April 24, 2001 Minutes

Fifteen of the nineteen members (there is one vacancy) were present, representing a quorum:

Bryant, Anne

Ouye, Kathleen

Davis, Fr. William

Parrino, Cheryl

Eichler, Edwin

Rivera, Robert

Gold, Heather

Rosenblum, Lisa - by telephone

Gumper, Frank

Sanders, Dr. Jay

Hess, Kevin

Talbott, Dr. Brian

Hogerty, Martha

Thoms, Allan

Jackson, Jimmy

One member joined the meeting in progress:

Lubin, Joel

Two members were absent:

Lineberry, Isiah

Officers of the Corporation present:

Barash, D. Scott - Assistant Secretary

Haga, Robert - Assistant Treasurer

Others present for the meeting:

Name

Company

Blackwell, Mel

USAC

Faunce, Donna

USAC

Flannery, Irene

USAC

Howard, Cathy

USAC

Miller, Linda

USAC

Moore, Kate

USAC

Ricker, John

NECA

Sandy, Colin

NECA

Schroder, Katherine

FCC

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' meeting of Tuesday, January 30, 2001.

a2.

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

a3.

Approval of Notification to the FCC of USAC Board of Directors' Terms that Expire on December 31, 2001, and Approval of Annual Notification Thereafter. Ms. Parrino stated that although it is eight months before some of the Board members' terms expire, experience shows that allowing for more lead-time allows the FCC and the constituency groups sufficient time to find replacements or to re-nominate a current Board member. For future years, USAC staff is recommending that they be authorized to notify the FCC annually, early in the year and without further Board approval, of Board terms expiring at the end of that year.

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

RESOLVED, That the USAC Board of Directors authorizes staff to notify the FCC of the Board members' terms that expire on December 31, 2001; and

RESOLVED FURTHER, That the USAC Board of Directors authorizes staff, going forward, to automatically notify the FCC annually of Board members' terms that expire on December 31 of that year.

a4.

Authorization of the Executive Committee to Perform Audit Oversight Functions. Ms. Parrino explained the need to define the Board-level audit oversight of USAC's audits. A general corporate practice is for a board of directors to have a separate audit committee that oversees all of the company's audit functions. USAC staff recommends that the audit oversight responsibility be given to the Executive Committee rather than forming a new committee. The membership of the Executive Committee provides balanced representation of all aspects of USAC's operations, and the Executive Committee has served many of these functions as well as serving the functions of the finance committee. The proposed resolution would formally grant authority over audits to the Executive Committee. Mr. Gumper noted that the Executive Committee approved the recommendations at its April 19, 2001, quarterly meeting.

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

RESOLVED, That the USAC Board of Directors adopts the recommendation of the USAC Executive Committee and hereby authorizes the Executive Committee to oversee all corporate audit functions; and

RESOLVED FURTHER, That the USAC Board of Directors adopts the recommendation of the USAC Executive Committee to direct staff to develop an Internal Audit Charter defining the role, responsibilities, and reporting structure for the Director of Internal Audits and internal audit staff.

a5.

Approval of 3rd Quarter 2001 USAC Common and Consolidated Budgets. Ms. Bryant said that the annual budget is the same as presented at the January 2001 Board meeting with one exception-an increase to implement the change in the contribution methodology as a result of the recent FCC order. Staff estimates the changes will increase administrative expenses by $255,000 for the 3rd Quarter 2001. Ms. Faunce reviewed the increases and decreases to the 3rd Quarter 2001 budget.

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 Executive Committee to approve a 3rd Quarter 2001 USAC common budget of $904,600; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve a 3rd Quarter 2001 USAC consolidated budget of $7,959,000.

a6.

Approval of Revised 2nd Quarter 2001 Revenue Projections, Revisions to the Variance Threshold Procedures, Report on the Deadline for Revising Revenue Filings, and Report on Maintaining the Late Filing Fee. Mr. Haga distributed revised Attachments A, B, and C. He also informed the Board of the three missing numbers on page 6 of the issue paper. Mr. Haga reviewed the FCC order released in March 2001 in which the FCC directed that the interval between the accrual of revenues and the USF contribution assessment based on those revenues be shortened by six months. Accordingly, USAC will need to file the revenue projection associated with the April 2, 2001, revenue filing at the beginning of May and those revenues will be used to restate carrier contributions in the second quarter. Further, USAC will be required to submit a supplemental revenue data filing to the FCC at the beginning of the third month of each quarter. Because data will be reported in quarterly amounts instead of semi-annual amounts, staff is recommending reducing the variance threshold from $2.5 billion to $1.25 billion for future filings. Staff further recommends Board approval to file the revenue base associated with the April 2, 2001, revenue data collection, revision of the variance threshold for future filings, and explicit delegation to the Executive Committee to approve the 3rd Quarter 2001 revenue base to be filed with the FCC on June 1, 2001.

