for Year 2004
California Department of
Education E-rate/CTF Training
Provide unbiased guidance to apply for E-
rate and CTF telecommunication discounts.
Provide information about program changes.
Provide state, local, and vendor
Provide information references.
E-rate and CTF Application Process
What is E-rate?
E-rate (“Education-rate”) is a federal
program, officially known as Universal
Service Fund (USF), Schools and Libraries
The annual fund is $2.25 billion. It is
administered by the Schools and Libraries
The fund offers 20-90% discounts on
telecommunications, Internet service, and
What is CTF?
California Teleconnect Fund (CTF) is a state
program administered by the California
Public Utilities Commission (CPUC). The
fund is now $55 million annually.
California Teleconnect Fund
A Program of the California Public Utilities Commission
Purpose of the CTF Program
• The CTF offers 50% discounts on monthly recurring
costs of telecommunications services to eligible
• Schools and libraries
• Hospitals and health clinics
• Community Based Organizations
• Consortia of eligible entities
• 50% below the rates (tariff or negotiated rate)
charged to other businesses for the same services or
their functional equivalents
How the CTF Is Funded
Funded by all end users of
telecommunications services through a
surcharge on their telecommunications bills
Services That Qualify for a CTF
• Measured business or its functional
• Switched 56 or its functional equivalent
• Integrated Services Digital Network (ISDN)
or its functional equivalent
Charges/Taxes Eligible for CTF
• Monthly recurring charges
• Company-specific surcharge/surcredit
• CPUC user fee
• Federal excise tax
• 911 tax
• Local/city Tax – Variable
• The taxes and surcharges or surcredits
covered by the CTF Program are based only
on the approved CTF discount amounts.
Charges Not Discounted by CTF
• Nonrecurring charges (e.g., installation
• Usage charges
CTF Application Process
• Applicant submits CTF application to CPUC with
all required information (e.g., IRS tax-exempt
• New CTF application and instructions are
CTF Application Process
• The CPUC calculates discounts based on the
date the application is received by the CPUC.
• Once the application is approved by the
CPUC, it is not necessary to reapply for CTF
• Applicants inform telecommunications
providers of changes or additions to
lines/services to receive CTF discounts for
Applying for E-rate
Forms 470, 471, and 486
Eligible entities: schools and libraries
Eligible uses – new definition
Number of students eligible for National
School Lunch Program
Rural and urban designation
Priority One – Telecommunications and
Priority Two – Internal connections
E-rate Application Steps
File Form 470 to request services.
Receive Form 470 acknowledgment letter.
File Form 471, Request for Funding.
Receipt Acknowledgement Letter (RAL) from SLD
SLD Review Form 471.
Review and correct Funding Commitment Decision
File Form 486 (Aug 2003) and Form 486 notification.
Modify funding requests on Form 500.
Why File a Form 470?
It’s required for competitive bidding and
procurement of services.
It initiates the application process.
It describes the technology services being
Form 470 - Items to Consider
Calculate your E-rate discount.
Choose an E-rate application strategy.
Design an education technology plan.
Identify your non-discounted costs
File online by applying for user ID and PIN .
Applicant PIN Request System
Online Form 470
Apply online at
Select either the “Form 470 PDF” or
“Form 470 Interview.”
Print each page of the application as you
complete it online before selecting "Next" to
move to a new screen.
Form 470 - Blocks 1 and 2
Complete all requested information in Blocks
1 and 2.
Print and file the screen that displays the
application number. You will need to refer to
the application number later. Read Form 470
instructions and directions on the form.
Form 470 – Block 3
Technology assessment of services being
sought – What kind of other technology is to
support the effective use of E-rate
Form 470 – Block 4
Identifies recipients of services – eligible
Identify billed entities and ineligible entities.
This information is required to help service
providers understand the scope and
location(s) of the services being sought.
Form 470 – Block 5
Certifies that discounts are for eligible
Certifies the technology plan.
Certifies eligible purposes, no resale or
Secures access to necessary resources
Form 470 – Follow-up
Work with potential vendors to estimate costs
for Form 471.
Keep copies of all responses to Form 470 and
Develop and keep documentation of the
process for selecting a specific vendor (price is
the most heavily weighted factor in the
Select the most cost-effective provider.
Form 470 – Reminders
Procurement must be competitive and follow the
Excessive vendor involvement is not allowed.
Form 470 cannot be completed by a service
Form 471 – Request for Discounts
Form 471 must be preceded by the filing and
posting of a Form 470 for at least 28 days.
Online, filing is easier and more accurate.
File individual Form 471 for Priority 1 and
Priority 2 discounts.
