January 25 and 26, 1999 Minutes

Board of Directors Meeting

A meeting of the Board of Directors of the Universal Service Administrative Company (USAC) was held at the Ronald Reagan Building/International Trade Center, 1300 Pennsylvania Avenue, N.W., Washington, D.C., on Monday and Tuesday, January 25 and 26, 1999. Ms. Lisa Rosenblum, Chair of the USAC Board of Directors, called the meeting to order on Monday, January 25, 1999, at 9:08 a.m. Eastern Time. Ms. Cathy Howard, Executive Assistant to Ms. Cheryl Parrino called the roll for Mr. Robert Haga, Acting Secretary.

1. Annual Election of Officers – Ms. Parrino explained that the USAC By-laws require that officers be elected as the first order of business in the first Board of Directors meeting of a new calendar year. The Board inquired why they were keeping the "Acting" in front of Mr. Haga’s title. Ms. Parrino explained that Mr. Haga is being recommended for re-election as the Acting Secretary and Treasurer due to several vacancies in USAC that need to be filled. The filling of these vacancies may affect whether Mr. Haga would continue as the Secretary and Treasurer or if another person would be more appropriate for one or both of the positions. By electing him as Acting Secretary and Treasurer, it leaves room for changes in the future.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolutions:
   

   RESOLVED, That the USAC Board of Directors elects Ms. Lisa Rosenblum as Chairperson of the Board of the Universal Service Administrative Company, and
   
   RESOLVED, That the USAC Board of Directors elects Dr. Henry Marockie as Vice-Chairperson of the Board of the Universal Service Administrative Company, and
   
   RESOLVED, That the USAC Board of Directors elect Ms. Cheryl L. Parrino as CEO of the Universal Service Administrative Company, and
   
   RESOLVED, That the USAC Board of Directors elects Mr. Robert Haga as Acting Secretary and Treasurer of the Universal Service Administrative Company.

2. Election of New Board Members – Ms. Parrino explained that consistent with the Plan of Reorganization approved by the FCC, the USAC Board should be comprised of nineteen (19) members. There are two unfilled positions on the USAC Board that did not exist prior to the reorganization. For one of these unfilled positions, the Plan states that "the additional rural health care representative on the Rural Health Care Board shall serve on the USAC Board." For the other unfilled position, the Plan proposed to add the CEO of USAC to the Board. The reorganization created Board positions for both of these positions, and the Board must elect individuals to the two Board positions created by the merger. In addition, another vacancy exists due to the resignation on December 31, 1998, of Mr. Donald Lynch from the USAC Board of Directors. According to USAC By-laws and FCC rules, USAC must notify the FCC of the vacancy so that it can begin the selection process for a successor. The Executive Committee authorized USAC to notify the FCC of the vacancy during its January 14, 1999, conference call. There is no Board action required at this time regarding this vacancy.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors hereby elects Ms. Cheryl Parrino and Mr. Isiah Lineberry to the USAC Board of Directors.

3. Formation of the Rural Health Care and Schools & Libraries Committees and Reformation of the High Cost & Low Income Committee – Ms. Parrino explained that as a result of the merger and FCC Order, the USAC Board of Directors must establish a Rural Health Care Committee and a Schools & Libraries Committee to oversee the administration of the Rural Health Care and Schools and Libraries Universal Service Programs. The USAC Board must also adopt changes to the structure of the High Cost & Low Income Committee.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolutions:
   

   RESOLVED, That, consistent with its By-laws, the USAC Board of Directors approves the reformation of the High Cost & Low Income Committee to oversee the administration of the high cost and low income support mechanisms by the High Cost & Low Income Division. The High Cost & Low Income Committee shall have the authority to make decisions concerning: (i) how the Administrator projects demand for the high cost and low income support mechanisms; (ii) development of applications and associated instructions as needed for the high cost and low income support mechanisms; (iii) administration of the application process, including activities to ensure compliance with Federal Communications Commission rules and regulations; (iv) performance of audits of beneficiaries under the high cost and low income support mechanisms; and (v) development and implementation of other functions unique to the high cost and low income support mechanisms, and
   

   RESOLVED FURTHER, That the High Cost & Low Income Committee shall consist of the following members of the USAC Board of Directors: (i) one low income representative; (ii) one state telecommunications regulator; (iii) one state consumer advocate; (iv) two incumbent local exchange carrier representatives (one representing rural telephone companies, as that term is defined in 47 USC 153(37) and one representing non-rural telephone companies); (v) one inter-exchange carrier representative; (vi) one competing local exchange carrier representative; (vii) one commercial mobile radio service representative; and (viii) the Chief Executive Officer, and
   

