April 20, 1999 Minutes

Board of Directors Meeting

A meeting of the Board of Directors of the Universal Service Administrative Company (USAC) was held at The Westin Grand Hotel, 2350 M Street, N.W., Washington, D.C., on Tuesday, April 20, 1999. Ms. Lisa Rosenblum, Chair of the USAC Board of Directors, called the meeting to order at 10:15 a.m. Eastern Time. Ms. Cathy Howard, Executive Assistant to Ms. Cheryl Parrino called the roll for Mr. Robert Haga, Acting Secretary.

1. Approval of Minutes – On a motion duly made and seconded, the Board approved the minutes, as distributed, of the Board of Directors’ meeting of Monday and Tuesday, January 25 & 26, 1999.
   

2. Election of New Board Member, Mr. Wayne Rehberger, MCIWorldCom – On a motion duly made and seconded, the Board unanimously adopted the following resolution:
   RESOLVED, That the USAC Board of Directors hereby elects Mr. Wayne Rehberger to the USAC Board of Directors.
   

3. Kevin Hess Representation of Non-Rural Telephone Companies on the High Cost & Low Income Committee – Ms. Parrino reported that this issue was discussed in the High Cost & Low Income Committee meeting. USAC sought clarification from the FCC on this issue and the FCC responded that it would be more appropriate for Mr. Frank Gumper to represent non-rural ILECs and for either Mr. Kevin Hess or Mr. Ed Eichler to represent rural ILECs. Mr. Hess agreed to step down; however, he stated that he is very interested in attending the Committee meetings as he feels the issues before the Committee are very important. He requested that he be allowed to participate; however, he recognizes that since he is not a member of the Committee, he would not be allowed a vote. The other Committee members were amicable to his request. Mr. Jackson also resigned as a member of the Committee as he felt that the Committee would be better served by representation from a large IXC, specifically by Mr. Wayne Rehberger of MCIWorldCom who will be considered for election to the USAC Board of Directors during these quarterly meetings. Mr. Jackson also is interested in continued participation in the Committee as a non-voting member.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolutions:
   

   RESOLVED, That the USAC Board of Directors accepts the recommendation of the USAC High Cost & Low Income Committee to appoint Mr. Edwin Eichler to the High Cost & Low Income Committee to represent rural ILECs; and
   
   RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC High Cost & Low Income Committee to appoint Mr. Frank Gumper to the High Cost and Low Income Committee to represent non-rural ILECs; and
   
   RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC High Cost & Low Income Committee to appoint Mr. Wayne Rehberger to the High Cost and Low Income Committee to represent IXCs.

4. Selection of Board of Directors’ Terms and Selection of Directors to Specific Terms – Ms. Parrino explained that between the last quarterly Board meeting and this one, the Board had directed Mr. Haga to meet with the different represented groups and find an amicable way to select the specific term for each Director. That was accomplished for each group except one through mutual agreement. The "Other Service Providers" group has yet to select terms.
   
   On a motion duly made and seconded, the Board unanimously voted to lay the motion concerning the Selection of Board of Directors’ Terms and Selection of Directors to Specific Terms on the table until after the first break so that the "Other Service Providers" group could meet and decide on who should fill which term.
   

5. Refunds to Contributors Qualifying for De Minimis Status and Billings to Previously Qualified De Minimis Carriers – For information only. No discussion took place.
   

6. Status Report on the Readiness of USAC Operations for the Year 2000 – For information only. No discussion took place.
   

7. Legislative Activity – For information only. No discussion took place.
   

8. Treasurer’s Report – Mr. Haga gave a brief overview of the information contained in the memo. A Board member noted that usually the Treasurer of a corporation is a Board member. Mr. Haga is the Acting Secretary/Treasurer; however, he is not a member of the Board. The Board directed staff to investigate the legal aspects of this issue further and report the findings to the Board.
   

9. Regulatory Report – Mr. Haga distributed a copy of a case before the FCC opposing the universal service contribution requirement. The document is the Memorandum Opinion and Order, CC Docket No. 96-45, of the FCC in which the FCC denies Startec Global Communications Corporation’s request to have the universal service contribution requirements waived.
   

10. Report on RFP – Ms. Parrino reported that USAC staff is preparing a Request for Proposal to solicit a more favorable arrangement with NECA or another vendor for High Cost, Low Income, and Billing, Collection, and Disbursement functions. USAC is behind schedule on this, but it is a top priority now.
    

