attachments by including the associated Billed Entity Numbers, Form 471 application numbers, FRNs, and contact information.
3. Form 471 applications and certifications on paper are data entered by the SLD's Client Service Bureau in Lawrence, Kansas. The SLD's experience is that more than half of all such paper forms have missing, incorrect, or inconsistent entries that must be fixed before the forms can be properly processed. This Problem Resolution process normally involves applicant inquiries. Once inquiries are made, applicants have 15 days to supply the missing or corrected information. Generally, these inquiries are not complex, but timely replies are critical.