   RESOLVED FURTHER, That, consistent with its By-laws, the USAC Board of Directors approves the formation of a Rural Health Care Committee to oversee the administration of the rural health care support mechanism by the Rural Health Care Division. The Rural Health Care Committee shall have authority to make decisions concerning: (i) how the Administrator projects demand for the rural health care support mechanism; (ii) development of applications and associated instructions as needed for the rural health care support mechanism; (iii) administration of the application process, including activities to ensure compliance with Federal Communications Commission rules and regulations; (iv) calculation of support levels under § 54.609; (v) performance of outreach and education functions; (vi) review of bills for services that are submitted by rural health care providers; (vii) monitoring demand for the purpose of determining when the $400 million cap has been reached; (viii) performance of audits of beneficiaries under the rural health care support mechanism; and (ix) development and implementation of other functions unique to the rural health care support mechanism, and
   
   RESOLVED FURTHER, That the Rural Health Care Committee shall consist of the following members of the USAC Board of Directors: (i) two rural health care representatives; (ii) one service provider representative; (iii) two at-large representatives elected by the Board; (iv) one state telecommunications regulator; (v) one state consumer advocate; and (vi) the Chief Executive Officer, and
   
   RESOLVED FURTHER, That, consistent with its By-laws, the USAC Board of Directors approves the formation of a Schools & Libraries Committee to oversee the administration of the schools and libraries support mechanism by the Schools & Libraries Division. The Schools & Libraries Committee shall have the authority to make decisions concerning: (i) how the Administrator projects demand for the schools and libraries support mechanism; (ii) development of applications and associated instructions as needed for the schools and libraries support mechanism; (iii) administration of the application process, including activities to ensure compliance with Federal Communications Commission rules and regulations; (iv) performance of outreach and education functions; (v) review of bills for services that are submitted by schools and libraries; (vi) monitoring demand for the purpose of determining when the $2 billion trigger has been reached; (vii) implementation of the rules of priority in accordance with § 54.507(g) of this chapter; (viii) review and certification of technology plans when a state agency has indicated that it will not be able to review such plans within a reasonable time; (ix) the classification of schools and libraries as urban or rural and the use of the discount matrix established in § 54.505(c) of this chapter to set the discount rate to be applied to services purchased by eligible schools and libraries; (x) performance of audits of beneficiaries under the schools and libraries support mechanism; and (xi) development and implementation of other functions unique to the schools and libraries support mechanism, and
   
   RESOLVED FURTHER, That the Schools & Libraries Committee shall consist of the following members of the USAC Board of Directors: (i) three school representatives; (ii) one library representative; (iii) one service provider representative; (iv) one at-large representative elected by the Board; and (v) the Chief Executive Officer, and
   
   RESOLVED FURTHER, That the High Cost & Low Income Committee, Rural Health Care Committee, and Schools & Libraries Committee may act on behalf of the Corporation on issues relating to the programmatic aspects of their respective support mechanisms, unless (i) the action is with respect to Board approval of a budget or the action is presented by the Chief Executive Officer to the Board for review, and (ii) the Board disapproves such action by a two-thirds vote of a quorum of the Board, and
   
   RESOLVED FURTHER, That meetings of the High Cost & Low Income Committee, Rural Health Care Committee, and Schools & Libraries Committee shall be open to the public and be held in Washington, D.C.

4. Appointment of Members to the High Cost & Low Income, Rural Health Care, and Schools & Libraries Committees – Ms. Parrino explained that Board members must be appointed to serve on the High Cost & Low Income (HCLI) Committee, the Rural Health Care (RHC) Committee, and the Schools & Libraries (SL) Committee consistent with USAC’s By-laws and FCC Rules.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolutions:
   

   RESOLVED, That the USAC Board of Directors hereby appoints the following members of the USAC Board of Directors to the High Cost & Low Income Committee: (i)Mr. John Anthony Butler (representing low income consumers); (ii) Chairman Allan Thoms (representing state telecommunications regulators); (iii) Ms. Martha Hogerty (representing state consumer advocates); (iv) Mr. Edwin H. Eichler(representing rural ILECs), and Mr. Kevin Hess (representing non-rural ILECs); (v) Mr. Jimmy Jackson(representing inter-exchange carriers); (vi) Ms. Heather Burnett Gold(representing CLECs); (vii) Mr. Tom Wheeler (representing CMRS providers); and (viii) Ms. Cheryl L. Parrino (USAC CEO), and
   
   RESOLVED FURTHER, That the USAC Board of Directors hereby appoints the following members of the USAC Board of Directors to the Rural Health Care Committee: (i) Mr. Isiah Lineberry and Dr. Jay Sanders (rural health care representatives); (ii)Mr. Kevin Hess (representing telecommunications service providers); (iii) Mr. Jimmy Jackson and Mr. Talbott (at-large representatives); (iv) Chairman Allan Thoms (representing state telecommunications regulators); (v) Ms. Martha Hogerty(representing state consumer advocates); and (vi) Ms. Cheryl L. Parrino (USAC CEO), and
   
   RESOLVED FURTHER, That the USAC Board of Directors hereby appoints the following members of the USAC Board of Directors to the Schools & Libraries Committee: (i) Ms. Anne L. Bryant, Dr. Henry Marockie, and Mr. Brian Talbott (representing schools); (ii) Ms. Kathleen G. Ouye (representing libraries); (iii) Mr. Frank Gumper (representing telecommunications service providers); (iv) Mr. David Abramson (at-large representative); and (v) Ms. Cheryl L. Parrino (USAC CEO).

