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FCC Issues USF Report and Order

In June 2005 the FCC issued a broad inquiry into the management and oversight of the four Universal Service programs including the E-rate.Since then the FCC has issued dozens of favorable appeal decisions and, in essence, made further regulation by appeal precedent as opposed to a more formal Order until now.The FCC is concerned with easing the administrative burden on applicants while strengthening regulations to curb waste, fraud and abuse.

Here are a few of the details from the Order:

Since June 2005 the FCC's Office of Inspector General's Office has started overseeing 460 audits of contributors and beneficiaries for all 4 Universal Service Programs.The FCC stressed that the 5-year documentation retention requirement is for service providers as well as applicants.In a footnote the FCC stated that "KPMG LLP recently completed its last round of one hundred schools and libraries audits, under the OIG's oversight.Over $11 million in improper payments were identified and USAC is currently in the process of recovering these funds…"However, the FCC further clarified that "…Sanctions, including enforcement action, are appropriate in cases of waste, fraud, and abuse, but not in cases of clerical or ministerial errors…"

The FCC agrees with most of the comments that it is important to measure how schools are using E-rate funds or what "level of connectivity and speeds".The FCC argues that "…the Commission is not in a position to evaluate the impact of E-rate funds on connectivity as compared to other funding sources…"USAC hired BearingPoint to conduct close to 1000 site visits (mini-audits) per year in which they collect some of the connectivity data from the schools they visit.The FCC would like a summary of those issues.

USAC does collect some relevant data on the Form 471 and the FCC will "…further require the Administrator to work with the Wireline Competition Bureau ("Bureau") to modify the relevant FCC forms or to create additional questions for program participants to more accurately determine how schools and libraries connect to the Internet and their precise levels of connectivity.The collections of such additional information will enable the Commission to identify the specific products, services, and capabilities (e.g., T-1s, DS-3s) at specific quantities provided via the E-rate program…."

Application Processing
While the FCC will not impose processing deadlines for USAC at this time, the FCC does want USAC to report back to them on various application performance measures:

  • Number of eligible applicants served and their discount rate;
  • Number of applications and FRNs submitted;
  • Average (mean) processing time and percent of applications and FRNs completed by June 1; measured from the date of receipt to the date of commitment or denial;
  • Processing time for fastest 50 percent, 75 percent, and 100 percent of the applications and FRNs;
  • Number of applications and FRNs rejected;
  • Number of applications and FRNs granted;
  • Average (mean) dollar amount awarded and median dollar amount awarded, per FRN;
  • Total amount disbursed.

The FCC acknowledges the frustration applicants and service providers have with USAC in terms of getting reimbursed through the E-rate program.In this Order, the FCC is mandating that USAC document the amount of time it takes for BEAR's and SPI's to get processed as well as the number of paid invoices and the number of rejected invoices.

The FCC also is directing USAC to monitor how long it takes to determine appeals and to provide that information to the FCC.

The FCC was clear that there will be other Universal Service reforms in the future and recognizes that the E-rate application process is cumbersome.The FCC is requiring USAC to find public schools that are not participating in the E-rate program and get a better understanding of the difficulties and challenges they have.Each year the FCC would like USAC to report their conclusions back to the Commission.

Related Documents

The FCC USF June 2005 NPRM

The FCC USF August 29th 2007 Report and Order 

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