Discount Calculations Update

The SLD’s PowerPoint slides on calculating discounts and the other key topics are available online.

This year’s training on discount rate calculations includes a review of the basics, but provides additional information we had not previously seen addressed by the SLD.  Most importantly, the SLD confirmed that “All Direct Certification students are considered eligible for the NSLP for E-rate discount purposes.”  Under Department of Agriculture guidelines, phased-in a few years back, Direct Certification students are identified as NSLP-eligible by state social service agencies based on their families’ participation in programs such as food stamps (now designated “SNAP”) and Temporary Aid to Needy Families (“TANF”).

As explained by the SLD, schools are given lists of Direct Certification students who are automatically enrolled in the National School Lunch Program.  Based on our experience, this is a bit of an oversimplification.  In some states, Direct Certification eligibility for NSLP is conveyed by letter to the participating families.  Those families may then enroll their children in NSLP merely by providing the letters to the school, without having to complete standard NSLP applications.  In other states, Direct Certification data is provided to the schools for NSLP enrollment purposes, but only after the schools advise the families of their rights (not usually exercised) to exclude their children from NSLP.  Data provided to the schools is likely to significantly improve NSLP participation levels and result in higher E-rate discounts.  In any case, recognition of the validity of Direct Certification data by the SLD is a positive development.

On a related topic, the SLD noted that the Department of Agriculture has initiated a new program entitled the Community Eligibility Option (“CEO,” aka “Provision 4”).  Under this program, schools with at least 40% of their students eligible for NSLP through Direct Certification can serve free breakfasts and lunches to all their students (with a reimbursement rate equal to 1.6 times the percentage of Direct Certification students).  This program is being phased in nationally over four years starting with three states this year (IL, KY, and MI).  The SLD notes that the “FCC is considering how this will work with E-Rate.”

The SLD slides also cover the use of alternative discount mechanisms including following:

1. Acceptable mechanisms
1. Programs that meet the Income Eligibility Guidelines (“IEG”) for NSLP

• Medicaid
• Food stamps (“SNAP”)
• Supplementary Security Income (“SSI”)
• Section 8 Housing Assistance
• Low Income Home Energy Assistance program (“LIHEAP”)
• Food Distribution Program and Indian Reservations

2. Sibling match
3. Surveys, if properly done, with or without extrapolation
1. Unacceptable mechanisms
1. Programs that do not meet the IEG threshold for NSLP

• Temporary Aid to Needy Families (“TANF”) — except as used for Direct Certification
• Title 1
• Scholarship programs — presumably unless accompanied by properly documented data showing income below the IEG threshold

 

Additional slides discuss the acceptability of combining alternative discount mechanisms.  The key points are that such data must be “scrubbed” to eliminate duplicates, and survey extrapolation data cannot be combined with other measures.

Two other minor points should be noted in the SLD’s discount calculation training presentations, namely:

1. A slide used in the early training sessions noted that “Starting in FY2102, applicants must use NSLP data as of a date verifiable by your state authority to determine your appropriate discount rate.”  As the result of a number of questions raised about the late posting of NSLP statistics in many states, the slides were revised to eliminate this requirement.  It is clear, however, that the FCC and USAC are looking for ways to streamline the review of applicant NSLP data and that new procedures may be instituted for the following year.
2. The slide on calculating discounts for new private or charter schools notes that if the population is known (e.g., from pre-enrollment data), that eligibility data should be used.  However, if the eligibility of the population is not known, the SLD indicated that the applicant should apply for the minimum 20% (or presumably 25% in a rural area), and amend their application “with actual figures if obtained later.”  As a practical matter, this may cause problems for an applicant, particularly one applying for Priority 2 services.  Our recommendation is that applicants file their Form 471s with a more realistic estimate of their expected discount rates and with the intention of supporting/modifying that data later in the year during the PIA review process.

 

E-Rate Updates and Reminders

Sales-Related Consulting and the E-Rate Gift Rules:

Last April, Hewlett-Packard (“HP”) asked the FCC to clarify that the short-term loan of equipment to an applicant would not be defined as a “gift” under the new E-rate gift rules (see our newsletter of April 25, 2011).  To date, the FCC has not responded to that request for clarification nor offered any guidelines.

