April 20, 1998 Minutes

Board of Directors Meeting

The regular meeting of the Board of Directors of the Universal Service Administrative Company (USAC) (the Corporation) was held at the Omni Shoreham Hotel, 2500 Calvert Street, NW, Washington, D.C., on the above date. The meeting was called to order at 1:30 P.M. by Lisa Rosenblum, Chair.

1. Ms. Rosenblum welcomed the Board and presented the Minutes of the February 17, February 27, March 10 and March 13, 1998 Board of Directors meetings. On a motion duly made and seconded, the Minutes were unanimously approved. Ms. Rosenblum reported that the CEO selection process was progressing with the existing candidate. Ms. Rosenblum then requested reports on the activities of the High Cost and Low Income Committee, the Schools and Libraries Corporation, and the Rural Health Care Corporation.
   

2. Ms. Gold, Chair of the High Cost and Low Income Committee, reported on the meeting held that morning of the High Cost and Low Income Committee. She reported on the status of carrier eligibility. Only 3 study areas have not been designated as eligible carriers. Ms. Gold reported on the variances between first quarter projections and actuals and the resolution to adopt the third quarter funding levels. Refer to the Minutes of the High Cost and Low Income Committee at Attachment II.
   

3. Ms. Ouye, Chair of the Schools and Libraries Corporation(SLC), reported that all staff were very busy now that the 75 day window had closed. SLC has received in excess of 46,000 applications. Additional staff have been added to handle the volume.
   

4. Mr. Lee Bailey, on behalf of the Rural Health Care Corporation (RHCC), reported RHCC had engaged Price Waterhouse to design its processes and that an informational website (www.rhccfund.org) had opened on April 1, 1998 to provide guidance on application procedures. RHCC was working with phone company representatives and expected the 75 day window for its applications would open on May 1, 1998. Approximately 18,000 rural health care facilities have been contacted and 2,000 have responded. It is too early to gauge demand on the program. RHCC has established a Q & A line at 1-800-229-5476.
   

5. Mr. Eichler reported that the Planning Committee is awaiting the appointment of a CEO for USAC and further amendments from FCC Chair, William Kennard, on the 1998 organization of SLC and RHCC.
   

6. Mr. Levy updated the Board on recent regulatory events:
   

1. TRS data can now be utilized by USAC staff to verify Form 457 submissions.
   

2. The USAC authority to borrow is still pending at the FCC.
   

3. The FCC has also been asked to clarify the amounts which are reimbursable from the Low Income fund to implement toll limitation services.
   

4. A nonpayment list for January (approximately 86 companies) along with supporting documentation has been forwarded to the FCC for collection.
   

5. Mr. Levy's view is that the GAO's inquiry into the legality of SLC and RHCC does not affect NECA and USAC. The factors are different.
   

7. Mr. Lynch reviewed the April 6 meeting of the Budget and Finance Committee.
   

1. Mr. Lynch has been elected Chair.
   

2. An outside auditor for USAC will be chosen by competitive bid. Staff is issuing an RFP for disposition at the next regular meeting of the Board.
   

3. The Committee recommended that the following budget for the 3rd Quarter 1998 be adopted by the full Board. On a motion duly made and seconded the motion was passed unanimously.
   

   RESOLVED that USAC Board accepts the recommendation made by the Budget and Finance Committee to adopt a 3rd Quarter budget for USAC of $1,231,000.

8. Mr. Ricker explained in detail the 1Q98 Schedule of USF Billing and Disbursements. The Board discussed making an allowance for known non payment due to bankruptcies, disputed amounts and/or a 'safety margin'for uncollectibles. The Board concluded that there was not enough history to make an informed decision on the level of any allowance for nonpayment. Better data will result in better policy. On a motion duly made and seconded the Board passed the following resolution:
   

   RESOLVED that the decisions to include an allowance for bankruptcies, disputed amounts and noncollectibles will be deferred until the 4th Quarter filing and any shortfall due the high cost fund will be funded by an entry and transfer from the low income fund.

   The Board recessed at 2:53 p.m. and reconvened at 3:10 p.m.
   

9. Mr. Ricker presented the background resolution authorizing staff to proceed with the May 1, 1998 filing for the third quarter. On a motion duly made and seconded, the Board passed the following resolution:
   

   RESOLVED, that the USAC Board of Directors, having reviewed a summary of current status of telecommunications service provider revenues for calendar year 1997 at its meeting on April 20, 1998, hereby directs the staff to proceed with the required May 1, 1998 filing on behalf of USAC. Staff may make adjustments if additional data becomes available or errors are discovered, and to reflect changes required as a result of FCC orders.

10. Mr. Ricker reported the USAC system development was on target and under budget. The Board was appreciative and expected that the CEO would do a thorough review of operation being performed by NECA. Mr. Ricker then presented the options available to USAC to process SLC invoices. SLC & RHCC face the timing problem of matching monthly collections with annual fund commitments and the need to ensure cash is available to meet the required payment obligations. Mr. Rhyner explained the details and differences contained in the option effecting netters and nonnetters. On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, that USAC staff should implement Option 2 as described in Tab 5 of the April 20, 1998 pre-meeting materials.

11. Ms. Rosenblum announced that the next regularly scheduled meeting of the Board will take place on July 20, 1998 at the Washington Marriott.
    

There being no further business to come before the Board, upon a motion duly made and seconded, Ms. Rosenblum adjourned the meeting at 4:50 P.M.

___________________________________
Edward R. English
Secretary

____________________________________
Date