April 18, 2000 Minutes

a1.

Approval of the Minutes. On a motion duly made and seconded, the Board approved the minutes, as distributed, of the USAC Board of Directors' meetings of Tuesday, January 25, 2000, and Thursday, March 23, 2000.

a2.

Reports from the Committee Chairs. Each of the Committee Chairs reported the activity from the April quarterly Committee meetings: Ms. Gold - High Cost & Low Income Committee; Ms. Ouye - Schools & Libraries Committee; Dr. Sanders - Rural Health Care Committee; and Mr. Gumper - Executive Committee.

a3.

Election of a USAC Treasurer, Executive Committee Chair, and Executive Committee Vice Chair. Mr. Gumper reported that the Nominating Committee met on April 6, 2000, to recommend a candidate for the position of USAC Treasurer. Ms. Anne Bryant indicated an interest in the position, and the Nominating Committee nominated her. The Committee submitted the nomination to the Executive Committee and the Executive Committee approved the recommendation at its quarterly April 13, 2000, meeting.

Mr. Gumper also noted that at its January 2000 quarterly meeting, the Board of Directors neglected to elect a new Chair and Vice Chair for the Executive Committee, leaving in place the previous Chair and Vice Chair. The Executive Committee met on February 29, 2000, and passed a resolution recommending that the Board elect Mr. Frank Gumper as Chair and Dr. Henry Marockie as Vice Chair of the USAC Executive Committee.

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

RESOLVED, That the USAC Board of Directors accepts the recommendation of the USAC Nominating Committee and Executive Committee to elect Ms. Anne Bryant as Treasurer of USAC; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendations of the USAC Executive Committee to elect Mr. Frank Gumper as Chair and Dr. Henry Marockie as Vice Chair of the USAC Executive Committee.

a4.

Resolution Honoring Mr. Wayne Rehberger. Mr. Gumper explained that this resolution would officially thank Mr. Rehberger, ex-Board member, for his productive, albeit short time, in service to the USAC Board of Directors.

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

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

FURTHER RESOLVED, That the USAC Board of Directors directs staff to send a letter signed by the Board Chair and the CEO stating such sentiments to Mr. Rehberger.

a5.

Approval of Notification to the FCC of USAC Board of Directors' Terms that Expire on December 31, 2000. Mr. Gumper explained that the purpose of this action would be to notify the FCC and the relevant stakeholders now of the six Board member terms that expire on December 31, 2000, in order to allow sufficient time to either find new candidates or re-nominate the current directors.

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

RESOLVED, That the USAC Board of Directors accepts the recommendation of the Executive Committee to notify the FCC of the Board members' terms that expire on December 31, 2000; and

FURTHER RESOLVED, That the USAC Board of Directors accepts the recommendation of the Executive Committee to notify the relevant stakeholder groups of the Board members' terms that expire on December 31, 2000.

The Committee further raised the issue of what to do if replacements for the terminating Board members are not found by December 31, 2000. Because USAC's By-laws provides for no term limits for Board members, and because the Board of Directors has the ability to amend the By-laws, the Board INSTRUCTED the USAC Executive Committee to develop an amendment to the By-laws that would allow Board members to continue to serve on the Board until the election of a replacement by the Board. The Board further DIRECTED the Executive Committee to bring a proposed resolution for this change to the USAC By-laws to the Board of Directors at their July 2000 quarterly meeting.

a6.

Approval of 3^rd Quarter 2000 USAC Common and Consolidated Budgets. Ms. Parrino explained that there are several issues pending that could have an impact on the budget:

• The signing of a contract with a vendor for the programmatic work associated with the Rural Health Care and the Schools & Libraries Programs - Negotiations are still in progress, so concrete numbers are not available at this time.

• A proposal submitted by the members of the Coalition for Affordable Local and Long Distance Services (CALLS), which would reform access charges and universal service - Because the CALLS proposal recommends a July 1, 2000, implementation date, USAC staff believes that USAC should plan for the possibility of implementation of universal service access charge reform. Therefore, staff proposes to include a contingency of $75,000 in the 3^rd quarter 2000 to cover the additional costs associated with such action. Based on current information, USAC staff believes that the CALLS proposal will be managed by the High Cost and Low Income Division and overseen by the High Cost and Low Income Committee.

• Proposed changes to Section 54.307(b), which would allow competitive eligible telecommunications carriers to receive support in the quarter following the date of their latest data submission rather than on an annual basis - These changes were made per an FCC Order issued April 7, 2000; however, staff determined that due to the small number of CLECs that are affected by these changes in 2000 and the time remaining in the year for such submissions, the budgetary impact would be insignificant in 2000. Staff did note, however, that estimating payments may be more difficult due to the data being submitted quarterly rather than annually, and that additional amounts will need to be budgeted beginning in 2001 due to the change.

