MEMORANDUM
Date:
10/9/2002
To:
E-Rate
From:
Claude Shipley
RE:
E-Rate News for the Week of 10/7/2002-10/11/2002
-October Filing Deadlines
-Questionable Supplier Practices
-Correcting" SPIN Change Requests
-E-Rate Training Opportunities: [Note that my previous email about the
rebroadcast by FKN of the VA worksop for the 17th of October also applies to the
training referenced below for the 24th of October.]
The E-Rate News for the Week, prepared by E-Rate Central, is sponsored by the
Council of Chief State School Officers ("CCSSO") and made possible by a grant
from the AT&T Foundation. Official SLD news is in the "What's New!" section of
the SLD's Web site (http://www.sl.universalservice.org).
Additional information is on the State Education Telecommunications Alliance's
("SETA") Web site (http://www.e-ratecentral.com).
-October Filing Deadlines
October 28th and 29th are important filing deadlines. Most E-rate participants will
be affected by at least one of these deadlines. To avoid losing funding that has
already been awarded, please review the following situations carefully.
(1) The deadline for filing BEARs (Form 472s) for discount
reimbursements is 120 days after the last day for receipt of service (or, in
special circumstances, 120 days after a Form 486 Notification Letter). For
most applicants seeking reimbursements on FY 2001 recurring services
(ending June 30, 2002), BEARs must be postmarked by October 28, 2002.
Remember that a BEAR form must be acknowledged by the supplier before it
can be submitted, so do not wait until the last day to begin completing your
forms.
If a SPIN change must be made before a BEAR can be filed, the change request
must be made by October 28th as well (see notice below on "Correcting" SPIN
Change Requests).
(2) The deadline for filing Form 486s, indicating receipt of services,
is 120 days from either the date of the Funding Commitment Decision Letter
("FCDL") or from the start of service, whichever is later. For FY 2002
awards, with services starting July 1, 2002, the following Form 486 deadlines
are particularly critical:
October 29th - Waves 1-5 (FCDLs dated before July 1st)
October 30th - Wave 6 (FCDL dated July 2nd)
(3) Libraries that did not file (or filed incomplete) Form 486s for FY
2001, or who subsequently filed Form 500s to reduce funding, have until
October 28th to take corrective action (see
http://www.sl.universalservice.org/reference/CIPAGuidance.asp).
-Questionable Supplier Practices
Fraud and abuse is always a concern in large funding programs. E-rate is no
exception. Although there have been few public reports of egregious actions, there
are clear signs that the SLD and FCC have found problems and are actively
investigating certain applicants and suppliers. At the very least, this scrutiny is
leading to funding denials and/or funding delays.
In one state alone, we recently identified over 120 applications from last year (FY
2001) that have not yet been acted upon. We believe these applications are being
held pending the resolution of supplier and/or applicant investigations. The
majority of these applications involve small private and parochial schools with 90%
discount rates - key targets for unscrupulous E-rate vendors.
SLD investigations appear to revolve around several questionable vendor practices
which should act as red flags for all applicants. In particular:
(1)
Close involvement by a vendor in all phases of the E-rate process,
most particularly in the Form 470 service request and vendor selection phases
is prohibited. Open competitive bidding is a key requirement of the E-rate
program. A vendor cannot be listed as the contact on a Form 470 and should,
in no way, act to prevent an applicant from receiving and considering other
vendor bids.
(2)
Applicants are responsible for paying the non-discounted portion of
all E-rate eligible services. Even the poorest applicants must pay 10%.
Vendor offers to provide essentially "free" service - by forgiving the non-
discounted portion, arranging for "grants" to cover the non-discounted
portion, or providing other offsetting free services - are at best suspect and at
worst fraudulent.
(3)
Service and equipment pricing must be competitively based. SLD
investigations are apparently finding purchase prices that are well above the
prevailing market levels, annual lease rates that approach the purchase prices,
and annual maintenance rates that far exceed the underlying equipment prices.