Rural Health Care (RHC) Committee Report Issues (Items 11-16):

11. Rural Health Care Program Status – Mr. Hess reported on the status of the Rural Health Care Program. Total estimated support for the 1998 funding year is $2.7 million (maximum). Commitment letters are estimated to be ready to send out around May 15, 1999. Outsourcing expenses are being reduced in the following ways: (1) the outreach contracts with the National Telephone Cooperative Association (NTCA), the National Organization of State Offices of Rural Health (NOSORH), and the National Rural Health Resource Center have been suspended pending program modifications; and (2) staff continues to work with PricewaterhouseCoopers (PwC) staff to reduce the monthly expenses associated with that contract.
    

12. Engagement of Deloitte and Touche, LLP to Complete the Pre-Disbursement Audit – For information only. Mr. Hess pointed out the last two sentences of the agenda item memo:
    

    On March 31, 1999, representatives of USAC and DT met with FCC and the parties reached a meeting of the minds on what is expected and what went wrong the first time. DT expects to complete the audit by May 9, 1999.

13. Status of the Rural Health Care Division Financial Audit – Mr. Hess reported that this audit is on schedule and should be completed soon.
    

14. Revised 2^nd and 3^rd Quarter 1999 Programmatic Budgets – Ms. Parrino reported that there have been several adjustments to the budget since the March 5 Evaluation of the Rural Health Care Program Report to the FCC. The Rural Health Care Committee agreed that the second and third quarter budgets filed in the March 5 report should be modified to reflect the resignation of the President, reductions in the cost of outreach and outsourcing contracts, and the reallocation of USAC common expenses and increases in the allocation method for Billing and Collection, consistent with the method that is currently authorized by the FCC. The Committee directed USAC staff to work with NOSORH regarding NOSORH’s outreach contract with the Rural Health Care Program. See the attached revised division budget; changed fields are highlighted.
    
    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 Rural Health Care Committee to reduce the second and third quarter budgets filed in the Report to reflect a reallocation of USAC common expenses other than compensation, and
    
    RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation made by the Rural Health Care Committee to increase the third quarter budget filed in the Report to reflect the allocation method for Billing and Collection that is currently authorized by the Commission.

15. Preliminary 3^rd Quarter 1999 Projections – Mr. Hess reported that the total estimated support for the 1998 funding year is $2.7 million. The Rural Health Care Fund has collected $53 million. The Rural Health Care Committee is recommending that $46 million be refunded. Ms. Parrino stated that this action would be consistent with how excess funds are handled in all the other programs. This has not been done with the Rural Health Care Fund up until now, hence the need for a resolution to that effect. The Rural Health Care Committee approved such a resolution at the April 19, 1999, quarterly meeting.
    

16. Status of the March 5, 1999, "Report to the FCC, Evaluation of the Rural Health Care Program" – Mr. Hess stated that the comments and reply comments received by the FCC in response to its Public Notice for comment were relatively supportive of USAC’s recommendations. USAC is waiting for final response from the FCC.
    

Schools and Libraries (SL) Committee Report Issues: (Items 17-20):

17. Schools & Libraries Program Update – Ms. Ouye reported on the status of the Schools & Libraries Program: The Schools & Libraries Division (SLD) continues to review and process appeals and hopes to finish in early May. This process takes up a tremendous amount of staff time. Over 400 of the 1,500 appeals have been cleared with both positive and negative results for the applicants.
    
    The Year 2 Forecast is projected at $2.4 billion (up from Year 1 Forecast of $2.2 billion). The cap amount is $2.25 billion. There seems to be plenty of continuing interest in the program. There has also been a slight shift in the type of requests; there is a 2 percent increase from Year 1 for telecommunications and Internet connection requests.
    
    A Year 3 Task Force has been formed to find ways to improve the process and better serve the service providers and clients. Agreement has already been reached on several recommendations (form changes, changes to the windows online, etc.). The Task Force may also recommend moving the funding to the cap.
    
    Some of the schools and libraries report that they are having a difficult time finding eligible service providers. The SLD staff is working on a project to address that issue.
    
    The SL Committee reviewed the implications to the Schools & Libraries Program of any decisions that may come out of the 5^th Circuit Court review.
    

18. SLD Forms Processing Statistics: Program Year One and Program Year Two (As of April 7, 1999) – For information only. No discussion took place.
    