5. Review of Executive Committee Representation and Selection of Members – Ms. Parrino explained that at its October 20, 1998, meeting, the USAC Board of Directors approved the formation of an Executive Committee and appointed members. At that time, the Board agreed to review the Committee representation after the consummation of the merger. The merger has now been consummated. In addition, since the Committee was formed, one of the members has resigned from the USAC Board of Directors.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolutions:
   

   RESOLVED, That the USAC Board of Directors determines that the Executive Committee shall consist of six (6) USAC Board members: the Chairperson of the USAC Board; the Chairperson of the High Cost & Low Income Committee; the Chairperson of the Rural Health Care Committee; the Chairperson of the Schools & Libraries Committee, an at-large representative; and the USAC CEO, and
   
   RESOLVED FURTHER, That the USAC Board of Directors makes the following appointments to the Executive Committee: the Chairperson of the USAC Board; the Chairperson of the High Cost & Low Income Committee; the Chairperson of the Rural Health Care Committee; the Chairperson of the Schools & Libraries Committee, Ms. Cheryl Parrino, the USAC CEO; and Mr. Frank Gumper as the at-large representative to the Executive Committee.

   Ms. Rosenblum suggested that the Board recess for the purpose of having each of the USAC Committees go into session to select recommendations for Chairs and Vice Chairs of the Committees to forward to the Board. The reason for recessing into Committees at this point is so that once the Committees have made their recommendations, the Board can then reconvene and approve those selections so that Board members will know who should go to the Executive Committee meeting on Tuesday, January 26, 1999, since the Executive Committee consists of the Chairs of each Committee and one at-large representative.
   
   On a motion duly made and seconded, the Board unanimously agreed to recess at 9:24 a.m., subject to the call of the Chair, for the purpose of having each of the USAC Committees go into session to select recommendations for Chairs and Vice Chairs of the Committees.
   
   At 9:34 a.m., the Board reconvened. Ms. Rosenblum called the meeting to order and asked that the roll be taken. Ms. Cathy Howard, executive assistant to Cheryl Parrino (CEO of USAC) called the roll for Mr. Robert Haga, Acting Secretary.
   
   

   Fifteen of the eighteen elected members were present, representing a quorum:
   Abramson, David	Marockie, Dr. Hank
   Bryant, Anne	Ouye, Kathleen
   Eichler, Ed	Parrino, Cheryl
   Gold, Heather	Rosenblum, Lisa
   Gumper, Frank	Sanders, Dr. Jay
   Hess, Kevin	Talbott, Brian
   Hogerty, Martha	Thoms, Allan
   Lineberry, Isiah
   Three members were absent:
   Butler, Tony	Wheeler, Tom
   Jackson, Jimmy
   Officers of the Corporation present:
   Haga, Robert – Secretary/Treasurer
   Others present for the meeting:
   Name	Company
   Bailey, Lee	USAC – RHC Division
   Blackwell, Mel	USAC
   Dwyer, Shari	Thomas Communications
   Faunce, Donna	USAC
   Howard, Cathy	USAC
   Kiser, Cherie	Mintz, Levin, Cohn, et al.
   Kriete, Debra	USAC – SL Division
   Lavery, Dick	GTE
   Moore, Kate	USAC – SL Division
   Rodda, Jim	MCI WorldCom

   
   

6. Election of High Cost & Low Income, Rural Health Care, and Schools & Libraries Committees Chairs and Vice Chairs – Ms. Parrino explained that the USAC Board of Directors needs to approve the recommendations from the High Cost & Low Income, Rural Health Care, and Schools & Libraries Committees for their Chairs and Vice Chairs, respectively.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolutions:
   

   RESOLVED, That the USAC Board of Directors accepts the recommendation made by the High Cost Low Income Committee to re-elect Ms. Heather Gold as its Committee Chair and Ms. Martha Hogerty as its Vice Chair, and
   

   RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation made by the Rural Health Care Committee to elect Dr. Jay Sanders as its Committee Chair and Mr. Kevin Hess as its Vice Chair, and
   
   

   RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation made by the Schools & Libraries Committee to re-elect Ms. Kathleen Ouye as its Committee Chair and Dr. Hank Marockie as its Vice Chair.

On a motion duly made and seconded, the Board unanimously agreed to recess at 9:36 a.m., to reconvene at 9:30 a.m., Tuesday, January 26, 1999.

At 10:05 a.m. on Tuesday, January 26, 1999, the Board reconvened. Ms. Rosenblum called the meeting to order and asked that the roll be taken. Ms. Cathy Howard, executive assistant to Cheryl Parrino (CEO of USAC) called the roll for Mr. Haga, Acting Secretary.

Election of Executive Committee Chair and Vice Chair – Ms. Parrino explained that the USAC Board of Directors needs to approve the recommendation from the Executive Committee for the Executive Committee Chair and Vice Chair.

