Program Compliance

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Program Compliance

• Catriona Ayer
• Schools Libraries Division
• Universal Service Administrative Company

Washington Chicago Los
Angeles Newark Sept. 30, 2005 Oct. 6,
2005 Oct. 11, 2005 Oct. 21, 2005
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Agenda

• Top Denial Reasons and how to avoid them
• Selective Review issues
• PIA Reminders
• Site Visits
• Audits

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Top Ten Denial Reasons

• Ineligible products and services
• 30 Rule countered by When in doubt, break it
  out
• Contracts not signed or not in place
• Make sure that you have a signed and dated
  contract in place when needed
• Unauthorized consortium members
• Make sure that you have Letters of Agency, that
  meet the requirements posted on the website

4
Top Ten Denial Reasons

• Insufficient documentation
• Respond to PIAs requests for documentation, and
  ensure that you meet the FCCs document retention
  requirements.
• Insufficient support resources
• Secure access to, and document, sufficient
  resources to make effective use of the funds
  money to pay your share, hardware, software,
  electrical capacity and maintenance.

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Top Ten Denial Reasons

• Form 470 not filed
• Dont extend contracts without posting a Form 470
  unless those extensions were already mentioned on
  the establishing Form 470.
• Competitive bidding violations
• Conduct a free and open competitive bidding
  process. The Applicant cannot turn over their
  responsibility for this to a service provider.
  Document your compliance!

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Top Ten Denial Reasons

• 28-Day Rule violations
• Keep your dates in order Allowable Contract
  Date ? Contract Award Date ? Application Signed ?
  Application Received Date
• Invalid telecom provider
• Use the SPIN search tool on the website as a
  guide to determine if a provider is eligible to
  provide Telecommunications services.
• Form 470 not certified or certified late
• Certify online and by window close!

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Who Does What

• Applicants
• Write tech plan, file Form 470 and write RFP,
  evaluate bids, select provider, document the
  process, file Form 471, select invoice method
• Service Providers
• Respond to 470/RFPs, assist with preparing Item
  21, provide answers on specific goods and
  services requested, but NOT on competitive
  bidding
• Consultants
• If separate from service provider, can assist
  applicants with their role once Letter of Agency
  (LOA) is in place.

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Competitive Bidding

• Fair and open competitive bidding process
• Avoid conflicts of interest
• Independent consultant Service Provider
• Applicant Service Provider
• Open competition and bid evaluation
• Follow the rules FCC and state/local
• Beware of unusual contract clauses
• Applicants must document the process

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Form 470

• Based on, and in line with, tech plan
• Service requested must tie to services requested
  on Forms 471.
• Cant have encyclopedic lists of services
• Must be detailed enough so that bidders can
  formulate bids.
• Must include all entities receiving services,
  including NIFs.
• RFPs must be properly indicated on 470, and must
  be available for 28 days.

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Imposing restrictions

• Applicants can set some requirements for bidders.
• For example, applicants may require service
  providers to provide services that are compatible
  with one kind of system over another (e.g. Apple
  vs Windows) or compatible with one kind of
  hardware (e.g. Cisco switches).
• Applicants must be prepared to explain if/how
  they disqualified bids.
• Applicants must inform all bidders of any
  requirements that could lead to disqualification.

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Competitive Bidding

• Selecting the winning bidder
• Price must be the primary factor, considering
  only ELIGIBLE goods and services.
• Solution must be cost-effective (not just the
  most cost-effective)
• May not use E-rate to subsidize the procurement
  of ineligible or unrequested products or services
  because that constitutes a rebate of the
  non-discount portion of the costs, which is a
  violation of FCC rules.

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Contracts

• Each FRN must be one of the following
• Tariffed services provided under contract are
  contracted services.
• Month-to-month and tariffed services do not need
  contracts.
• Internal connections and Basic Maintenance of
  Internal Connections are presumed to be
  contracted services.

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Contracts

• Must a sign a contract after your 28 days has
  elapsed but before you file your 471.
• Must contain two signatures and two dates
  (applicant and provider).
• If contract was signed before 10/13/04, and only
  had applicant signature, can get signature of
  service provider now to come into compliance.
• Include description of goods and services to be
  delivered.
• Be prepared to explain documents that dont look
  like a traditional contract.

