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Universal Service Administrative Company Re: Schools and Libraries Program

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Released: December 31, 1969
Federal Communications Commission
Washington, D.C. 20554
January 16, 2009

DA 09-86

Mr. Scott Barash
Acting Chief Executive Officer
Universal Service Administrative Company
2000 L Street, N.W.
Suite 200
Washington, DC 20036
Re:
Schools and Libraries Program, WC Docket No. 02-6
"Table C" recovery issues
Dear Mr. Barash:
This letter responds to the outstanding policy issues regarding recovery of funds in the schools and
libraries universal service program, also known as the E-rate program, on which USAC has sought formal
guidance. On March 8, 2006, USAC submitted a memorandum proposing action regarding schools and
libraries commitment adjustments and funds recoveries. In that memorandum, USAC submitted lists of
recovery situations in a table format: Tables A, B, and C.1 Table C contained scenarios that were not
specifically addressed in the Schools and Libraries Fifth Report and Order, and USAC had proposed to
seek recovery for the violations listed in Table C.
Those Table C scenarios are outlined in the attached chart. The chart provides our guidance as to when
recovery should occur. Generally, we agree with USAC's recommendations to process recoveries for the
scenarios listed. However, in certain instances we believe that recovery might not be appropriate for
particular factual situations, as explained in detail below and as noted on the chart.
Children's Internet Protection Act (CIPA) Violations: USAC recommended complete recovery in every
instance in which the applicant did not comply with all CIPA requirements, which require a school or
library to certify that it is enforcing a policy of Internet safety that includes measures to block or filter
Internet access for minors and adults to certain visual depictions.2 We note, however, that, in certain
instances, although the applicant may not have been in technical compliance, there was substantial
compliance with the spirit of the CIPA requirements. For example, an audit found that Little Rock
School District (Little Rock) was not in compliance with the CIPA requirement to have in place an


1 Table A contained scenarios that were specifically addressed in the Schools and Libraries Fifth Report and Order
and in which there was a specific reference in the Schools and Libraries Fourth Report and Order as to the party
from whom recovery should be directed. Table B contained scenarios that were specifically addressed in the
Schools and Libraries Fifth Report and Order, but did not have a specific reference in the Schools and Libraries
Fourth Report and Order
as to the party from whom recovery should be directed. See Schools and Libraries
Universal Service Support Mechanism
, CC Docket No. 02-6, Fifth Report and Order and Order, 19 FCC Rcd 15808,
(2004) (Schools and Libraries Fifth Report and Order); Federal-State Joint Board on Universal Service, CC Docket
Nos. 96-45, 97-21, 02-6, Order on Reconsideration and Fourth Report and Order, 19 FCC Rcd 15252 (2004)
(Schools and Libraries Fourth Report and Order).
2 See 47 C.F.R. 54.520.

Internet safety policy that addressed measures designed to restrict minors' access to harmful materials.
Although Little Rock's Internet safety policy did not address this point, Little Rock did have in place an
Internet filter that restricted minors' access to harmful materials. In this case, recovery is not warranted.
Services Delivered to an Entity Not Listed on the FCC Form 471: USAC recommended complete
recovery in every instance in which services were delivered to an entity that was not listed in the
applicant's FCC Form 471. Pursuant to the Commission's direction in its Bishop Perry Order, however,
USAC has allowed applicants to modify their FCC Forms 471 for clerical and ministerial errors.3
Accordingly, an applicant first must be given an opportunity to show that the omission of such entity
from the FCC Form 471 was a ministerial or clerical error. If such entity would otherwise be eligible,
then recovery is not warranted.
No Signed Contract (2004 and Beyond); No Legally Binding Agreement (2003 and Before): Starting in
2004, USAC denied the validity of contracts unless they were signed and dated by both parties. USAC
also began to distinguish between contracts and legally binding agreements. USAC based its actions on
language in the Schools and Libraries Fifth Report and Order, which states that, for recordkeeping
purposes, applicants and service providers should keep "executed contracts, signed and dated by both
parties."4 Consistent with the Commission's direction, contract guidance information posted on USAC's
website no longer requires a contract to be signed and dated by both parties.5 Thus, USAC should not
recover funding if there was a binding agreement that was legal under state law.
Equipment Not Utilized: USAC recommended recovery in every instance in which equipment was not
utilized: for example, the equipment was installed but not connected to any computers, or some
equipment was still in its original packaging and had not been installed. There could be situations that
would justify a decision to not recover funds. For example, in one of the audits, Brownsville Independent
School District delayed installation of all equipment due to human resource limitations, but anticipated
that very shortly all of the equipment would be installed. In this instance, if the equipment was
subsequently installed, recovery would not be warranted.