19. Status of the Schools and Libraries Division Financial Audit – Ms. Ouye reported that the SLD took action to complete its 1998 financial audit and expects Arthur Andersen to complete the audit by the end of April. A substantial audit of the procedures and processes of the Schools & Libraries Program is still outstanding.
    

20. 3^rd Quarter 1999 Programmatic Budget Schools & Libraries Program – See Item #21.
    

21. Preliminary 3^rd Quarter 1999 Projections – Ms. Ouye reported that the Schools & Libraries Program is within the targeted budget; however, staff anticipates that revisions will need to be made to the 4^th Quarter projections as that is when the SLD plans to step up action on commitment letters which will result in increased programmatic costs.
    

High Cost & Low Income Committee Report Issues (Items 22-26):

22. High Cost Program Status Report – Ms. Gold reported on the status of the High Cost Program. She noted that a "true-up" of the high cost support for the 2^nd Quarter was calculated as required by the FCC. Adjustments will be reflected in the 2^nd Quarter Filing.
    

23. Low Income Program Status Report – For information only. No discussion was held.
    

24. High Cost Support Payments for Incumbent Carriers Involved in Study Area Ownership Exchanges – Ms. Gold reiterated what Mr. Haga had explained in the HCLI Committee meeting: USAC has been involved in a dispute between two local exchange carriers over which carrier is entitled to the high cost support for lines that are sold from one carrier to the other. Based on informal input from the Commission, USAC has determined that loop support should continue to be paid to the company that reported the costs as has historically been done. However, the FCC may change this procedure in the future due to the continuous changes in the market as companies merge and consolidate. The Committee discussed the appropriate method for informing carriers of this issue. The Committee also directed the CEO of USAC to notify the FCC of USAC’s position.
    

25. 3^rd Quarter 1999 Programmatic Budget – Ms. Gold reported that the only changes in the programmatic budget is how USAC is now allocating overhead—based on fund size rather than total costs of the program.
    

26. Preliminary 3^rd Quarter 1999 Projections – Ms. Gold reviewed the preliminary 3^rd Quarter 1999 Projections. She reported that the Committee expressed some concern over the last sentence of the resolution about filing the 3^rd Quarter Projections with the FCC that was approved by the HCLI Committee, which reads: "Staff may make adjustments if additional data becomes available or errors are discovered and to reflect changes required as a result of FCC orders." The Committee wants to be informed of the variance between the projections approved and the projections that are actually filed. Mr. Haga had explained that there are approximately ten days between the Committee meeting and the filing date. The final numbers are based on the information USAC receives between the meeting and the filing date. That is why the USAC Committee and Board meetings are scheduled so close to the filing date, so that staff can present numbers to the Board members that are as true as possible. The Committee directed staff to bring back to the next quarterly Committee meeting a history of the variance between approved numbers and actual numbers filed. The Committee will evaluate the variance and determine whether further review is required.
    

Executive Committee Report Issues (Items 27-38):

27. The Status of the USAC Financial and Agreed Upon Procedures Audits for the Period September 17, 1997, to December 31, 1998 – Ms. Parrino reviewed the status of the financial audit of USAC being performed by Arthur Andersen. As part of that audit, the FCC recommended that Arthur Andersen do a supplemental audit of a number of carriers’ underlying books and records to determine the reliability of the revenue base that is used in setting the contribution factor. Fifteen carriers were chosen. Only $80,000 was originally budgeted for the audit. Now cost is estimated to be $100,000. Approval for the additional costs is required in order for the USAC CEO to go forward with the audit. Once a good audited base is established, Ms. Parrino will recommend to the FCC that an audit of carriers books only be conducted once every two years, or if conducted annually, to use a smaller sample.
    
    On a motion duly made and seconded, the Executive Committee unanimously adopted the following resolutions:
    

    RESOLVED, That the USAC Board of Directors accepts the recommendation made by the Executive Committee to authorize the CEO to pay for additional costs of the financial and agreed upon procedures audit, up to $150,000, if actual costs exceed the estimate because of significant additional work with the FCC staff, and
    
    RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation made by the Executive Committee to authorize the CEO to pay for additional costs of the supplemental audit of carriers books, up to $150,000, if the costs of the supplemental audit exceed $100,000, and
    
    RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation made by the Executive Committee to increase the budget by $120,000 to reflect the current estimate of the audits.