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State Master Contracts

• Single winner
• Applicants do not need to justify the selection
  of the winning bidder
• Multiple winners
• Applicants must be able to document why they
  selected the specific provider off the master
  contract.
• Multiple Award Schedules
• Applicants must be able to document why they
  selected the specific provider off the multiple
  award schedule.
• Only Terms and Conditions, not prices
• These contracts do not meet FCC contract
  requirements.

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Selective Review

• Selective Review Information Request is available
  on the website.
• Requests information about the competitive
  bidding process, and
• Requests information about the necessary
  resources (Item 25 certification).
• Retain documentation needed to be able to answer
  these questions.
• Be careful to answer questions COMPLETELY and
  FULLY. USAC will evaluate answers as they are
  given and will not reach out to seek
  clarification.

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Selective Review

• Can you pay your share?
• Final budget or draft budget with letter
  explaining budget process
• Cannot rely on grants that you have applied for
  but havent received
• Funds cannot come from the service provider or an
  entity controlled by the service provider where
  funding is contingent upon selecting that
  provider.
• Service provider bills cant be ignored or waived.

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Payment Plans

• Applicants are required to pay their share at the
  same time that USAC pays the discounted amount.
• Service Provider certifies that the invoices they
  submit are for services that have been billed to
  service providers customers.
• Therefore, deferred payment plans that allow the
  applicant to pay after USAC has paid will
  jeopardize a funding request.
• FCC Rules include a presumption that the
  non-discounted share will be paid within 90 days.
  

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Selective Review

• Do you have the other necessary resources?
• Are there end user computers?
• Must have reasonable plans to fully utilize all
  internal connections for which they are
  requesting discounts (e.g. 2 year plan to get
  computers for all network drops).
• Do you have software to run on the computers?
• Staff trained on how to use the technology?
• Electrical capacity?
• Can you maintain your eligible and ineligible
  equipment?

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Selective Review

• Resource Deficiency Advisory
• Possible outcome no impact on funding
• Highlights areas that we think are of concern
• PIA may follow up in the future.
• Funding Denials
• Can result when applicants cant show they
• Have the money to pay the non-discounted share
• Had a fair and open competitive bidding process
• Have the necessary resources to make effective
  use of the services.

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Antitrust Violations

• Federal and state laws prohibit business
  practices that unreasonably deprive consumers of
  the benefits of competition, resulting in higher
  prices for inferior products and services.
• Beware of
• Applicants having an interest in a company that
  is listed on their Form 471
• Kickbacks and bribes
• Bid rigging (criminal)
• Price fixing (criminal)

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Suspension Debarment

• Individuals that are civilly liable or convicted
  of criminal offenses related to the E-rate will
  be suspended and then debarred from the program,
  thereby prohibiting them from consulting,
  assisting and advising applicants or providers,
  and receiving funds or discounted services from
  E-rate.
• List maintained on website.

22
Documentation

• Retain documents to show your compliance
• Letters of agency and any agreements with all
  consultants
• Technology Plan and CTPA Plan Approval letter
• RFP, including evidence of publication date
• Any and all bids (winning and losing)
• Documents describing bid evaluation criteria and
  weighting
• Any correspondence with potential bidders
• Documents related to the selection of the service
  provider(s)
• Signed and dated copies of contracts.

23
Whistleblower Hotline

• USAC maintains a national Hotline in an effort to
  curb waste, fraud and abuse.
• Hotline accepts information on possible rule
  violations.
• Callers can remain anonymous if they wish.
• Investigated by Special Program Compliance team
• 888-203-8100

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Check and Recheck

• Requests for information
• Answer by the deadline or ask for an extension
• Failure to respond means SLD will act based on
  information that is available.
• Double check your work
• SLD assumes all data on forms is correct
• Use RAL to verify your Form 471 data including
  all information in Blocks 4 5 of your Form 471.
• Provide full and complete answers in response to
  requests for information.

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30 Rule

• FCC Rules specify that if 30 or more of an FRN
  is ineligible, then the entire FRN is denied.
• Applicants must be able to support the dollars
  requested by showing either contracts or bills.
• Fudge factors are not allowed.
• Some increases can be explained increased use,
  lines, service, etc.