On a motion duly made and seconded, the Board unanimously adopted the following resolution:

RESOLVED, That the USAC Board of Directors accepts the recommendation made by the Executive Committee to elect Ms. Lisa Rosenblum as its Committee Chair and Mr. Frank Gumper as its Vice Chair.

7. Approval of minutes of Tuesday, December 15, 1998 – On a motion duly made and seconded, the Board unanimously approved the minutes, as distributed, of the December 15, 1998, USAC Board of Directors’ meeting.
   

8. Process for the Selection of Board of Directors’ Terms and the Selection of Directors to Specific Terms – Ms. Parrino explained that the reorganization created staggered terms for the Directors of USAC. The FCC left to USAC the appointment of specific directors to terms of two, three, and four years. Ms. Rosenblum asked Mr. Haga to organize Board Members and to not take action today on this item. She noted that no Board member has expressed a sense of urgency as all terms run until December of 2000.
   
   Ms. Rosenblum asked the Board whether they were comfortable with the groupings proposed, and asked that Mr. Haga get those groups together to decide terms.
   

9. Video Conferencing – Ms. Parrino reported on the video conferencing information and estimated cost gathered at the Board’s request. The Board discussed the item and noted other avenues could be examined. Ms. Howard said that she would work with Dr. Sanders and Mr. Abramson to get more data for the Board.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors determines not to pursue video conferencing at this time based on the current costs. The Board directs staff to monitor the costs and the change in technology and to bring a recommendation back to the Board when the costs justify the use of the technology.

10. Resolution Honoring Mr. Donald Lynch – Mr. Lynch resigned from the USAC Board of Directors effective December 31, 1998.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors hereby expresses its profound appreciation for the service Mr. Donald Lynch has provided to the Universal Service Administrative Company, and wishes him the best in his future endeavors.

    The Board directed staff to purchase a plaque on which to ascribe an appropriate expression of thanks and to send it to Mr. Lynch.
    

11. Resolution Honoring Mr. Jim Rodda – Mr. Jim Rodda was responsible for assisting Mr. Lynch in his service on the USAC Board, and made large contributions to USAC operations and the USAC Board in this role.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors hereby extends to Mr. Jim Rodda thanks and appreciation for his hard work provided to the Universal Service Administrative Company.

    The Board directed staff to send a letter to Mr. Rodda expressing USAC’s thanks and appreciation.
    

12. Refunds to Contributors Qualifying for De Minimis Status – Ms. Parrino explained that at its October 20, 1998, Board meeting, the USAC Board of Directors authorized the issuance of refunds for telecommunications service providers that had, based on their first six months of 1997 revenue, contributed to the program, but as a result of reporting their calendar year 1997 revenues, were subsequently determined to be de minimis as a result of having an annual contribution of less than $10,000. The Board had requested that this be done as soon as possible. Mr. Haga stated the total refunded amount included interest and was more than $1.6 million.

13. Status Report on the Readiness of USAC Operations for the Year 2000 – Ms. Parrino explained that the Board has requested regular status reports on the readiness of USAC operations for the year 2000. There is essentially no change in Year 2000 readiness since the last report given at the last Board meeting on December 15, 1998. All operational systems are Year 2000 compliant. All systems currently under development incorporate Year 2000 standards and are on target to be fully operational prior to August 1999.

14. Report on Directors & Officers Insurance and Indemnification – Mr. Haga reported that USAC’s Directors & Officers (D&O) insurance provides greater coverage than the policies maintained by either of the former corporations and has been renewed effective January 1, 1999, at a rate lower than the premium in effect for the Rural Health Care Corporation and the Schools & Libraries Corporation on September 1, 1998. Coverage has been obtained consistent with the Merger Agreement.

15. List of Telecommunications Carriers Filing FCC Form 457 – At the Board’s request, Mr. Haga reported that information regarding carriers that have filed FCC Form 457 has been posted by the FCC on the Internet and provided the Board with the URLs.

16. Filing of Comments in Public Notice Seeking Comments on Joint Board Second Recommended Decision – Implementation Time Needed – Mr. Haga reported that USAC filed Reply Comments on January 13, 1999, advising the FCC to leave sufficient time to implement any changes that will be required by July 1, 1999.

17. Site Visits Outside of Washington, DC – Ms. Kiser reported that the USAC Board of Directors cannot conduct meetings outside of Washington, D.C. that directly relate to the administration of USAC, per FCC order. Site visits outside the parameters of a Board meeting, however, would be permissible, so long as: (1) the visits are directly related to the administration of universal service programs, (2) visiting directors receive written consent from all members of the Board or relevant committee, (3) this written consent is filed with the minutes of proceedings of the Board or relevant committee, and (4) USAC details the site visits—and how they directly related to USAC’s administrative goals—in its annual report to Congress and the FCC. As long as the first and second criteria are met, Board members would be entitled to receive reimbursement from USAC for their expenses related to the site visits. Some Board members felt that obtaining the written consent from all Board members would be cumbersome.
    