On a motion duly made and seconded, the Board adopted the following resolutions with one amendment (in italics):

RESOLVED, That the Board of Directors accepts the recommendation of the USAC Executive Committee to delegate to the Executive Committee the authority to review the new revenue base filing that is due at the FCC on June 1, 2001; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to thereafter authorize staff to file Contribution Base amounts with variances not exceeding $1.25 billion for the international and interstate revenue base of the Board-approved contribution base amounts, and variances at or below the above level are deemed approved by the Board. For variances above $1.25 billion for the international and interstate revenue base the Board delegates the authority to review and approve the filings to the FCC to the Executive Committee; and

RESOLVED FURTHER, That the USAC Board of Directors, having reviewed a summary of the current status of telecommunications service provider revenues for July through December 2000 as provided in revised Attachment A, accepts the recommendation of the Executive Committee to authorize staff to proceed with the required May 2, 2001, filing to the FCC on behalf of USAC. Staff may make adjustments in accordance with approved variance thresholds.

The Board DIRECTED staff to provide the Board with a schedule of changes in both interstate and international revenues along with total revenues for the periods that USAC has collected this information.

a7.

Procedure for Handling Appeals Concerning Contribution and Data Collection and Proposed Resolution of Three Such Appeals. Mr. Barash reviewed the recommended procedure for handling appeals concerning contributions and data collection. He noted that the Board's programmatic committees have authorized USAC staff to resolve appeals within the programs in the absence of unusual or novel circumstances. The proposed procedure mirrors the processes currently in place for the programmatic committees. These are the first appeals received by USAC seeking review of contribution and collection matters, which creates the need for USAC procedures to handle them. Mr. Thoms questioned why the Board is not resolving all appeals directly, because the FCC rules governing USAC's operations contemplate parties appealing to the USAC Board of Directors, not to the staff.

Mr. Thoms expressed concern about public perception should staff handle appeals based on authority delegated by the Board. Several other Board members observed that the separate programs receive too many appeals for the Board to resolve directly, but that the Board is ultimately responsible for all activities specified in the FCC rules that are delegated to staff. Ms. Ouye noted that the Schools & Libraries Program alone had over 2,000 appeals in the year 2000.

The Board DIRECTED USAC staff to discuss this issue with FCC staff. Mr. Barash then discussed the specifics of the three pending appeals concerning contribution and collection matters, and recommended a course of action concerning those appeals to the Board.

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

RESOLVED, That the USAC Board of Directors directs USAC staff to implement the proposed procedures for adjudication of appeals to USAC for matters relating to billing, collection, or disbursement disputes, and

RESOLVED FURTHER, That the USAC Board of Directors directs USAC staff to dispose of three pending appeals by contributors in accordance with the recommendation in this issue paper.

Mr. Jackson voted no. Dr. Sanders abstained.

a8.

Approval of Contract Negotiations for USAC's Billing, Collection, Disbursement, and Financial Services - Confidential & Proprietary. On a motion duly made and seconded, the Board adopted the following resolution:

RESOLVED, That the USAC Board of Directors determines that discussion of matters related to USAC's RFP for billing, collection, disbursement, and financial services shall be conducted in Executive Session.

See Executive Session.

a9.

Miscellaneous. None.

i1.

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

i2.

Assistant Treasurer's Report. Mr. Haga reported that the 1st Quarter 2001 financial results are presented to the Board and that the numbers speak for themselves. Ms. Parrino pointed out that the major findings in Attachment E, a draft of Arthur Andersen's review of USAC's operations, have been highlighted for ease of scanning the document.

i3.

Regulatory Report. For information only. No discussion held.

i4.

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

i5.

Bankruptcy Report. For information only. No discussion held.

i6.

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

i7.

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

i8.