• High Cost Forward-Looking Model - USAC staff has communicated the Board's concerns about the re-coding of the model input data and implementation of the high cost forward-looking model to the FCC informally; a formal letter will be sent when and if USAC is ordered to do the re-coding. A contingency for this possible action was included and approved in the 2000 budget at the January quarterly meeting.
  

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

RESOLVED, That the USAC Board of Directors accepts the recommendation of the Executive Committee to include a contingency of $75,000 in the 3^rd Quarter 2000 consolidated budget for implementation of an access reform proposal; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the Executive Committee to approve a 3^rd Quarter 2000 USAC consolidated budget of $9,930,800; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the Executive Committee to approve a 3^rd Quarter 2000 USAC common budget of $673,000.

a7.

Approval of 3^rd Quarter 2000 Revenue Projections and Resolutions on the May 2000 FCC Filing. Mr. Haga reported that the numbers as listed for 3^rd quarter 2000 in Attachment A were estimates and new numbers are still being received. The 3^rd Quarter 2000 filing will reflect the most current numbers available at the time of final preparation of the filing. Staff has included an estimate for those carriers that have not yet filed forms and believes that the total amount will be close to the amounts provided as well as within the approved variance level.

On a motion duly made and seconded, the Board 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 July through December 1999, authorizes staff to proceed with the required May 2, 2000, filing to the FCC on behalf of USAC. Staff may make adjustments in accordance with approved variance thresholds.

a8.

Approval of April 2001 - January 2002 Board of Directors Quarterly Meeting Schedule. On a motion duly made and seconded, the Board adopted the following resolution:

RESOLVED, That the USAC CEO recommends the following board meeting dates for April 2001 - January 2002:

• April 23 & 24, 2001
• July 23 & 24, 2001
• October 22 & 23, 2001
• January 23 & 24, 2002
  

a9.

Update and Possible Action on USAC's Financial Reporting Issue. With the consent of the Board, the Chair deferred this item until the end of the Agenda. See Executive Session.

a10.

Update and Approval of Ongoing Contract Negotiations. With the consent of the Board, the Chair deferred this item until the end of the Agenda. See Executive Session.

a11.

Miscellaneous. None.

i7.

Status of the USAC Financial and Agreed Upon Procedures Audits for 1999. Ms. Bryant reported that USAC has been given a clean opinion by its auditors on the USAC 1999 financial and agreed upon procedures audit. USAC is coming in within budget on the audit. This is the second year that USAC has gone through this process and staff is finding that the due date of March 1 each year for the filing of the audit plan with the FCC is very difficult to make. USAC closes its books in early February. USAC's parent company, the National Exchange Carriers' Association, Inc. (NECA) does not close its books until mid-February. This short time period makes it difficult for the auditors to review materials and submit a draft of the audit to the FCC's auditors by March 1.

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

RESOLVED, That the USAC Board of Directors directs staff to seek a waiver from or change to Section 54.717(f), which provides that "within sixty (60) calendar days after the end of the audit period, but prior to discussing the audit findings with the Administrator, the independent auditor shall be instructed by the Administrator to submit a draft of the audit report to the Common Carrier Bureau Audit Staff," to provide additional time for USAC to file the draft of the audit report.

i1.

Report of Legislative and Media Activity. For information only. No discussion held.

i2.

Assistant Treasurer's Report. Mr. Haga distributed Attachment B1, a summary of quarterly fund activity for 1999 and 2000.

i3.

Regulatory Report. For information only. No discussion held.

i4.

Report on Accounts Receivable and Collection Efforts. For information only. No discussion held.

i5.

Status of Form 457 Audit. For information only. No discussion held.

i6.

Bankruptcy Report. For information only. No discussion held.

i7.

Status of the USAC Financial and Agree Upon Procedures Audits for 1999. Action required - see the last item under "Action Items" for further information.

i8.

Status of the Consolidation of Data Collection. Mr. Haga provided an update to the issue paper. USAC staff continues to discuss with NECA the on-going data collection work. USAC has a particular interest in the revenue data collection feature as the accurate, timely, and complete collection of revenue data is necessary to make sure the $4.5 billion collected by the fund are fairly apportioned. NECA has an interest in the revenue data collection due to their experience and administration of the TRS fund and their NBANC subsidiary. NECA proposed to extend the current contract with USAC through 2002 for only the revenue data collection work. Under the proposal, USAC would assume the responsibility for the functions, but NECA would perform the work. This will allow the current appointments for TRS, NBANC, and Local Number Portability to maintain cost certainty prior to their renewal periods beginning in 2003. Staff is proposing to extend NECA's contract through the end of 2002. In the meantime, staff will issue a Request for Proposal as soon as feasible for the remainder of the billing, collection, and distribution functions. This will resolve this matter in a reasonable manner. The FCC has directed the administrators affected by the revenue data collection to resolve this issue and file the resolution with the FCC by May 15.