    The Board directed staff to develop policy and procedures for Board members to use when traveling to give presentations on behalf of USAC and subsequently requesting reimbursement for such travel when the party requesting the presence of the Board member does not cover expenses.
    

18. Treasurer’s Report – Mr. Haga gave the Treasurer’s Report, reporting on investment income earned for the funds in 1998. He reported that the return has been consistent with the federal funds rate and that all investments have been consistent with USAC’s approved guidelines. Mr. Haga also reported on the fund balances as of December 31, 1998, and that it is necessary to reduce Second Quarter Collections to adjust the fund levels to their authorized levels.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    Resolved, That the USAC Board of Directors, having reviewed a summary of the investment income and statement of changes in fund balance, hereby authorizes the staff to include adjustments for interest earned and over or under collections in the required Quarterly filing with the FCC. Staff may make adjustments is additional data becomes available.

19. Regulatory Report – For information only. Mr. Haga provided a written report on regulatory and legislative actions relating to universal service and asked the Board members to contact him if they have any questions.
    

20. Report on the Request For Proposal Process for Accounting and Financial Services and National Exchange Carrier Association Contract Revisions – Ms. Parrino reported that prior to January 1, 1999, the payroll and general accounting processing for the Rural Health Care Program was provided by Deloitte & Touche LLP. The National Exchange Carrier Association (NECA) provided the same professional services for USAC and the Schools & Libraries Division. As of January 1, 1999, all services are being provided by NECA. A Request for Proposal (RFP) was issued on October 30, 1998, requesting consolidation of these functions. Virchow, Krause & Co., LLP was one of eight firms that submitted bids on the RFP and was awarded the contract because it had the lowest price, an outstanding reputation with not-for-profits and municipal utilities, and a staff that was very interested in obtaining USAC’s business. The contract will be effective April 1, 1999.
    

Rural Health Care (RHC) Committee Report Issues: (Items 21-25)

21. Rural Health Care Program Overview – For Information Only. Dr. Sanders provided an overview of the program.
    

22. Rural Health Care Program Status – For information only. Dr. Sanders discussed program limitations and the March 1 Report owed to the FCC.
    

23. Rural Health Care Program Budget 1999 – Mr. Gumper reported that each division developed separate budgets for 1999—on a stand-alone basis and on a merged basis. The RHC Committee approved the following budget amounts: 1999 direct cost budget of $2,964,000 for the Rural Health Care program, with $869,000 for the second quarter, excluding Rural Health Care’s share of general USAC costs.
    

24. Rural Health Care Program 2^nd Quarter 1999 Budget – See Agenda Item #23.
    

25. March 1 Report to the FCC on the Rural Health Care Universal Service Program – Ms. Parrino reported that the FCC directed USAC to evaluate the Rural Health Care Universal Service Program and to file a report with the FCC on March 1, 1999, with the results of the analysis. Concern was expressed over the fact that a significant amount of the money collected through the RHC Program is for administrative purposes based on current demand. Board members expressed a concern that this will need to be corrected for the good of all of the programs. A Board member suggested that more time may be necessary than the 30 or so days left before the report is due in order to work with staff on finding ways to revise the program in an effort to lower those administrative costs; however, Ms. Parrino pointed out that if USAC asks for more time from the FCC, it will be that much longer before USAC puts recommendations before the FCC and that much longer before the FCC can take action to make changes. Other Board members suggested meeting with members of Congress to let them know of the policy barriers. It was pointed out that USAC is responsible for the administration of the program, not for policy changes. Policy changes should come from the constituency not from USAC. The CEO, with the assistance of the Rural Health Care Committee, needs to find a means for obtaining input from the RHC Program constituents. Dr. Sanders reported that the Western and Southern Governors’ Association is totally committed to the RHC Program using the new telecommunications technology and it may be willing offer some suggestions. Mr. Lineberry reported that he would be willing to gather a group of constituents that he works with who are involved with the RHC Program by teleconference along with USAC’s CEO in order to explore ways of obtaining input from the constituency. The Board directed staff to follow-up on these suggestions.
    
    The Board directed that the Executive Committee should be responsible for the final approval of the March 1 Report; however, USAC should work with the RHC Committee to finalize the report and the full Board should see the report before it goes to the Executive Committee for approval.
    

Schools & Libraries (SL) Committee Report Issues (Items 26-30)

26. Schools & Libraries Program Overview – Ms. Ouye, the Chair of the SL Committee, reported on the activities from the SL Committee meeting on January 25, 1999.
    

• The SL Committee approved several resolutions. Ms. Ouye asked for clarification on what kind of actions needs the approval of the Board. Ms. Parrino stated that actions concerning programmatic functions do not require Board approval but would be subject to a veto by supermajority if the issue was raised to the full Board by the CEO. All the actions approved by the SL Committee were related to programmatic functions.
  

• The SL Committee established three subcommittees: Finance, Audit, and Programmatic.
  