Need to submit item 21 attachments after
Form 471 – Guidelines
Wait 28 days before signing up for services.
Note contract extensions and contract expiration
Note the E-rate funding escape clause.
Include product or service upgrades/substitutions in
Separate internal connections/wiring portions of
contracts for highest discount schools.
Make sure procurement complies with local and
state procurement rules.
Form 471 – Blocks 1 and 2
Block 1 is to provide information on the billed
– Contact information, billed entity number
– Summer contact information
Block 2 is used to indicate changes to the
contract information. Contact SLD Help.
Form 471 – Block 4
– See: http://www.sl.universalservice.org/reference/Discount.asp
Maximize discounts by counting the number of students
eligible for free and reduced price lunches.
Use Form 471 instructions and SLD references for
Review alternative mechanisms for calculating
– See: http://www.sl.universalservice.org/reference/alt.asp
Form 471 – Block 5
Document the services ordered.
Create a separate Block 5 worksheet for
– Service provider
– Category of service (telecommunications,
Internet, internal connections)
– Establishing Form 470
Separate out ineligible services.
Form 471 – Block 6
Use Block 6 to certify form 471.
Submit online if you have a PIN. Attach a
copy of the online confirmation page and
attach that to the top of the item 21
Justify “duplicative services” in item 21.
Form 471 – Item 21 Attachments
Label clearly to identify the correct Form 471.
List services/items requested (quantity,
description, cost, type of cost, narrative).
Separate ineligible services/items.
Attach quote or bill from the vendor (phone
Document nonduplicative services.
Form 471 Submission
Was Form 471 signed after contract?
Was Form 471 signed by an authorized person?
Is the applicant prepared to prove that they had the
money “in the bank?”
Tips to handle the program Integrity Assurance
– Make sure you know what it is asking.
– Don’t answer more than you were asked.
– Retain PIA responses for audit purposes.
Form 471 Receipt
Acknowledgement Letter (RAL)
Correct data entry errors.
Provide or correct applicant’s contact information.
Correct (not change) a Service Provider
Identification Number (SPIN).
Reduce, cancel, or split a Funding Request Number
Submit corrections, if any, within 3 weeks after date
Modify funding requests – Cancel or reduce
Modify service dates – See SLD guidance on
changing service dates and contract
All form submissions and proof of submission
All bids, awards, contracts, assumptions,
decisions, budgets, tech plan certifications
All communications with the SLD (e-mail may
be used for documentation)
Documents should be kept for 5 years, and
organized by funding year.
Actions to Take After Receiving
Actions to Take After Receiving FCDL
File a Form 486 by the deadline or else lose
Communicate all necessary information to
Document all new work done during funding
Track discounts OR file a Billed Entity
Applicant Reimbursement (BEAR Form 472)
• Why file
• When to submit (don’t miss the deadline)
• Ways to submit
Form 486 – Why File
No discounts until the Form 486 is filed
To alert SLD that services are being provided
To certify that your technology plan is
To certify compliance with the Children’s
Internet Protection Act (CIPA) compliance
Form 486 Submission
Submit Form 486 within 120 days of FCDL
date or start of service, whichever is later.
Submit Form 486 on paper or online.
Form 486 Tips
File on time or else you will lose some funding.
Make sure your technology plan is approved by
the start of service.
CIPA compliance has not changed for school
Libraries are now required to comply with CIPA
Steps to Take After
Receipt of FCDL
• Provide necessary information: service providers
- Existing Services – which FRN will fund discounts
and at what percent eligibility
- New services – which FRN funds the project and
timeline for project (may change due to date of FCDL)
- Service substitution or SPIN changes (complete
paperwork earlier in the FY)
Steps to Take After
Receipt of FCDL
Document all new work performed during
• All lines and circuits installed and the date
• Dates of lines and circuits disconnected, if
• Every piece of equipment installed or
moved (Documentation is necessary in
case of an audit in the future)
Steps to Take After
Receipt of FCDL
Track discounts OR file BEAR Form 472
– Discuss with each service provider whether
discounts will appear on bills or BEAR Form 472
will be needed.
– Work with service provider to understand where
discounts appear on the bills.
– If BEAR Form 472 is needed, pay bill in full and
then follow the process at:
California Department of General Services
• Purchase from a single vendor
– Can integrate multiple technologies
• Purchase from multiple vendors
– Potentially wider variety of choices
• Make consortia arrangements
– Leverage buying power of multiple entities
• Purchase through State of California
- CMAS, CALNET
• Information technology services
• Bid-based contracts
• Competitive products, services, agencies,
• No order limit for local agencies
Eligible Services Available through
• Telecommunications services
• Internet access services (many suppliers)
• Internal connections
Contract Agreement Number
• Give resulting E-rate contract local contract
agreement number (for CALNET, use locally
• Contract agreement number and state
contract number need to be included on
• Issue date - Date agreement signed (must be
before the Form 471 application deadline for the
• End date - Use last date of the funding year to
allow for delays (for telecommunications and
Internet access June 30th and for nonrecurring
services September 30th).