Last week, HP expanded upon its request seeking similar clarification on an “analogous area, the provision of consulting and related services to schools and libraries for no charge, as part of a typical sales process.”  As it had in its earlier equipment loan request, HP proposed a series of conditions that must be met to assure that free consulting services would be consistent with the E-rate gift rules.  The proposed conditions were:

(1)  Consulting services are provided pursuant to a defined program;
(2) The program is applicable or available to a variety of public sector customers, i.e., not just schools and libraries;
(3) The consulting services are provided for a reasonable period of time, agreed to by the parties; and
(4) The process or factors for determining that services will be provided at no charge (or at a substantial discount) is the same for educational institutions as that generally used outside of the education context.

Both HP’s requests, last April’s and last week’s, underscore vendor and applicant concerns with the FCC’s E-rate gift rules.  While the intent of the rules is clear, many practical issues remain gray.  The confusion is compounded by the possible assessment of substantial COMAD penalties for actions determined to be rule violations well after-the-fact.

We recommend that applicants seeking equipment loans and related assistance as a part of their procurement and evaluation process proceed with caution.  At a minimum, applicants should make sure that potential vendors are given similar opportunities to provide demo equipment.

FCC Creates Connect America Fund:

The FCC voted unanimously last week to create a new Connect America Fund (“CAF”) to replace the existing High Cost program, the largest of the four Universal Service Fund (“USF”) programs (including E-rate).  The primary purpose of the CAF program, in addition to capping expenditures and requiring greater accountability, is to support the development of broadband networks in high cost areas.

The Executive Summary of the CAF Order, released on Friday, makes no specific mention of E‑rate, but many rural schools and libraries may over time benefit from the increased availability of broadband facilities in their areas.  The full FCC Order and Further Notice of Proposed Rulemaking should be available for review this week.

SLD Fall Training Status:

The first six of the SLD’s eight fall training workshops have been conducted.  The agenda and slides for the SLD’s 2011 training are available online.  Subsequent workshops are being held regionally on the following schedule:

                        November 1                 Los Angeles, CA
                        November 8                 Orlando, FL

USAC training videos are also available online.  Two short ones on Form 470 Filing and Dark Fiber are on the USAC Web site.  Longer presentations on E-Rate Topics (and other Universal Service Fund programs) are available on YouTube.

Applicants seeking other E-rate training opportunities should check for state-sponsored E-rate workshops.  Contact information for State E-rate Coordinators may be found on the State Information pages of the E-Rate Central Web site.  Other sources of basic E-rate training include the two Webinars conducted by E-Rate Central earlier this year which are available online at http://www.webjunction.org/techplan-erate.

Schools and Libraries News Brief dated October 28 – Consultant Registration Numbers

The use of Consultant Registration Numbers (“CRNs”) now required on all Forms 470 and 471 submitted by applicants who use consultants.  The SLD defines a “consultant” as “any non-employee of the entity applying for funding that assists in filling out the application materials for a fee. Consultants can be organizations with one or more employees or they can be individuals.”

In addition to defining a “consultant,” the News Brief addresses the following questions:

• What is a Consultant Registration Number?  (Answer: A unique 8-digit identification number in the form 160NNNNN.)
• How does a consultant obtain a CRN?  (Answer: Call the Client Service Bureau (“CSB”) at 888-203-8100.)
• How does an applicant find the CRN for its consultant?  (Answer: From the consultant or from CSB.)
• Where is consultant information located on Form 470 and Form 471?  (Answer: At the end of Block 1.)

 

FY 2011 was the first funding year in which applicants became responsible for identifying their consultants, if used.  As might be expected, first-year compliance does not appear to have been 100%.  Almost 3,900 Form 471 applications were submitted by two or more applicants sharing the same contact person who may be a consultant, but was not identified as such.  The SLD may follow up on these situations at some point, but do not expect penalties for first-year errors.

One interesting sidelight of the new CRN-identification process is that it provides the first concrete indication of the use of consultants by E-rate applicants.  Based on Form 471s submitted for FY 2011, over half the dollars requested, but less than half the actual applications, were associated with one of over 325 consultants.