28. Report on Accounts Receivable and Collection Efforts – Mr. Haga reported that the total outstanding dollars has finally dropped below 1 percent. The staff is working towards achieving a goal of .5 percent. The FCC continues to act quickly to send out letters to the delinquent companies.
    

29. Report on FCC Form 457 Late Filing Fee – Ms. Parrino reported that although there is not much data to work with yet and the letters went out later than anticipated, the late filing fee seems to have had an impact on the carriers that were notified of the penalty if their filings were late.
    

30. Seeking Tax Exempt Status for USAC – Ms. Parrino stated that USAC has evaluated the benefits of filing for tax exempt status. USAC would realize a small savings in costs by gaining this status. The Board directed staff to seek input from the FCC and NECA and to report their findings at the next quarterly meeting.
    

31. Distribution of Excess Netting Credits Procedures – Mr. Haga explained that these procedures address the providers’ concern that they are required to wait until the fund year-end to receive a distribution of program funds that exceed their Universal Service Fund contribution obligation for the Rural Health Care Program. The procedures also address the issue for any contributing service provider that has elected to net for the Schools & Libraries Program that wants to receive a direct reimbursement of excess support in advance of year-end. Mr. Haga said that USAC should calculate the estimated reimbursement before the fund year-end by using the first quarter contribution numbers to project the total contributions for the entire year. A Board member questioned why the providers have to have eligible telecommunications carrier (ETC) status for the Rural Health Care Program but not for the Schools & Libraries Program. Staff informed the Board that the FCC is reviewing the ETC issue.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors, having reviewed the Distribution of Excess Netting Credits Procedure at its meeting on April 20, 1999, and based on the recommendation of the Executive Committee, hereby directs the staff be authorized to proceed with the implementation of the stated procedures for processing the distribution of excess netting credits to ETCs under the Rural Health Care Program and contributing Service Providers electing to net for the Schools & Libraries Program.

32. Authorization for Purchase of Computer Equipment – Mr. Haga explained that when USAC merged, a Request for Proposal (RFP) was issued to solicit computer vendors for a system for the merged entity. Internet Intelligence Group of Maryland was chosen for computer products and helpdesk support based on price and the ability to meet the requirements in the RFP. In an effort to avoid obsolescence of computer equipment, upgrades will be necessary on an ongoing basis. The total cost of computers is now estimated to be above $100,000, which requires Board authorization. USAC is requesting approval for a capped amount of $175,000 to cover the entire package and any unexpected additional costs.
    
    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 authorize the Chief Executive Officer to approve all expenses or contracts valued at or below a 1999 annual amount of $175,000 for computer hardware and software.

33. 3^rd Quarter 1999 USAC Common Budget – Ms. Parrino reported that the common budget is changing due to the following factors: (1) increase in audit expenditures; (2) reallocation of an employee from the program to the division level; (3) slight increase in rent for the Madison, Wisconsin office; and (4) increase of 4.5 staff positions since the original budget was approved. Despite these modifications, USAC as a whole is on target with the annual budget.
    
    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 Rural Health Care Committee and supported by the Executive Committee to reduce the second and third quarter budgets filed in the Report to reflect a reallocation of USAC common expenses other than compensation, and
    
    RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation made by the Rural Health Care Committee and supported by the Executive Committee to increase the third quarter budget filed in the Report to reflect the allocation method for Billing and Collection that is currently authorized by the Commission, and
    
    RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation made by the Executive Committee to approve a 3^rd Quarter 1999 USAC common budget of $663,500.

34. 3^rd Quarter 1999 USAC Consolidated Budget – Ms. Parrino reported that the actual costs for 1998 were less than the budgeted amount. Referring to Attachment B, Ms. Parrino provided revisions to reflect current amounts as provided by the Rural Health Care Division. Under the "Revised Annual Budget," "Outside Services" increased from $2,115,600 to $2,250,600, which changes the "Total Direct Costs" to $34,168,000 and the "Total Consolidated" to $37,125,000. Under the "Revised 3^rd Quarter," "Outside Services" increased from $388,000 to $402,000, which changes the "Total Direct Costs" to $7,841,100 and the "Total Consolidated" to $8,592,300. USAC also needs to make an adjustment with the next quarterly filing to true up the difference between budgeted administrative costs collected and actual administrative expenses incurred.
    