• Verify current status of small business,
Disabled Veteran Business Enterprise (DVBE),
and contractor license certifications
• Verify that products/services are on the
contract (ask for pages from the contract).
Make sure that the state contract contains all
required products and services.
• Consider the E-rate funding cycle
• Stipulate in purchase order that award is
contingent upon full, anticipated E-rate funding.
• Require that prices for change orders be at or
below the purchase order rates (not to exceed
the state contract rates).
• Communicate with supplier “up front” regarding
eligibility for a project discount.
• Specify “functional equivalent” substitution if
products become outdated between application
date and actual date of delivery.
• Note that procurement could result in multiple
• Separate E-rate eligible and noneligible items
• Ensure accurate tracking of discounts.
Asking for CMAS-only vendors is allowed,
but you must still have a competitive
procurement process and evaluate multiple
Multiple CMAS responses allows price
comparisons and competitive bidding to take
Be prepared to provide legal opinion to prove
such documentation constitutes a contract
pursuant to California Public Contract Code.
Quotes are not considered contracts
according to SLD rules.
Managing Phone Bills
Reviews and Audits
What Vendors Can Do and
May Not Do in the E-rate
California Department of
Education E-rate/CTF Training
What the vendor can do to help you
What the vendor may not do to help you
Waive the nondiscounted cost.
Give proper assistance in Form 470 process.
Assist applicants customers with tech plans.
Give proper assistance in Form 471 process.
Inappropriate roles for service providers
The applicant has a duty to conduct a fair,
open, and competitive procurement process
that seeks the most cost-effective solution to
its technology needs. Price must be the most
important factor under consideration but
should not be the only consideration.
Vendor/service provider’s (SP’s) experience
Ability of SP to meet deadlines
Proximity of SP to work site
Quality of work and ability to manage the
Ability to provide necessary maintenance
Prior E-rate experience
Appropriate Role of
Before submission of the Form 470, service
Understand the requirements of the E-rate
technology plan requirements
Understand the E-rate program rules,
requirements, and timelines.
Offer unbiased technical assistance that
does not have an undue influence on the
applicant’s ability to follow the open, fair
competitive bidding process.
Appropriate Role of
Before submission of the Form 470:
Provide assistance within guidelines of the
Provide input ONLY on development of the
Request for Proposal (RFP).
Wait 28 days before signing contract with
Appropriate Role of Vendor/Service
After submission of the Form 470:
Provide information on products and services being
Assist the applicant in the creation of the Form 471
item 21 attachment documentation.
Provide a quote or a bill and a copy of the contract.
Provide quantity, product/service description, unit
cost, extended pre-discount cost.
Visit the site if all bidders are allowed to do so.
Appropriate Role of
After the FCDL
Assist with service substitution information and
SPIN change requests (if required).
Provide easy-to-understand account information.
Review billing arrangements with applicant
(discounts or reimbursements).
Provide current information on SPIN numbers
and legal names.
Remind applicants of deadlines and timelines.
Encourage compliance with program rules.
Service Providers May Not
Complete or sign applicant’s Form 470 and Form 471.
Serve as the contact or evaluator on Form 470.
Serve as a technology plan approver.
Prepare an applicant’s Request for Proposal (RFP).
Enter into a contract prior to the required 28-day waiting
Provide “Alternative Funding” grants or foundations as
payment applicant’s undiscounted portion of the service
provider’s bid. See
Make determinations on product or service eligibility.
Service Providers May Not
Interfere with or hinder the competitive
bidding process. See
Offer to “waive” the nondiscounted portion of
the bill for which the applicant is responsible.
Provide the answers to the Selective Review
Information Requests on behalf of the
Consequences for Violation of
Denial of funding
Cancellation or adjustment of funding
Audit or other investigation
County Office of Education (COE)
as a Service Provider
The SLD views intermediate service
agencies, such as county offices of
education, that provide services to be the
same as any other vendor. COEs must
must follow the same rules.
Managing Phone Bills
Managing Phone Bills
Applying for nondiscounted costs
Summary billing and your E-rate Form 471
What to do before requesting summary bills
What to expect from summary bills
Other phone bill management strategies
Summary Billing Preparation
Check to see if your carrier has summary billing.
