In This Week's Issue
»	FY 2008 — FY 2009 Funding Status
»	Reply Comments on ESL for FY 2010
»	E-Rate Updates and Reminders
»	Schools and Libraries Audit News Brief Series dated June 29th - July 1st

E-Rate Central News for the Week
July 6, 2009

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 (516-832-2887) or through our Contact Us Web form. Additional E-rate information is located on the E-Rate Central Web site.

FY 2008— FY 2009 Funding Status

Wave 11 for FY 2009 is scheduled to be released on Tuesday, July 7th, for $35 million. Total FY 2009 funding is currently $589 million. Only Priority 1 services for FY 2009 are being funded at this time.

The Schools and Libraries Committee of the USAC Board has conditionally recommended, subject to FCC approval, the commencement of Priority 2 funding at the 90% level for FY 2009. Unfortunately, USAC calculates that it is currently $400 million dollars short of being able to fund all valid Priority 2 requests at this level. Presumably, USAC is assuming that the FCC will approve this recommendation only if it also approves a roll-over of previously unused funds into FY 2009. This should be at least $1 billion. The FCC's roll-over decision was expected last week, but did not occur.

For applicants seeking Priority 2 funding at 80%, USAC's $400 million shortfall estimate is a discouraging indication. The initial demand for Priority 2 funding in the 80-89% band, as reported last March, was just over $1 billion. Unless well over $1 billion in roll-over funds are made available, the Priority 2 funding threshold for FY 2009 is likely to be in the mid-eighties.

Wave 59 for FY 2008 is scheduled to be released on Wednesday, 8th, for $24 million. Total FY 2008 funding is now $2.35 billion. A decision has still not been made on the funding of Priority 2 services at 87%.

Reply Comments on ESL for FY 2010

A limited number of reply comments on the proposed Eligible Services List ("ESL") were submitted last week. A summary of the major issues addressed is as follows:

Video on Demand Servers	Although technically not a Reply Comment, VBrick Systems filed an Ex Parte letter reporting on a conference call with FCC staff the preceding week to discuss the eligibility of video on-demand ("VOD") servers. Vbrick pointed out - correctly, in our view - that the distribution functions of VOD servers should be eligible. Multi-function VOD servers must be cost-allocated to remove the costs associated with any ineligible content storage functions.
VoIP	The State E-Rate Coordinators Alliance ("SECA") expressed support for initial comments of the E-Rate Management Professionals Association ("E-mpa") and Funds for Learning seeking additional clarification on what equipment may or may not be included as a part of on-premise, Priority 1 services.
Web Hosting	SECA and Edline both supported the need for further clarification of Web hosting eligibility, but expressed widely divergent views on such eligibility. SECA expressed concern with cost allocation procedures assigning high eligibility costs to multi-function application services, apparently far in excess of comparable costs for basic, stand-alone, Web hosting. Edline argues that higher Web hosting costs are justified by the special requirements of school-based Web applications.
Wireless Internet	Qualcomm and the San Diego Unified School District1 expressed support for initial comments filed by AT&T, Sprint, and Verizon proposing full eligibility for wireless Internet services so as to provide any-time, any-place, access to school staff and students. Currently, the eligibility of wireless services is limited by a relatively strict definition of "educational purpose" - specifically excluding residential usage. Putting aside the educational merits of expanded wireless Internet eligibility, it should be noted that such a change would likely increase the demand for Priority 1 services significantly, with an offsetting reduction in available funding for Priority 2.

Copies of submitted comments in this proceeding can be found in the Search for Filed Comments section of the FCC Web site. To find comments on this and other E-rate matters, enter "02-6" in the Proceeding box at the top left-hand corner of the search screen.

E-Rate Updates and Reminders

SLD Fall E-Rate Training:

Final training schedules and registration information for six of the eight one-day SLD workshops planned for this fall are available on the SLD Web site. The first session in Washington, DC, on September 22nd is almost fully subscribed; attendance thereafter will be on a first-come-first-served, waiting list basis.

National Broadband Planning and E-Rate:

In one of his first public appearances (at Seneca High School in Erie, PA), the FCC's new Chairman, Julius Genachowski, noted that although the U.S. is falling behind other countries in broadband deployment, it "is doing better in one important category: broadband connections in schools." The Chairman credited the E-rate program with this success.

