The filing season is now in full swing for eRate funding year 2003, also known as Year Six to veterans of the program. Schools and libraries across the nation are scrambling to post requests on the internet, sign contracts, and file required paperwork by this year’s deadline of Feb. 6. Here are four simple—but legal—strategies for maximizing your share of the $2.25 billion in funding that is available:

1. Follow the rules.

The first step to maximizing eRate discounts is actually to secure them. Each year, more than 20 percent of funding requests are denied for procedural reasons by the Schools and Libraries Division (SLD) of the Universal Service Administrative Co., the entity responsible for administering the program. Put another way, applicants have a one in five chance of being denied funding in any given year.

Once you have received a funding commitment, careful adherence to deadlines throughout the year is necessary. More than 20 percent of eRate money committed to schools and libraries was not claimed in each of the first three program years. The rate for Year Four, which ended June 30, 2002 for recurring services and Sept. 30, 2002 for one-time charges, appears to be running much higher than 20 percent. Certification requirements and filing deadlines associated with the Children’s Internet Protection Act imposed in Year Four might be a contributing factor. Some or all eRate funding can be lost if filing deadlines are missed for various forms.

Another factor contributing to the relatively high failure rate is the turnover of eRate coordinators. Each year, approximately 20 percent of eRate personnel are new to the program. In many places, the eRate has become a rite of passage for technology or business personnel. The program is quite complex, demanding a great deal of time, attention, and perseverance throughout the year. Some coordinators will pass this responsibility to subordinates at the earliest opportunity. Inexperience with the program commonly leads to mistakes and ultimately to funding denial.

Steps to successful eRate funding include:

  • Designate a point person for the eRate who will study the program, keep up with changes in policy, and shepherd requests from the posting of Form 470 through receipt of eRate funds.

  • Create a comprehensive technology plan that covers all services you plan to order. Address technology goals, funding, training, facilities, and evaluation in the plan. Technology plans must be approved by a certified technology plan approver. A list of certified approvers is available on the SLD web site.

  • File a Form 470 online with plenty of time to wait 28 days, negotiate contracts, and file a Form 471 within the filing window. This year, the last day to file a Form 470 and stay in the filing window is Jan. 9, 2003. Two percent of funding requests are denied because a contract was signed prior to the 28-day posting period.

  • File a Form 471 online within the filing window, which ends Feb. 6 for the 2003 program year.

  • Apply only for services that are eligible for discounts, using the SLD Eligible Services List as a guide. Three percent of funding requests are denied because more than 30 percent of the requests contain ineligible components.

  • Adequately document discount percentage and service requests. Four percent of funding requests are denied because of insufficient documentation.

  • Be able to document that sufficient resources are in place to make use of discounted services, including staff training, adequate electrical connections, maintenance, and ability to pay the non-discounted portion of eRate-funded services. Four percent of requests are denied because the SLD determines that applicants lack sufficient support resources.

  • Sign certification pages for Form 470 and Form 471 and mail them to the SLD by Feb. 6. Well over three percent of funding requests are denied because certification pages were either sent late or not sent at all.

2. Get the highest discount rate to which you’re entitled.

Discounts are based on the number of students eligible for the National School Lunch Program (NSLP) and applicant location (urban or rural). Eligibility for the NSLP is defined as students residing in households that are within 185 percent of the poverty level. Generally, students in higher grades choose not to participate in the NSLP, resulting in significantly lower discount rates at high schools, thereby lowering a library’s or school system’s overall eRate discount.

The SLD has identified a number of alternative means for establishing eligibility, however, including participation in such programs as Medicaid, food stamps, Supplementary Security Income (SSI), Section 8 federal public housing assistance, and the Low Income Home Energy Assistance Program. Schools also may use surveys to determine student NSLP eligibility. Surveys must be delivered to every household with students at the school, and school officials may extrapolate the results if they get a return rate of at least 50 percent. The survey must include the address of the family, grade level of each child, size of the family, and income level of parents. The survey also must assure confidentiality.

Additional items on the survey should include a checklist of the aforementioned alternative programs. Even if fewer than 50 percent of surveys are returned, of the surveys received that indicate participation in at least one of the alternative programs, those students may be counted as NSLP-eligible.