Get a list of all telecommunication lines.
Decide how you want the bill to be organized.
Convert all billed telephone numbers and working
telephone numbers to the same billing cycle.
Determine level of detail (eligible/ineligible, by site,
Detail pages for each billed telephone
number and working telephone number
Tracking costs for filing your Form 471
-Makes Item 21 attachments easier
-Separates ineligible numbers
-Lists E-rate discounts
Phone Bill Strategies
Always pay current charges.
Request a check for credits accumulated.
Build an E-rate process tracking system.
Use summary billing to track your discounts.
Review and Audit Readiness
Compliance with E-rate
Documentation for Audits and Reviews
Program Integrity Assurance (PIA) reviews
Minimum Processing Standards
Complete applicant information.
Complete submission of form.
File online to ensure you have met minimum
The PIA team checks for eligibility of entity.
The PIA team checks for eligibility of service.
The PIA team verifies discount rate
Applicant should be aware of timelines to
respond to the PIA team.
Selective Reviews - Item 25
Preparing for Selective
They are used by the SLD to verify:
– Competitive bidding and vendor selection
– Form 471 item 25 certification, “Can you use and
support the product and services requested?”
– Ability to pay for nondiscounted costs
– Technology plan
They are conducted at the billed entity level.
Tips on Selective Reviews
Provide the requested information in 14
– Request an extension of time if necessary.
– Document the approval of the extension (date,
SLD contact, extension date).
– Fax or e-mail requested information to SLD.
Contact PIA representative to establish a
Competitive Bidding – Vendor
Provide RFP or reason for not providing an
Keep all bid responses, not just the one
Document how you selected the vendor and
keep the documentation. Remember: cost
must be the heaviest weighted factor, but
there can be other factors.
Item 25 Certification
Documentation of your ability to pay for your share of
Estimates of non-E-rate hardware, software,
professional development, retrofitting, and
maintenance investments that are necessary to
make effective use of the E-rate discounts
Technology plan review
Estimate of the technology level of all schools or
libraries in your organization after the receipt of E-
Preparing for Audits
Purpose of E-rate Audits
To protect the program from waste, fraud,
To ensure the program accomplishes its
mission of “affordable telecommunications
and information services for all eligible
schools and libraries”
To help the program meet its mission in the
most effective and efficient manner possible
What Auditors Look for
Inadequate competitive procurement process
Ineligible services being funded
Lack of resources to support effective use of E-rate-
Unauthorized equipment substitutions with
increased costs and decreased functionality
Incorrect discount calculations
Implemented evaluations as indicated in your
Location of E-rate-funded equipment
Potential Consequences of
Selective Reviews and
Denial of funding Subpoena
commitment State or local
Rejection of invoices prosecution
Commitment Recovery under the
adjustment Federal Debt Collection
Reimburse E-rate FCC enforcement
Civil lawsuit action
Civil false claims action
Asset or inventory tracking documents
missing or not complete
Competitive bidding violations
Invoice documentation, SP invoice/bills
Tech plan and evaluation
National School Lunch Program data
documentation not available
Be Prepared for the Auditors
Rules require records to be kept for five years.
Keep e-mail, notes, memos, FCC Form instructions,
eligibility list, etc.
Audit is based on the rules in place at the time your
application was processed.
Be responsive to auditors:
– Make it as easy as possible for them,
– but don’t be afraid to question their requests
Turn to experts, reputable vendors, and third-party
Free and reduced-price lunch surveys
Original RFP and bidders’ list
All bids, selection criteria, and reasons for bid selection
Shipment receipt information
Canceled checks and payment dates
Item 21 attachments
Test all contracts.
Are you in compliance with state and local
– Did you really conduct a competitive bid?
– Can you demonstrate how you chose the winner?
Is the contract consistent with Form 470?
Do contract dates correspond to Form 471?
Applicant must have contract, PO, or other binding
Applicant may want to make contract contingent on
Don’t sign before allowable contract date (No
agreement to purchase, no P.O., etc.)
Funds will cover services delivered only during the
funding year (e.g., July 2004 - Sept. 2005 for YR 7).
Signing Contracts (Continued)
Be careful that contract language doesn’t cause
problems down the road.
The term “functional equivalent” allows for easier
product/service substitutions later.
Specify responsibilities of applicant and vendors:
– Form 486 submission
– Payments and invoicing of its portion
– Eligible services/locations
Make sure original contract language specifies the
terms of renewal.
The value of all price reductions, promotional offers,
and "free" products or services must be deducted
from the prediscount cost of services indicated in
Costs, trade-in allowances, and discounts must be
fairly and appropriately derived.
