In This Week's Issue
»	FY 2008 Internal Connections Funding Beginning
»	SLD Fall 2008 Training Finalized
»	Direct Certification and E-Rate Discounts
»	Schools and Libraries News Briefs for July 11th

E-Rate Central News for the Week
July 14, 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 2008 Internal Connections Funding Beginning
This will be an unusual funding week. The SLD is planning to release two funding waves for FY 2008 but, for the second week in a row, no wave for FY 2007.

Wave 12 for FY 2008 is scheduled to be released on Tuesday, July 15th. Funding in this wave will be $23.3 million. It will be for Priority 1 services only.

Wave 13, which will include the first FY 2008 funding for Priority 2 services, is scheduled for release on Wednesday, July 16th. Funding in this second wave will be $112.5 million. As of Wave 13, the cumulative national FY 2008 funding total is $828 million.

At this point in the FY 2008 funding cycle, Internal Connections requests will be funded only at the 90% discount level. The SLD has determined that it will not be able to fund Internal Connections at or below 79% and will be denying Priority 2 FRNs at these levels. The availability of Internal Connections funding at the 80-89% level has not yet been established (although, as previously discussed, the prospects for reducing the Internal Connections funding threshold all the way to 80% are bleak). For the time being, Funding Commitment Decision Letters ("FCDL"s) on applications that include 80-89% Priority 2 FRNs may designate these FRNs "As Yet Unfunded."

SLD Fall 2008 Training Finalized
The SLD has posted the final schedule and registration information for its seven 1.5 day training sessions to be held this fall in the following cities and on the following dates:

To assure a spot in one of these sessions (particularly in Washington, DC), reservations should be made early. The training agenda and online registration is available at SLD Training.

Direct Certification and E-Rate Discounts
Although E-rate program rules permit the use of alternative discount rate mechanisms, most applicants base their discount rate calculations on student participation in the National School Lunch Program ("NSLP"). The primary advantage of using actual NSLP data is that it is generated through regular child nutrition systems and is typically easy to document (simplifying E-rate application review). The disadvantage is that this data reflects student "participation" in NSLP, not the number of students who are actually "eligible" for free or reduced-price lunches. Particularly in the upper-grades, where there may be a stigma associated with NSLP participation, the percentage of "eligible" students is usually higher than the percentage of "participating" students. Since E-rate discounts may be based on "eligible" percentages, this means that some applicants may not be applying for discounts at optimum levels.

Additionally, and in a broader societal sense, this also means that many students are not getting the nutritional benefits they deserve. To address this issue, the USDA, in cooperation with state education departments, developed a program of "Direct Certification" to simplify access to free meals (through lunch, breakfast, and milk programs) for certain low-income children. The process allows local education agencies (schools and school districts) to directly certify children for free meals if they are members of households already receiving Food Stamps or Temporary Assistance for Needy Families ("TANF") without filling out free meal applications. The process is also designed to simplify the schools' job of verifying student eligibility.

Direct Certification has been optional for all schools participating in federal school meal programs since 1991, but it is now mandatory. In 2004, Congress enacted the "Child Nutrition and WIC Reauthorization Act of 2004." The purpose was to "amend the Richard B. Russell National School Lunch Act and the Child Nutrition Act of 1966 to provide children with increased access to food and nutrition assistance, to simplify program operations, and improve program management, to reauthorize child nutrition programs, and for other purposes." Direct Certification became the process that LEAs "shall" do, not simply "may" do. The mandatory provision was phased in starting in 2006-2007 for school districts with 25,000 students or more. For 2007-2008, the threshold was reduced to 10,000 students. Beginning July 2008, it now applies to every school participating in the NSLP program, public or private, regardless of size.

Implementation of Direct Certification varies from state to state, usually based on an agreement between the state education department and whichever state welfare agency handles the Food Stamp and TANF programs.

In the simplest implementation form, the cooperating agency mails Direct Certification letters to all the Food Stamp or TANF households. These letters are normally scheduled to be mailed in August. The instructions indicate that the households' children can be automatically enrolled in their schools' free meal programs (without filling out the standard applications) by giving the letters to the schools. However, note that while this is a step forward in making enrollment easier for the families (and simplifying the schools' verification procedures), it still relies on the families to proactively enroll their children. As a result, we would not expect a significant change in NSLP participation rates.