Another method to boost discount rates at higher grade levels is sibling matching. Often a younger sibling of a high school student dent will participate in the NSLP at elementary or middle school. Older siblings residing in the same household are also eligible for NSLP and can be counted for eRate discounts. As with survey results, confidentiality of sensitive information is critical.

If you employ an alternative discount calculation method, share your overall discount information with your local library to increase its discount, too. Information also should be shared with state eRate coordinators to assist with discount justification when the SLD questions your school or district’s discount rate.

3. Form strategic partnerships with other eRate-eligible entities.

One way to significantly increase the discount rate for large school divisions or library systems is through consortia. According to the Federal Communications Commission’s web site, “The Commission encourages eligible schools and libraries to aggregate their demand with others to create a consortium with sufficient demand to attract competitors and negotiate lower rates.” Current regulations governing discount calculations for consortia stipulate that a consortium’s discount is based on the simple average of all its members.

Large school divisions or library systems with relatively low discount rates can create a consortium with a single high-discount school, resulting in a much higher discount for the large entity. For example, a school division with 40 schools and a 50-percent discount creates a consortium with a correctional educational school or private school with a discount of 90 percent. The resulting eRate discount for all 41 schools is 70 percent. The obvious advantage to the school division is an increased discount rate. The advantages to the single 90-percent discount school include a reliable broadband connection, better service for students, and—most importantly—assistance with the eRate filing and record-keeping process.

To establish a consortium, an agreement should be formalized between participating entities, taking care to include only eRate-eligible services. A Form 470 must be posted on the SLD web site specifying that services are requested on behalf of the consortium. A letter of agency must be filed with the consortium’s lead member containing specific SLD-required language. A Form 471 must be filed, within the filing window, on behalf of the consortium. The high-discount member must receive its appropriate discount, but may not receive the services at no charge. Finally, the consortium should be based on a reasonable business model and not solely for eRate discount purposes.

4. Have the eRate pay for vendor infrastructure.

In some cases, eRate discounts are available to pay for a vendor’s central office infrastructure. This has become known as the $500,000 Rule or the Brooklyn Decision. Applicants—particularly in rural areas—may require Tier I broadband connectivity for distance learning or other applications; however, the local telephone company may only provide Tier III connections without expensive upgrades to its central office equipment. The telephone company may be reluctant to capitalize the required equipment for a single customer.

According to the Brooklyn Decision, the telephone company (or other vendor) may pass one-time central office capital upgrade costs to the customer and potentially have the entire amount eligible for eRate discounts of up to $500,000 in a single year. Other commission requirements under the Brooklyn Decision specify that the services and their uses are eligible for eRate funding and the costs of the capital upgrades are properly allocated, so the eRate only pays for improvements associated with service to eligible schools or libraries.

In the example, if the school division is the only entity requesting Tier I service and the company has no demand from other customers for Tier I service, the entire amount could be discounted through the eRate. However, if the local community college also expressed a desire for Tier I service, the capital costs must be prorated between the eRate-eligible applicants and the community college. If capital upgrade charges and installation charges associated with the eRate application exceed $500,000, the entire amount must be amortized over at least three years.

Waste, fraud, and abuse

An article on maximizing eRate discounts would not be complete without a word on program waste, fraud, and abuse. While the strategies outlined above adhere to both the spirit and letter of eRate regulations as they currently exist, many vendors and applicants press the rules too far, resulting in increased scrutiny of all applications and many more post-commitment audits.

A government program that distributes up to $2.25 billion per year to nearly 36,000 entities is likely to have a certain amount of abuse—and the eRate is no exception. But increased scrutiny by the SLD and intensive audits are helping to identify vendors and applicants attempting to defraud the program. When you sign the certification pages on eRate forms, you’re pledging that service requests are reasonable to meet the basic needs of your teachers and students.

As you make the final dash to meet looming filing deadlines, be aware that the SLD continuously changes policies. Before hitting the “Submit” button on your online Form 471, check the agency’s “What’s New” page to see if last-minute changes in policy would alter your funding request.