Summary of FCC's Revenue Base Change Order. For information only. No discussion held.

i9.

Report on Adding User Search Capabilities to Support Mechanism Data. Mr. Haga reported that the many requests from the public for data concerning the universal service support mechanisms have taken a considerable amount of USAC staff time; therefore, staff decided to automate the database so that anyone could easily access the information directly. This reduces the workload for staff and provides stakeholders with timely information. Currently, USAC staff is working on entering as much information on the USAC web site as possible in a form that users can then cut and paste to other computer software programs if desired. Eventually staff plans to provide users with the ability to customize the information they are seeking and to search the USAC databases to find that information on the USAC web site.

i10.

Report on Pending Litigation. For information only. No discussion held.

i11.

Report on USAC's FCC Financial Reporting Issues - Confidential & Proprietary. On a motion duly made and seconded, the Board adopted the following resolution:

RESOLVED, That the USAC Board of Directors determines that discussion of matters related to USAC's FCC financial reporting shall be conducted in Executive Session.

See Executive Session.

i12.

Miscellaneous. None.

i13.

Rural Health Care Support Mechanism Status Report. For information only. No discussion held.

i14.

Review of 3rd Quarter 2001 Rural Health Care Programmatic Budget. For information only. No discussion held.

i15.

Review of 3rd Quarter 2001 Rural Health Care Projections and Resolution on the May 2001 FCC Filing. For information only. No discussion held.

i16.

Schools and Libraries Program Status Report. For information only. No discussion held.

i17.

Summary of Management's Response to the Consultant's Report on the Schools and Libraries Division's Invoice Payment Process. For information only. No discussion held.

i18.

Review of 3rd Quarter 2001 Schools and Libraries Programmatic Budget. For information only. No discussion held.

i19.

Review of 3rd Quarter 2001 Schools and Libraries Projections and Resolution on the May 2001 FCC Filing. For information only. No discussion held.

i20.

High Cost and Low Income Programs Status Report. For information only. No discussion held.

i21.

Report on the Implementation of New Initiatives for the High Cost and Low Income Programs. For information only. No discussion held.

i22.

Review of 3rd Quarter 2001 High Cost and Low Income Programmatic Budgets. For information only. No discussion held.

i23.

Review of 3rd Quarter 2001 High Cost and Low Income Projections and Resolution on the May 2001 FCC Filing. For information only. No discussion held.

Fourteen of the nineteen members were present (there is one vacancy), representing a quorum.:

Bryant, Anne

Jackson, Jimmy

Davis, Fr. William

Lubin, Joel

Eichler, Edwin

Ouye, Kathleen

Gold, Heather

Parrino, Cheryl

Gumper, Frank

Rivera, Robert

Hess, Kevin

Sanders, Dr. Jay

Hogerty, Martha

Talbott, Dr. Brian

Two members joined the Executive Session in progress:

Rosenblum, Lisa - by telephone

Two members were absent:

Lineberry, Isiah

Officers of the Corporation present:

Barash, D. Scott - Assistant Secretary

Haga, Robert - Assistant Treasurer

Others present for the meeting:

Name

Company

Blackwell, Mel

USAC

Faunce, Donna

USAC

Flannery, Irene

USAC

Howard, Cathy

USAC

Moore, Kate

USAC

Schroder, Katherine

FCC

a8.

Approval of Contract Negotiations for USAC's Billing, Collection, Disbursement, and Financial Services - Confidential & Proprietary. Mr. Gumper explained that the Board has requested that the Executive Committee review the proposed course of action concerning the billing, collection, disbursement, and financial services procurement before bringing the matter before the Board. At its April 29, 2001, quarterly meeting, the Executive Committee reviewed and approved the course of action as recommended by USAC staff. The Board discussed details of the ongoing contract negotiations.

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

RESOLVED, That the USAC Board of Directors accepts the recommendation of the Executive Committee and approves the course of action proposed by USAC management regarding the proposals received in response to the Request for Proposals for Billing, Collection, Disbursement, and Financial Services, including, but not limited to, engaging in further discussions with more than one proposed vendor.

The Board DIRECTED staff going forward to provide the Board with a list of all significant contracts, including the dollar amount and expiration date of each.

i11.

Report on USAC's FCC Financial Reporting Issues - Confidential & Proprietary. The Board held a discussion on USAC's FCC financial reporting issues.