    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 Executive Committee to approve a 3^rd Quarter 1999 USAC consolidated budget of $8,592,300, and
    
    RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation by the Executive Committee to direct staff to seek clarification to ensure that the recommended true-up procedure is consistent with the rules.

35. 3^rd Quarter 1999 Revenue Projection and Resolution on April 30, 1999, Filing with the FCC for the 3^rd Quarter of 1999 – Ms. Parrino reviewed the information in the agenda item memo. She again referred to the last sentence of the proposed resolution as was brought up during agenda item #26 in which the HCLI Committee members want to be informed of the variance between the projections approved and the actual projections filed. The Board agreed and directed staff to bring back to the next quarterly Board meeting a history of the variance between approved numbers and actual numbers filed. The Board will then evaluate the variance and determine whether further review is required.
    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 calendar year 1998, adjusted for revenues reported for January through June 1998, at its meeting on April 20, 1999, and based on the recommendation of the USAC Executive Committee authorizes staff to proceed with the required April 30, 1999, filing with the FCC on behalf of USAC.

36. Form 457 Reported Revenue Decreases Greater than 45 Percent – Mr. Haga explained that this issue stems from a review of the six-month revenues (January – June 1998) as reported on FCC Form 457. While it is normal for revenues to fluctuate from filing to filing, some companies are reporting a decrease in total revenues greater than 45 percent from the same period one year prior. The use of the 45 percent range has no significance other than that it seemed to be where there was a good cutoff point. USAC will be sending letters to the delinquent companies requesting documentation to support the revenues reported. In response to a Board member inquiry, Mr. Haga reported that he did not know for sure if any of these companies are one of the carriers picked for the 457 audit, but that he had requested Arthur Andersen to include one or two in that audit.
    

37. Revisions to the Pre-Merger Consolidated Budget – Ms. Parrino reported that revisions were made to the pre-merger consolidated budget to reflect changes in amounts for the PricewaterhouseCoopers contract with the Rural Health Care Division and for USAC common costs that were allocated in error. She stated, however, that these revisions do not change the estimated annual budget as approved by the Board at the January 1999 quarterly meeting. The revisions only changed the merger savings, which decreased from 15 percent to 13 percent.
    

On a motion duly made and seconded, the Board unanimously agreed to recess at 11:40 a.m., subject to the call of the Chair.

At 11:55 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.

38. Selection of Board of Directors’ Terms and Selection of Directors to Specific Terms – Mr. Haga reported that during the recess, the "Other Service Providers" group met and decided on who should fill each term.
    
    On a motion duly made and seconded, the Board unanimously agreed to take from the table the motion relating to the Selection of Board of Directors’ Terms and Selection of Directors to Specific Terms and unanimously approved the following resolutions:
    

    RESOLVED, That the USAC Board of Directors selects the terms of the following representative groups to expire in the year 2000:
    1 ILEC
    1 IXC
    1 School
    1 Rural Health Care Provider
    1 Other Service Provider
    1 Consumer or Public Representative, and
    
    RESOLVED FURTHER, That the USAC Board of Directors selects the terms of following representative groups to expire in the year 2001:
    1 ILEC
    1 School
    1 Librarian
    2 Other Service Providers
    1 Consumer or Public Representative, and
    
    RESOLVED FURTHER, That the USAC Board of Directors selects the terms of the following representative groups to expire in the year 2002:
    1 ILEC
    1 IXC
    1 School
    1 Rural Health Care Provider
    1 Other Service Provider
    1 Consumer or Public Representative, and
    
    RESOLVED FURTHER, That the USAC Board of Directors appoints the following directors to terms that expire in the year 2000:
    Kevin Hess representing an ILEC
    Wayne Rehberger representing an IXC
    Hank Marockie representing Schools
    Jay Sanders representing a Rural Health Care Provider
    David Abramson representing an Other Service Provider
    Allan Thoms representing the Consumer or the Public, and
    
    RESOLVED FURTHER, That the USAC Board of Directors appoints the following directors to terms that expire in the year 2001:
    Frank Gumper representing an ILEC
    Anne Bryant representing Schools
    K. G. Ouye representing Libraries
    Lisa Rosenblum representing an Other Service Provider
    Tom Wheeler representing an Other Service Provider
    Martha Hogerty representing the Consumer or the Public, and