• The SL Committee approved three NECA subcontracts for 1999 with the following vendors for the following work: (1) National Computer systems, Inc., for client service bureau support and data processing support; (2) Spectrum Technology Group, Inc., for system development for the SL Universal Service Support Mechanism; and (3) Vestcom Mid-Atlantic, Inc. for issuance of commitment letters.
  

• The SL Committee approved the document, "Schools & Libraries Division Policy for Processing Applicant Inquiries and Objections to Funding Commitment Decisions Letters."
  

• The SL Committee approved the conceptual framework of a Pre-Discount Cost Calculation Worksheet. The SL staff is still in the process of finalizing the form as well as implementation instructions. Staff is strongly recommending to service providers that they use the worksheet in Year 2 in order to become familiar with it, as it will be a required form in Year 3.
  

• The SL Committee authorized the SL Division to seek reconsideration of the FCC staff decision regarding the state and local bidding process, and if reconsidered, authorizes the use of the procedures as outlined in the document, "SLC POST-COMMITMENT PROCEDURE – Changing Services Within an Approved Funding Request."
  

• The SL Committee reviewed options for meeting the FCC request to issue all funding commitment decision letters by February 15, 1999.
  

Mr. Hess stated that he has seen letters to the editor showing up in various newspapers praising the SL Program and how the program is helping schools and libraries. Ms. Ouye said that it is at the incentive of the schools and libraries to have letters and/or press releases printed.


27. Schools & Libraries Program Status – Ms. Ouye reported that the SL Division is currently working on Wave 6 of 9 Commitment Letters. Over $400 million in funding has been committed to date. All applicants will receive funding for telecommunications services and Internet connections that were requested. However, if the discount rate in Wave 6 is below 60 percent, applicants probably will not be funded for internal connections.
    

28. Schools & Libraries Division Year 1 Funding Commitment Decision Letter Report – See Agenda Item #27.
    

29. 1999 Schools & Libraries Division Goals and Objectives – Ms. Ouye reported that the SL Committee approved division goals and objectives for 1999. They are a bit ambitious, but doable.
    

30. 1999 Schools & Libraries Program Budget and 2^nd Quarter Estimate – Ms. Ouye reported that the SL Committee approved the following budget amounts: a 1999 budget of $28,607,000 for the Schools & Libraries program, with $6,772,000 for the second quarter, including Schools & Libraries’ share of general USAC costs.
    

High Cost & Low Income (HCLI) Committee Report Issues (Items 31-36):

31. High Cost & Low Income Program Overview – For information only. Ms. Gold gave a brief overview of the HCLI Programs referring to the agenda item memo and attachment. All forms and systems are in place to reach all entities.
    

32. High Cost Program Status – See Agenda Item #31.
    

33. Low Income Program Status Report – See Agenda Item #31.
    

34. High Cost & Low Income Program Preliminary 2^nd quarter 1999 Projections – See Agenda Item #35.
    

35. High Cost & Low Income Program Budget 1999 – For information only. Ms. Gold reported that the High Cost & Low Income Committee approved the following budget amounts: a 1999 budget of $1,054,700 for the High Cost program, with $182,900 for the second quarter, and a 1999 budget of $953,900 for the Low Income program, with $236,900 for the second quarter.
    

36. High Cost & Low Income Program 2^nd Quarter 1999 Budget – See Agenda Item #35.
    

Executive Committee Report Issues: (Items 37-48):

37. Status Report on the Audit of USAC Operations for the Year 1998 – For information only. Ms. Parrino reported on the status of the audit of USAC functions.
    

38. Report on Accounts Receivable – For information only. Mr. Haga reported on the status of the Accounts Receivable.
    

39. Report on Collection Efforts of USAC and the FCC – Mr. Haga referred to the document "USAC Collection Procedures for Delinquent Contributors" included as an attachment to the agenda item memo. These procedures provide guidance on steps that USAC personnel can take for collection activities. USAC continues to work with the FCC in issuing Notices of Apparent Liability.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors accepts the recommendation made by the Executive Committee to adopt the USAC document, "Collection Procedures for Delinquent Contributors."

40. Common Budget 1999 – Ms. Rosenblum stated that the common budget is a major step forward in setting up the New USAC and building a solid framework. Ms. Parrino explained that the USAC Board of Directors' committees have responsibility over programmatic costs; USAC has responsibility over common costs (e.g., overhead costs, billing and collection, USAC common employees). The Board can veto a programmatic budget by two-thirds vote. The USAC common costs are before the Board today. The Board is also being asked to approve the USAC consolidated budget. Ms. Parrino referred to Attachment F of the agenda item memo, which delineates the pre- verses post- merger budget. It is estimated that USAC could realize a 15 percent reduction in the consolidated budget due to a reduction in outside counsel and other administrative costs, and a reduction in outside contracts and costs for the Schools & Libraries program.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors approves a 1999 Budget of $37,189,100 for USAC consolidated, with $8,961,300 for the 2^nd Quarter. The USAC Board of Directors approves the Common USAC Budget for the year of $1,999,600, of which $503,700 is attributable to the 2^nd Quarter.