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

RESOLVED, That the USAC Board of Directors authorizes staff to extend the current agreement with NECA to perform the revenue data collection functions through 2002, and to continue current direction to put the remainder of the billing, collection, and disbursement functions out for bid.

i9.

Status of USAC Clarification Requests at the FCC. For information only. No discussion held.

i10.

Report on USAC Program Enforcement Issues. Mr. Barash noted that staff continues to work on refining the draft USAC Enforcement Compliance Plan and hopes to submit a final document to the FCC in the near future. Staff welcomes Board input. USAC has a responsibility for Program integrity and for reporting noncompliance of the Program rules to the FCC and continues to review additional steps it may take to fulfill those responsibilities.

i11.

Comparison of the 1999 USAC Budget to Preliminary Actuals. Ms. Parrino reported that on a consolidated basis, USAC was $1.5 million below budget (0.3 percent) for 1999. For the Rural Health Care Program, USAC came within $2,000 of the predicted Program budget as outlined in the Rural Health Care Report to the FCC dated March 5, 2000.

i12.

Report on AT&T's Proposed Revenue Base Change. For information only. No discussion held.

i13.

USAC Timeline and Key Dates. For information only. No discussion held.

i14.

Miscellaneous.

• FCC Press Release Dated April 17, 2000, Regarding Expansion of the Low Income Program's Lifeline Component to Native American Reservations. Mr. Gumper referenced copies of an FCC press release distributed to the Board at the beginning of the meeting that explains the FCC's plan to provide basic local phone service for as low as $1 a month for members of federally-recognized Native American tribes through the Lifeline Program, which is funded through the Universal Service Fund.

• USAC Annual Report to the FCC. Mr. Blackwell distributed the final printed version of USAC's 1999 Annual Report to the FCC. Board members may notify him of persons to whom they wish a copy of the report sent.

i15.

Rural Health Care Program Status Report. A correction was made to the last word in the issue paper: change "iRHC01" to "iBOD16." No other discussion was held.

i16.

Status of the Implementation of Program Changes. For information only. No discussion held.

i17.

Review of 3^rd Quarter 2000 Rural Health Care Programmatic Budget. For information only. No discussion held.

i18.

Review of 3^rd Quarter 2000 Rural Health Care Projections and Resolution on the May 2000 FCC Filing. For information only. No discussion held.

i19.

Miscellaneous. None.

i20.

Schools and Libraries Program Update. For information only. No discussion held.

i21.

Review of 3^rd Quarter 2000 Schools and Libraries Programmatic Budget. For information only. No discussion held.

i22.

Review of 3^rd Quarter 2000 Schools and Libraries Projections and Resolution on the May 2000 FCC Filing. For information only. No discussion held.

i23.

Miscellaneous. None.

i24.

High Cost Program Status Report. For information only. No discussion held.

i25.

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

i26.

Report of Clarifications on High Cost Model Implementation Issues. For information only. No discussion held.

i27.

Review of 3^rd Quarter 2000 High Cost and Low Income Programmatic Budget. For information only. No discussion held.

i28.

Review of 3^rd Quarter 2000 High Cost and Low Income Projections and Resolution on the May 2000 FCC Filing. For information only. No discussion held.

i29.

Disaggregation of Federal High Cost Support in Washington Sate and Other State Activity. For information only. No discussion held.

i30.

Miscellaneous. None.

a9.

Update and Possible Action on USAC's Financial Reporting Issue. Mr. Haga reported that the FCC has not yet determined whether the Universal Service Fund should be categorized as "federal funds" for accounting and financial reporting purposes. USAC staff continues to work with FCC staff per prior Board direction to address potential legal and operational ramifications of USAC transferring the funds if ordered to do so by the FCC.

a10.

Update and Approval of Ongoing Contract Negotiations. Mr. Barash informed the Board that the negotiations between USAC and the vendors being considered to provide programmatic support services for the Schools and Libraries and the Rural Health Care Programs continue on a day-to-day basis and excellent progress is being made; however, a contract is not yet ready for approval by the Board as had been previously hoped. Outside counsel has been engaged to help with the effort. Staff hopes to have a contract recommendation to the Board during the first week of May.

The Board determined that members of the Board should review the recommendation in a working session before the Rural Health Care and the Schools & Libraries Committees and the Board of Directors address the recommendation, and directed staff to schedule such a meeting prior to when the Board and Committees meet to approve a contract