Now that mandatory Direct Certification applies to schools of all sizes, a growing number of states have reversed the enrollment process so that the schools become the proactive parties. This is done by providing the Direct Certification data to the schools — sometimes in addition to a state mailing to the households, sometimes in lieu of a state mailing. The schools then send letters to the families of their students, advising them that the students are eligible for free meals and that the students are being enrolled (subject to an "opt-out" provision required by federal law). We believe this has the potential to significantly increase reported NSLP participation in many schools (especially at the secondary level).

The SLD is reportedly reviewing various aspects of Direct Certification, but has not yet provided any formal guidance. As a result, the following issues should be noted:

1. It is not yet known if the SLD (or auditors) will accept Direct Certification letters (or equivalent state data) to support the eligibility of children who are not actually enrolled in a free meal program, either because families opted not to enroll them or because their schools do not participate in such programs.
2. According to current SLD guidance, Food Stamp and NSLP eligibilities are equivalent, but TANF is an acceptable alternative measure of poverty only if a particular state's income eligibility guidelines are equal to or below the level of the Income Eligibility Guidelines (IEGs) for NSLP. In states with higher TANF income levels, Direct Certification may not be an acceptable alternative unless the data clearly distinguishes between Food Stamp and TANF participation.
3. A similar income eligibility issue arises in states in which Head Start operations are eligible for E-rate. The Richard B. Russell National School Lunch Act, together with the more recent Improving Head Start for School Readiness Act of 2007, makes any child enrolled in Head Start automatically eligible for free meals without further application or eligibility determination (i.e., essentially the same concept as Direct Certification). Although Head Start primarily serves children from families with household incomes at or below the federal poverty level, a small proportion of children in families with household incomes above the poverty level may also be served (and thus not be considered E-rate eligible).

Although there are some gray areas involving the applicability of Direct Certification to E-rate, the potential benefits are significant. To take full advantage — particularly since this will be the first year that Direct Certification is mandatory for all schools and new to many of them — we recommend that E-rate coordinators review the process with their food service personnel to assure that:

1. Regular free meal application packages sent to school families clearly indicate the Direct Certification option(s);
2. Students associated with Direct Certification letters returned to the schools are properly enrolled in the free meal programs; and
3. On the chance that families qualifying for Direct Certification also complete and return actual applications, there is no double-counting.

Schools and Libraries News Brief for July 11th
The SLD's News Brief for July 11th discusses three types of Form 486 letters used by the SLD. The most common is the Form 486 Notification Letter sent to any applicant whose Form 486 has been certified, processed, and accepted by the SLD. Corresponding letters are sent to all associated service providers. It is important that both the applicant and the service providers know that a Form 486 has been filed and accepted because the SLD will not process any invoices against those FRNs until this occurs.

Unfortunately, not every Form 486 is immediately accepted as filed. On a random basis, a small percentage of Form 486s are selected for technology plan reviews. The SLD will check to determine if the technology plan was created before the associated Form 470(s) was filed, and if the plan was approved before services for that funding year began.

Assuming that the services involved are for other than "basic telephone services" (which do not require a technology plan), the SLD will reject the Form 486 if the applicant fails the technology plan review. In this case, the applicant will receive a Form 486 Rejection Letter.

Alternatively, if the applicant realizes that there is a problem with its application, technology plan, or other aspects of its Form 486, it may agree to cancel the Form 486. In this case, the SLD will issue a Form 486 Cancellation Letter to the applicant (with corresponding letters to the associated service providers).

In the case of either a Form 486 rejection or cancellation, the applicant may be able to correct the original problem either by getting a technology plan belatedly approved and re-filing the Form 486, or by filing a Form 486 only for basic telephone services. A late filed Form 486 and/or a late approval of a technology plan will generally result in a reduction of funding.

One other type of Form 486 letter issued by the SLD (not discussed in this News Brief) is the warning/reminder that is sent to an applicant at its nominal Form 486 filing deadline date. This letter gives the applicant a 20-day grace period in which to file the Form 486. Since the first Form 486 deadline for any FY 2008 applicant is October 29, 2008, it will be several months before such reminders are sent to applicants other than those receiving late funding decisions for FY 2007 or earlier.