41. Common 2^nd Quarter Budget – See Agenda Item #40.
    

42. Combined 1999 and 2^nd Quarter Budget – See Agenda Item #40.
    

43. 2^nd Quarter Revenue Projections and January 29, 1999, Filing with FCC for 2^nd Quarter of 1999 – The USAC Board of Directors must provide authorization for the staff to proceed with the filing of quarterly Contribution Base information with the FCC due on
    January 29, 1999.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors, having reviewed a summary of the current status of telecommunications service provider revenues for January through June 1998 at its meeting on January 26, 1999, and based on the recommendation of the Executive Committee, hereby authorizes the staff to proceed with the required January 29, 1999, filing with the FCC 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.

44. USAC Collection Procedures for Contributors in Bankruptcy – Mr. Haga referred to the document "USAC Collection Procedures for Contributors in Bankruptcy." He noted that the bankruptcy of companies would be a continual issue; therefore, procedures are needed to establish collection practices regarding bankruptcies. With these procedures in place, it is hoped to at least collect partial payments.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors accepts the recommendation made by the Executive Committee to adopt the USAC document, "Collection Procedures for Contributors in Bankruptcy."

    On a motion duly made and seconded, the Board unanimously agreed to recess at 11:25 a.m., subject to the call of the Chair.
    

At 11:45 a.m., the Board reconvened. Ms. Rosenblum called the meeting to order and asked that the roll be taken. Ms. Cathy Howard, executive assistant to Cheryl Parrino (CEO of USAC) called the roll for Mr. Robert Haga, Acting Secretary.

On a motion duly made and seconded, the Board unanimously agreed to go into Executive Session at 11:46 a.m. for purposes of discussing Confidential agenda items.

On a motion duly made and seconded, the Board unanimously agreed to go into Open Session at 12:56 p.m. for purposes of reporting actions taken during Executive Session:

45. Organizational Structure – Ms. Parrino explained that now that the Universal Service Administrative Company, the Rural Health Care Corporation, and the Schools & Libraries Corporation have merged into one company, the USAC Board of Directors should review salaries and job titles to determine if they are appropriate for the new corporation. USAC should determine whether any additional employees should be designated as officers of the corporation. USAC also needs to establish a procedure for annual adjustments to salary. USAC management is requesting overall guidance on the salary structure and annual adjustment procedures; it is not requesting the Board to determine specific salaries for each employee.
    
    The Board believes there is enough flexibility in the budget for the USAC CEO to make final decisions concerning salaries based on market needs; final approval does not need to come from the Board. The Board further advised the CEO to pay particular attention to appropriate salaries and job descriptions for technology support staff as the salary demands of that area of expertise are increasing. The Board feels it will be necessary to meet those salary demands in order to hire personnel with the type of high caliber skills that the Universal Service programs require in order to function efficiently and effectively.
    
    The Board directed the USAC CEO to individually request specific comments from each of the Board members before bringing the issue to the Executive Committee.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolutions:
    

    RESOLVED, That the USAC Board of Directors, based on the recommendation of the Executive Committee and upon review of supporting documents, endorses the overall approach being taken by the USAC CEO to establish titles and salaries of employees of the Corporation consistent with the reorganized structure of USAC, agrees to keep salary levels at least at the current level for all employees for 1999, and authorizes the CEO to increase the salaries of 6 employees based on an increase in the job classification and function for those positions, with those changes approved effective February 1, 1999; and
    
    WHEREAS, this Board has reviewed the resolutions and recommendations of the Executive Committee of the USAC Board of Directors regarding the senior officers of the Corporation and deems it advisable that the Corporation establish three additional senior officer positions, each of which shall report to the Chief Executive Officer and each of which initially shall be designated as a President; and
    
    WHEREAS, this Board wishes to establish the duties and reporting responsibilities of each of such senior officers as well as those of the Chief Executive Officer;
    
    NOW, THEREFORE, IT IS RESOLVED, That the Chief Executive Officer is hereby made the chief executive officer of the Corporation, and as such shall be primarily responsible for the implementation of the policies of the Board of Directors and shall have authority over the general management and direction of the business and operations of the Corporation and those of its Committees (including, without limitation, the High Cost & Low Income [HCLI] Committee, the Rural Health Care [RHC] Committee, and the Schools & Libraries [SL] Committee), subject only to the ultimate authority of the Board of Directors. The Chief Executive Officer may sign and execute in the name of the Corporation contracts, share certificates, deeds, mortgages, bonds, and other instruments, except only in cases where the signing and the execution thereof shall be expressly delegated by the Board of Directors or the By-laws of the Corporation to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed. In addition, the Chief Executive Officer shall manage and supervise all the personnel of the Corporation and otherwise shall discharge and perform all duties usually and customarily incident to the office of chief executive officer and president of a not-for-profit corporation and such other duties as from time to time may be assigned by the Board of Directors; and
    