A proportionate cost allocation is required between
eligible and ineligible components.
Invoices and Payments
Vendor must invoice applicant before invoicing SLD.
Applicants must pay their nondiscount share
Invoices must clearly show what services are being
delivered (and where).
Applicant verifies that discounts are applied properly
Applicant credits or adjustments must also be
applied to SLD.
Changing a Service Provider
The change is subject to deadline.
The process is easier than it once was.
– Applicant can get out of old contract.
– Applicant has informed original vendor.
– State and local procurement regulations allow the
The change will be reviewed by auditors.
New product(s) must have the same functionality:
– Same medium (e.g., voice, data, video), same
Service substitution must be permitted under
Substitutes must not cost more than the original
product/service, or the applicant must pay any
Service Substitution (Continued)
The substitute must not include greater percentage
of ineligible services.
The substitute must be in line with Form 470 and
RFP, if any.
The substitute will be reviewed by auditors.
Potentially several millions of dollars may be
recovered, based on Andersen and Office of
Inspector General audit work
– Recovery of any and all funds paid from either
the beneficiary or the service provider
– Suspension and/or debarment from the program
for either beneficiaries or service providers
Transition to Investigation
Intentional fraud, waste, and abuse uncovered
by audit will result in an investigation. Possible
– Procurement irregularities
– Billing for goods and services not provided (false
– Ineligible items being funded
– Misappropriation of assets
– Beneficiaries not paying the undiscounted costs
– Misrepresentations on forms/certifications (false
Audits are easier if you make them part of
your E-rate application process.
Document your access to resources to pay
for nondiscounted costs to make effective
use of E-rated services and equipment.
Keep E-rate documentation by funding year.
Review SLD audit references on the Web.
Year 2004 E-rate Program
Program Changes, New Eligible and Ineligible
Services, New Interpretations of Rules
Unused funds rollover – more funds?
Appeals deadline – 60 days
Technology plans – more specific, written by the date
the Form 470 is submitted
Legally binding contracts – quotes not acceptable
30% rule – ineligible and unsubstantiated
Duplicative services – need to justify
New Eligible Services
Definition of educational purpose – on the premise
Voice mail – in any category
Wireless – same as wireline
Firewalls – servers or service
Alarm lines – but not 911 or E911 (yet)
Web hosting – but not Web site development
File servers – firewall servers
New Ineligible Services
Dark fiber – vs. lit fiber
VoIP – Voice-over IP as a service
UPS/battery backup limits
Maintenance - limited to “basic,” no managed
Definition of Educational Purpose
“. . . in the case of schools, activities that are
integral, immediate, and proximate to the
education of students, or in the case of
libraries, integral, immediate, and proximate
to the provision of library services to library
patrons, qualify as educational purposes
under this program.” Presume that activities
on school or library property meet this
Deliver the same function to the same
population in the same location during the
same period of time.
“Duplicative” is considered excess capacity,
and redundant needs should be justified
(e.g., system reliability).
Justify on Form 471, item 21.
Technology plan must be written by Form 470
Technology plan must be approved by Form 486
Did you correctly characterize your technology
Does your technology plan actually match what you
Are all the E-rate services/products addressed in the
What Does All This Mean?
More eligible services, more E-rate funds
Procurements by the rules
More specific technology plans, written by
Documentation to show effective use
Alignment of Form 470, tech plans, budgets
More reviews and audits
Top Reasons for Denial
30% ineligible services
Excessive vendor involvement
Documentation not provided to SLD within timeframe
Ineligible service provider or ineligible entity
No Form 470 reference
No contract when Form 471 filed
Payment of nondiscounted costs
Violation 28-day rule
Possible new FCC initiatives:
Limits to internal connections requests
Guidance on transferability of equipment
Eligibility of 911 and E911 lines
New Notice of Proposed Rule Making this fall
Year 2004 Strategies
Improve your district’s count of students eligible for
the free & reduce-price lunch program.
Understand rules regarding vendor involvement.
File one Form 471 for Priority One and one Form
471 for Priority Two requests.
Understand your phone bills and use summary
Year 2004 Strategies - Continued
Document, Document, Document
Use a stacking strategy to apply for E-rate and
CTF – discounts.
Data retrieval tool and E-rate manager tool
Add new eligible services on Form 470.
Do not use the term VoIP on your Form 470 for
For some applicants a consortia might work.
Schools and Libraries Division
California Department of Education
Access to training materials and E-rate
references is available at
Sign up on the CDE E-rate listserv to get
regular E-rate updates. See
Your county office of education and the
California Technology Assistance Project can
help with E-rate too.