I attended the USAC Schools and Libraries Committee Meeting on October 27th and the Committee approved two audits. What piqued my interest is that both audits were tied to service provider compliance. Incidentally, Lowest Corresponding Price (LCP) was among one of the issues that USAC auditors were concerned with. While the E-rate applicant community will still likely receive the bulk of the audits from USAC, it appears that USAC will be ramping up to serve more audits to the service providers that participate in the E-rate program. Based on the language from the audits themselves, the service providers need to demonstrate to the auditors that they “…have sufficient knowledge of the rules and have adequate controls and procedures in place to provide documentation required by the rules…”
The auditors’ aim is to confirm that service providers have internal controls and procedures when it comes to the competitive bidding process in order to determine if a service provider influenced the selection of the vendor. Additionally, the audits serve to ensure that providers are invoicing school districts properly and have a process in place to handle the reimbursements. Auditors are also examining documentation to determine whether controls exist to make certain that services were eligible, delivered, and installed in accordance with the rules.
According to the approved audits, service providers will be asked to provide documentation that they charged applicants the lowest corresponding price charged for similar services to non-residential customers. The auditors could also review service provider bills to school districts as well as bills to similarly situated non-residential customers or even the service provider’s price list. While service providers have asked the FCC to provide further guidance on how LCP will be interpreted and enforced, it is advisable that service providers review the current rules in the Code of Federal Regulations (CFR) tied to LCP.
The FCC’s Fifth Report & Order, released in 2004, provides E-rate applicants and service providers with a comprehensive list of the type of documentation that needs to be retained. Using this Order as a resource, service providers should ensure they have a document retention policy in place. In the FCC’s 7th Report & Order, the document retention rules have doubled and applicants and service providers alike need to retain E-rate related documentation for a ten year period based on the last date of service.
The E-rate program can bring in a steady revenue stream for service providers, however, service providers also need to understand their obligations and responsibilities. Here is some food for thought: in both cases that were approved by the USAC Schools and Libraries Committee, the auditors were recommending recovery of funds due to non-compliance with the regulations.