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2 in 5 Rule for IC

• Determined on an entity basis (ie each school,
  library or NIF)
• 2006 is the second year for the rule
• All entities on a Block 4 worksheet that received
  a positive commitment for IC, are counted as
  taking a year
• Check with consortia and districts to ensure that
  you know the status of your entities.
• If you receive IC funding in 2005 and 2006, you
  are not eligible again until 2010.

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Consortia

• Letters of Agency
• Follow standards listed on website
• Name of consortium leader, consortium member
  name, type of service, signature, date and title
  of people signing document and timeframe covered
  by agreement.
• Sample LOA available for review
• Must be dated before filing of Form 471
• Avoid common pitfalls
• Didnt specify type of service (cant just say
  E-rate eligible services)
• Forgot to sign and/or date LOA.

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ESAs

• Eligibility is based on state law definition of
  school
• Should be careful to avoid Conflicts of Interest
  (serve as applicants, providers, tech plan
  approvers, etc).
• ESAs can be applicants and service providers at
  the same time, but cannot double dip.
• ESAs should carefully read the guidance that will
  be posted soon on the website.

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FCC RNs

• All entities doing business with the FCC must
  have an FCC Registration Number (FCC RN).
• Apply through FCC website. Click on CORES.
• Need one per BEN or SPIN.
• Linked to Tax ID, and used for Red Light Rule
  implementation.

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Red Light Rule

• If an entity does not pay its debts to the
  government or USAC in a timely manner, then the
  entity is placed under Red Light.
• The purpose of the Red Light Rule is to get
  entities to pay their bills on time
• Entities that are under Red Light are subject
  to disbursements and applications being held
  and/or denied.

31
Red Light Rule

• If a service provider is on Red Light
• No effect on Forms 471 processing.
• For SPI and BEARS, payments are netted for USAC
  debt and held for FCC debt.
• If an applicant is on Red Light
• Applicants with 2005 and beyond Forms 471 are
  given notice and 30 days to pay the debt. After
  that, any pending applications are denied.
• BEARs to RL applicants are held. SPI are
  unaffected by the applicants Red Light.

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Red Light Rule

• FCC considers Red Light information to be
  proprietary and will, therefore, not publish a
  list of Red Lighted entities.
• Entities that know their FCC Registration Number
  and CORES password can check their status by
  going to the Red Light Display System at
  www.fcc.gov/redlight.

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NIFs

• Non-instructional Facilities (NIFs)
• Buildings, occupied or owned by eligible entity,
  but doesnt meet definition of school or
  library
• NIFs are not schools, but some NIFs can have
  classrooms.
• Need entity number (many now have them)
• If NIF with no classroom, use district/system
  average for discount.
• If NIF has classroom, use snapshot to determine
  discount.
• All eligible for Priority 1, must meet test for
  Priority 2 for essential for transporting data
  to the classroom.

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Audits

• Why me?
• Applicants and service provider certify that
  acknowledge that they may be audited.
• Some are random
• Some are not.
• You will receive some advance notice of the audit
• Auditors can be from USAC, the FCC or either
  ones external auditors

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Audits

• Make sure that your documentation is in order.
  See website for complete list of documents that
  you should have available to support your
  applications.
• Make sure that your physical inventory lists are
  in order so that you can quickly identify
  equipment
• You will have an opportunity to respond to the
  audit report.

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Audits

• Findings
• An internal control or other observation that is
  not a program rule violation.
• Exceptions
• A program rule violation. This can result in
  taking back a commitment

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Audits

• Classifications of Audits
• Compliant
• No rule violations
• Generally compliant
• Limited violations
• Not compliant
• Significant violations

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Site Visits

• Why does USAC conduct Site Visits?
• Provides USAC an opportunity to see E-rate funds
  in use
• Assesses USACs outreach and education efforts
• Opportunity to observe best practices in the
  field, and
• Ensures that program funds are being used in
  compliance with regulatory requirements.

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Site Visits

• 1,000 site visits were randomly selected for the
  first year of this initiative.
• You will receive advance notice that we are
  coming and what to prepare.
• We will interview staff to find out their
  experiences with the program.
• USAC is obligated to follow up on instances of
  non-compliance with FCC rules.
• More information, including tips for preparing
  for our visits are available on the website.

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Questions?