One suggestion for those seeking to avoid becoming embroiled in SLD
investigations, by selecting and listing a suspect vendor on a Form 471 application,
is to use the SLD's new Data Retrieval tool to identify vendors who seem to have
been previously involved in a disproportionately
high number of funding denials or delays. Although past funding problems
do not necessarily indicate questionable practices, they do suggest situations that
should be more carefully examined.
The SLD's Data Retrieval tool must be used on a state-by-state and on an individual
funding year basis. (Since funding for FY 2002 is not yet complete, we suggest
starting with FY 2001.) To check on a specific vendor, we recommend the
following steps:
(1) In the Data Retrieval search screen, select funding year 2001,
select the state in question, and enter the vendor's SPIN. Then click ">>Build
Data File." (Instructions on using the Data Retrieval tool, and a link to the
search screen, can be found on the SLD Web site at
http://www.sl.universalservice.org/funding/OpenDataSearch/.)
(2) Download the resulting Data File following the instructions on the next
screen (e.g., right-click for PC users). Import the Data File, which is a
tab-delimited text file, into Excel (or another database program) for easier
reading and data manipulation. Each row of the resulting file will provide
data on one FRN associated with that vendor.
(3) To best focus on actual funding decisions, sort by service type and
original discount rate, and delete all "NOT FUNDED" Internal Connection
rows for discount rates below 86% (for which funding was not available in
FY 2001). Deleting these FRNs avoids biasing the analysis by including any
Priority Two funding requests that would not have been funded under any
circumstances
(4) If the file contains a large number of records, it may be useful to
sort the file by commitment status.
We recommend paying the most attention to unusually unsuccessful vendors (i.e.,
those involved with a large number and a large proportion of FRNs listed as
"PENDING" or "NOT FUNDED"). So far in our analysis, for example, we have
found a number of vendors, each associated with more than 100 FRNs for FY 2001,
who did not have a single FRN funded last year. While lack of funding success is
hardly proof of problematic E-rate practices, applicants considering using such
vendors for their next year's applications may want to ask a few extra questions
first.
-"Correcting" SPIN Change Requests
Two weeks ago, the SLD posted guidance on service provider changes indicating
that SPIN Change Requests must be filed by the last service date.
Responding quickly to applicant concerns that many BEARs are prepared after the last
service date, and that SPIN changes are often required in this process, the SLD posted
new rules this week (see http://www.sl.universalservice.org/reference/SpinChange.asp)
permitting "correcting" changes to be submitted up until the BEAR invoice deadline. For
FY 2001 recurring services, as indicated above, this deadline is normally October 28,
2002. Once such changes are approved, applicants will have an additional 120 days to
file their BEAR forms.
Technically, note that the SLD has retained the last service date deadline for regular
SPIN Change Requests, but has created an alternative last invoice date deadline for
special "Correcting" SPIN Change Requests.
 E-Rate Training Opportunities
The Virginia Department of Education is conducting two videoconference E-rate
workshops and has graciously offered to allow applicants to participate nationally.
Virginia has run similar workshops before and they have been excellent. This year's
workshop schedule is:
E-Rate for Beginners: October 17, 2002, 2:00 - 4:00 p.m. EST
Maximizing E-Rate Discounts: October 24, 2002, 2:00 - 4:00 p.m. EST
The Virginia workshops are distributed via satellite using the C-band satellite Anik
E1 located at 118 degrees West, Channel 19. Test time for each workshop will
begin at 1:30 p.m. EST. [NOTE: The Florida DOE Florida Knowledge Network is
rebroadcasting at the same time. Refer to email on 11 October on how to obtain the
satellite connection or a taped copy.]
Disclaimer: This newsletter may contain unofficial information on prospective E-
rate developments and/or may reflect E-Rate Central's own interpretations of E-
rate practices and regulations. Such information is provided for planning and
guidance purposes only. It is not meant, in any way, to supplant official
announcements and instructions provided by either the SLD or the FCC.