3 See Request for Review of the Decision of the Universal Service Administrator by Bishop Perry Middle School, et
al., Schools and Libraries Universal Service Support Mechanism,
CC Docket No. 02-6, Order, 21 FCC Rcd 5316
(2006) (Bishop Perry Order).
4 Schools and Libraries Fifth Report and Order, 19 FCC Rcd at 15824, para. 48.
5 See USAC website, Contract Guidance, http://www.usac.org/sl/applicants/step04/contract-guidance.aspx (retrieved
Jan. 16, 2009); Requests for Waiver of the Decision of the Universal Service Administrator by Adams County School
District 14, et al., Schools and Libraries Universal Service Support Mechanism
, CC Docket No. 02-6, Order, 22
FCC Rcd 6019 (2007) (the Commission granted waivers of rule section 54.504(c) where the petitioners had legally
binding agreements in place for the relevant funding years, but missed the deadline for providing evidence of a
signed contract).
2

This letter addresses all of the outstanding issues on which USAC has sought formal guidance from the
Commission. Please let me know if you have any questions.
Sincerely,
Dana R. Shaffer
Chief
Wireline Competition Bureau
3

Table C Policy Issues

Issue

Relevant Rule

Guidance

1. Technology Plan Deficiency applicant's
54.508(a), stating the required elements of a Recover.
technology plan did not have all five criteria.
technology plan.
2. CIPA certification violations applicant did
54.520(c)(1), stating the certifications
Recover generally; however, certain situations
not comply with all CIPA requirements.
required by 47 CFR 254(h) and (l).
may not warrant recovery. See letter.
3. Services delivered to an entity that was not
4th R & O, 19 FCC Rcd 15252, 15, stating
USAC should determine if the entity should
approved to receive the service on FCC Form
that the service provider is likely to be the
have been listed on the FCC Form 471 and, if
471 for the Funding Request Number (FRN).
responsible party if it delivers services that
so, allow the applicant to amend the FCC
were not approved for funding under the
Form 471. See letter. Otherwise recover.
Form 471.
4. Service provided or equipment installed at an
54.501(b), (c), (d), stating the requirements
Recover.
ineligible entity or used for an ineligible purpose.
for eligible entities. 54.505, stating how to
determine the discount for an entity.
54.507(g) stating the rules of priority.
4th R & O, 19 FCC Rcd 15252, 15, stating
that the service provider is likely to be the
responsible party if it delivers services that
were not approved for funding under the
Form 471.
5. Equipment transferred prior to 3 years after
54.513(c), prohibiting the transfer of
Recover.
purchase or prior to closure of entity.
equipment for 3 years, with certain
exceptions.
6. No signed contract (2004 and beyond). No
5th R & O, 19 FCC Rcd 15808, 48, stating Do not recover if there was a binding
legally binding agreement (2003 and before).
that for recordkeeping purposes, applicants
agreement that was legal under state law. See
and service providers should keep
letter.
"executed contracts, signed and dated by
both parties."
4

Issue

Relevant Rule

Guidance

7. Non-telecommunications carrier provided
54.501(a), stating that only telecom carriers
Recover.
telecommunications services.
may receive E-rate support for providing
telecom services.
8. Failure to bill for the non-discounted portion.
54.523, requiring applicants to pay their
Recover.
share.
9. Funding disbursed priority two services below 54.507(g), stating the rules of priority.
Recover.
the funding threshold. This occurs when USAC
funds priority one services that are actually
priority two services because the entity has
improperly categorized them and the entity's
discount level is below the fundable priority two
threshold for that funding year.
10. Free services not deducted from the total pre- 54.523, requiring applicants to pay their
Recover.
discounted cost of services and thus used to
share, prohibiting the provision of rebates,
provide ineligible items or to provide a greater
defining rebates to include free services or
discount rate than that to which the applicant is
products.
entitled.
11. Equipment not utilized (equipment has been
54.507(d), setting forth the implementation
Recovery depends on the individual situation.
installed but no computers are connected, or that
deadline for non-recurring services.
some equipment is still in its original packaging
54.504(b), 54.504(b)(2)(ii), requiring
and has not been installed).
applicants to use services and equipment
only for educational purposes.
5

Issue

Relevant Rule

Guidance

12. Could not locate equipment.
54.504(b), 54.504(b)(2)(ii), requiring
Recover.
applicants to use services and equipment
only for educational purposes.
54.516(a), requiring applicants to maintain
asset and inventory records of equipment
purchased as components of supported
internal connections services sufficient to
verify the actual location of such equipment
for 5 years.
6

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