    RESOLVED, That the USAC Board of Directors appoints the following directors to terms that expire in the year 2002:
    Ed Eichler representing an ILEC
    Jimmy Jackson representing an IXC
    Brian Talbott representing Schools
    Isiah Lineberry representing a Rural Health Care Provider
    Heather Gold representing an Other Service Provider
    Tony Butler representing the Consumer or the Public

39. Organizational Structure – See report under Executive Session.
    

40. CEO Contract – See report under Executive Session.
    

41. USAC 1999 Timeline and Key Dates – For information only. No discussion was held.
    

42. Permissibility of Board Members to Attend Conferences and Have Associated Expenses Reimbursed – Ms. Parrino recommended that USAC seek guidance from the FCC. After a lengthy discussion, Board members agreed upon five points:

• Site visits should not be reimbursable.

• General training should not be reimbursable.

• Attendance should be reimbursable if it is directly related to the administration of a particular program.

• If the FCC approves of reimbursing attendance, all such requests should be forwarded to the CEO of USAC for review.

• After CEO review, the request should be routed to appropriate Committee or to the Board for written permission.

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

RESOLVED, That the USAC Board of Directors directs USAC staff to seek guidance from the FCC on whether attendance at conferences by Board members meets the standards as set forth in the FCC Order.

43. 2000-2001 Board of Directors Quarterly Meeting Schedule – Ms. Howard explained that it would be very helpful in guaranteeing meeting sites in Washington, D.C. for the quarterly Board and Committee meeting dates for the year 2000 as well as January 2001 if the schedule were set now. The Board requested that staff bring revised dates for the January 2001 meeting back to the Board at the July meeting; the Board recommended that we avoid dates of the Presidential Inauguration.
    

    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    RESOLVED that the USAC Board of Directors schedule the following dates for the quarterly USAC Board of Directors’ meetings for the year 2000:
    January 24 & 25, 2000
    April 17 & 18, 2000
    July 17 & 18, 2000
    October 23 & 24, 2000
    

44. Contingency Planning for 5^th Circuit Court of Appeals Decision – Ms. Parrino explained that each Committee discussed the implications to its respective program as a result of any decision that may come out of the 5^th Circuit Court. The Board directed staff to contact each member when a decision has been rendered.
    

45. Resolution Honoring Mr. Lee Bailey – Ms. Parrino informed the Board that Mr. Lee Bailey, President of the Rural Health Care Division, is resigning as of May 1, 1999.

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

    RESOLVED, That the USAC Board of Directors thanks Mr. Lee Bailey for his service and dedication to the Rural Health Care Program and wishes him well in all his future endeavors.

On a motion duly made and seconded, the Board voted 14 – 1 to go into Executive Session at 12:20 p.m. Easter Time for purposes of discussing personnel matters. All persons except Board members and USAC’s outside counsel representatives were asked to leave the meeting.

On a motion duly made and seconded, the Board unanimously agreed to go into Open Session at 1:10 p.m. Eastern Time for purposes of reporting actions taken during Executive Session:

46. Organizational Structure – Ms. Rosenblum reported the action taken during Executive Session.
    
    On a motion duly made and seconded, the Board unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors has determined to realign salaries for the new corporate structure over time rather than by realigning all salaries on January 1, 2000. Realignment would occur in either of two ways: (1) by freezing the salaries that are above comparable salaries or above the range for the position level until inflation brings the salary within the appropriate range, or (2) by filling vacancies at the appropriate salary level, and
    
    RESOLVED FURTHER, That the USAC Board of Directors approves the proposed position levels and the recommended salary ranges, and
    
    RESOLVED FURTHER, That the USAC Board of Directors adopts a policy that pay increases will be awarded based solely on merit, and
    
    RESOLVED FURTHER, That the USAC Board of Directors adopts a range of 0-6 percent for increase for 1999, and
    
    RESOLVED FURTHER, That the USAC Board of Directors adopts a policy that allows management to award pay increases as either an increase to the base salary or a lump sum payment.

47. CEO Contract – Ms. Rosenblum reported that no action was taken on this issue. Ms. Kiser gave Board members an update on the contract negotiations and will circulate a draft copy of the contract to the Board members when it is ready.
    

There being no further business to attend to, Ms. Rosenblum adjourned the meeting at 1:12 p.m. Eastern Time.

____________________________________
Robert W. Haga
Acting Secretary/Treasurer

July 26, 1999

Date