Notices of Broadband Funds Availability:

The Department of Commerce's National Telecommunications and Information Administration ("NTIA") and the Department of Agriculture's Rural Utilities Service ("RUS") jointly issued two Notices of Funds Availability ("NOFAs") on July 1st soliciting applications for a portion of the $4.7 billion in stimulus funding set aside for broadband initiatives.

The most important NOFA is for funding under the Broadband Technology Opportunities Program ("BTOP") offering up to $1.6 billion for broadband infrastructure, public computer centers, and sustainable broadband adoption (see BTOP Fact Sheet, and BTOP NOFA).

A much smaller NOFA of the State Broadband Data and Development Program, dealing with broadband mapping and planning, is also available (see Mapping Fact Sheet, and Mapping NOFA).

FFL National E-Rate Survey:

Funds for Learning, an E-rate consulting firm colleague and competitor, has published the results of its 2nd Annual National E-rate Survey. A brief summary of the results is as follows:

• "Opinions of E-rate program management have improved dramatically over the last year."
• "The E-rate program is meeting its goal of connecting schools and libraries to the Internet...Significantly, more than half of those surveyed thought that their organization would not be able to maintain their level of classroom connectivity without E-rate funding."
• "57 percent of participating organizations have just one person managing the E-rate process. Applicants agree that all phases of the E-rate process are equally cumbersome to learn, and also concede to spending more time on E-rate issues than they did a year ago... To cope with the administrative overhead, applicants enlist outside resources to help manage the E-rate process. Forty-six percent of applicants requesting more than $100,000 in E-rate discounts each year use a professional E-rate consultant."
• "Fifteen percent of survey respondents indicate that they have undergone an audit within the last two years. Of these audited applicants, 72.5 percent had no findings as a result of their audit. For the remaining group, failure to properly retain E-rate related documentation was the most common audit finding."

Pre-Commitment CIPA Review:

A few applicants subject to Selective Reviews have reported a new Pre-Commitment CIPA Review section asking, in part, about compliance — filtering, Internet Safety Policy, and public meeting — as early as FY 2002. As a historical note, the Children's Internet Protection Act was enacted in December 2000. In FY 2001, applicants simply had to indicate that they were "undertaking" measures to become compliant by FY 2002.

Applicants being asked to document early CIPA compliance should note that the FCC's formal record retention rules were not published until the release of its Fifth Report and Order (FCC 04-190) which did not become effective until October 2004.

Schools and Libraries Audit News Brief Series dated June 29th - July 1st

• Audit News Brief Series – Overview and Discount Calculations
• Audit News Brief Series – Document Retention
• Audit News Brief Series – Eligible Services and Technology Plans

In place of its regular weekly News Brief, the SLD released a special three-part series based on findings from last year's Round 2 beneficiary audits. Number 1 in the series lists the four most common areas involving adverse findings and comments; the remainder of the series reviews the underlying program rules at issue.

An important distinction is made between an audit finding and an audit comment. A "finding" identifies an actual program rule violation, which might lead to a return of funds request. A "comment" indicates that, whether or not a program rule was violated, good accounting practices were not being followed.

The SLD provides the following list of the most common findings, designated "(F)," and comments "(C):"

1. Discount Calculations
   • Entities did not properly apply the discount to the pre-discount cost. (F)
   • The discount calculation could not be verified. (F)
   • The exact data used to calculate the discount could not be provided, but the overall discount was verified. (C)
2. Document Retention
   • No documentation was retained to support the discount calculation. (F)
   • Equipment purchased with program funds could not be located. (F)
   • Customer bills were not available to support invoices submitted to USAC (Form 472 and/or Form 474). (F
   • Consortium leaders could not locate Letters of Agency and/or Forms 479 for all consortium members. (F)
   • Applicants did not follow their own document retention policy or did not have a policy. (C)
   • Asset registers were incomplete or not maintained. (C)
3. Eligible Services
• USAC was invoiced by applicants and/or service providers for ineligible equipment and/or services. (F)
4. Technology Plans
   • The technology plan was deficient (in other words, it did not adequately address the five required elements). (F)
   • The technology plan was not approved. (F)
   • The technology plan was not written (created) prior to filing the Form 470. (F)