    FURTHER RESOLVED, That there is hereby established three separate offices of President. The first shall be President of the High Cost & Low Income Division. The second shall be President of the Rural Health Care Division. The third shall be President of the Schools & Libraries Division. Each President shall report to the Chief Executive Officer and shall have such powers and duties as may from time to time be assigned to him or her by the Chief Executive Officer or the Board of Directors (including, for such purposes, the respective Committees of the Board for which they are President). Each President may sign and execute, in the name of the Corporation, contracts, deeds, mortgages, bonds, and other instruments as and when authorized to do so by the Chief Executive Officer or by the Board of Directors, except where the signing and execution thereof shall be expressly designated by the Board of Directors or By-laws to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed. Notwithstanding the foregoing, however, none of the Presidents shall, without the specific prior approval of the Chief Executive Officer or the entire Board of Directors, have the authority to (i) retain outside counsel, (ii) make or deliver reports on the operation of the Corporation or any Committee thereof to Congress or the FCC, or (iii) expend any sum, or commit the Corporation or any Committee thereof to expend any sum, in excess of $50,000.
    

46. Employee Benefits – Mr. Gumper explained that by adopting this resolution, a uniform set of benefits could be put into place for all USAC employees. Ms. Parrino explained that certain existing employment contracts and agreements provide for benefits that appear to be inconsistent with the benefits package approved by the Board in October 1998. The Board needs to determine the timeline and process for bringing all USAC employees under the benefits package approved in October.
    
    The Board noted that no leave time is allowed for voting purposes. The Board directed the USAC CEO to clarify whether leave for purposes of voting is covered under Federal Law, and if so, to make appropriate changes to the benefit package.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors accepts the recommendation of the USAC Executive committee to agree to provide an exception from the benefits package approved in October 1998 for those employees that have employment contracts and agreements and for those benefits that are specifically spelled out in employment contracts or agreements. The exceptions for those employees with employment agreements will expire on January 1, 2000, and the exceptions for contract employees will expire with the expiration of the contract.

47. Employee Health, Disability, Life, and Retirement Benefits – Ms. Parrino explained that the plan of reorganization proposed that, "Common programs for human resource administration, employee health insurance, pension, and compensation benefits are necessary for the combined entity." The FCC did not modify this proposal. All benefits comply with federal laws regarding such matters.
    
    The Board directed that the following resolution be implemented as soon as possible.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors approves the following actions:

    1. That the NTCA AA group health insurance plan formerly sponsored by Schools & Libraries Corporation ("SLC") and the Blue-Cross Blue Shield group health insurance plan and the Capital Care group health insurance plan formerly sponsored by Rural Health Care Corporation ("RHCC") for their respective employees (and their dependents) be and hereby are terminated, effective as of the date of this resolution, and that such employees (and dependents who are otherwise eligible) shall be immediately eligible to participate in the NTCA AA group health insurance plan offered by USAC to its employees, and
       

    2. That the NTCA savings plan maintained formerly by SLC shall be and hereby is terminated, effective as of the date of this resolution, in accordance with that plan’s provisions and applicable law and that, to the extent permitted under applicable law, the account balances of participants under that plan shall be transferred to the USAC NTCA Savings Plan ("USAC Plan"); and
       

    3. That the RHCC SEP IRA be and hereby is terminated, effective as of the date of this resolution, in accordance with its applicable provisions; and
       

    4. That the otherwise eligible former employees of SLC and RHCC who are as of the date of this resolution employed by USAC be permitted to participate in the USAC Plan in accordance with its terms and that such USAC Plan be and hereby is amended (1) to recognize service credit with either RHCC or SLC for purposes of eligibility and vesting under the USAC Plan, and (2) to permit such otherwise eligible employees to begin to participate in the USAC Plan as of the date of this resolution, notwithstanding any entry date provided for in the USAC Plan; and
       

    5. That all other insurance programs, including life and disability insurance, sponsored or maintained formerly by either SLC or RHCC shall be terminated and those employees formerly covered under such plans shall become immediately eligible to participate in similar plans sponsored or maintained by USAC.
       

48. CEO Contract – Ms. Rosenblum informed the Board that the contract of USAC’s CEO, Ms. Cheryl Parrino, expires on May 31, 1999. The USAC Board needs to determine whether to renew the contract and if so, to establish the terms of that contract. Ms. Parrino, Mr. Haga, and Ms. Howard left the meeting prior to the Board’s discussion.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors accepts the recommendation of the Executive Committee to seek renewal of the contract of the USAC’s CEO, Ms. Cheryl Parrino, for a period of three years, and
    
    FURTHER RESOLVED, That the USAC Board of Directors approves and authorizes payment of the bonus amount included in Ms. Parrino’s contract of May 19, 1998.

49. Miscellaneous
    

    • Current Address List of Directors – Send any changes to Ms. Cathy Howard at the USAC office in Madison, Wisconsin.
      

    • Expense Reimbursement Form
      

There being no further business to attend to, Ms. Rosenblum adjourned the meeting at 12:59 p.m. Eastern Time.
 
____________________________________
Robert W. Haga
Acting Secretary/Treasurer
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Date