October 23, 2001 Minutes

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

Buller, Karen

Lubin, Joel

Davis, Fr. William

Ouye, Kathleen

Eichler, Edwin - by telephone

Parrino, Cheryl

Gumper, Frank

Sanders, Dr. Jay

Hogerty, Martha - by telephone

Thoms, Allan

Jackson, Jimmy

Wheeler, Tom

Lineberry, Isiah - by telephone

Three members joined the meeting in progress:

Bryant, Anne

Rivera, Robert

Hess, Kevin - by telephone

Two members were absent:

Rosenblum, Lisa

Talbott, Dr. Brian

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 - by telephone

USAC

Johnson, Eric

FCC

Miller, Linda

USAC

McDonald, George

USAC

Ricker, John

NECA

Rodda, Jim

USAC

Repress, Deborah

USAC

Simmons, Ann

USAC

a1.

Approval of the Minutes. On a motion duly made and seconded, the Board approved the minutes as distributed of the meeting of Tuesday, July 24, 2001.

Board member Mr. Rivera joined the meeting at this point.

a2.

Reports from the Committee Chairs. Each of the Committee Chairs presented a report on the activities of each of their October 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.

Photo Shoot - USAC Board. The Board members gathered in the room to have their picture taken to be included in the 2001 Annual Report of USAC.

a4.

Appointment of a Nominating Committee and Direction to Committees for the Appointment of Committee Chairs and Committee Vice Chairs. Ms. Parrino reminded the Board that annual elections occur at each January quarterly meeting of the Board pursuant to USAC's By-laws. She explained that, if appointed, the Nominating Committee would be tasked with two responsibilities: (1) Bring to the Board at its January 2002 quarterly meeting nominations for the officer positions of the Board, and (2) bring to the Board at its anticipated December 2001 special Board meeting recommendations for Committee assignments for the anticipated new Board members.

In addition, staff recommended that the Board task each programmatic committee with bringing to the Board at its January 2002 quarterly meeting nominations for committee Chairs and Vice Chairs. Mr. Gumper said that Ms. Parrino was informed by the FCC that the nomination process for new Board members at the FCC is now closed and nominations for five of the six openings have been submitted. (In addition to the four openings mentioned above, there has been a vacant seat on the Board since Ms. Heather Gold resigned in July 2001.) Mr. Gumper further stated that with the recent resignation of Mr. Thoms, the FCC would need to open nominations for his vacant seat.

On a motion duly made and seconded, the Board adopted the following resolutions as amended (in italics):

RESOLVED, That the USAC Board of Directors establishes a Nominating Committee for the purpose of recommending to the USAC Board of Directors at its January 2002 meeting nominations for USAC officer positions and to bring to the USAC Board of Directors at the anticipated December 2001 special Board meeting recommendations for Committee appointments for new Board members; and

RESOLVED FURTHER, That the USAC Board of Directors appoints Mr. Isiah Lineberry as Nominating Committee Chair and Mr. Kevin Hess and Mr. Robert Rivera as members of the Nominating Committee; and

RESOLVED FURTHER, That the USAC Board of Directors directs each committee of the USAC Board of Directors to bring to the Board of Directors at its January 2002 meeting nominations for a Chair and Vice Chair of each respective committee.

a5.

Approval of 1st Quarter 2002 USAC Common and Consolidated Budgets and Information on Estimated 2002 Annual Budget. Ms. Parrino reported that the estimated 2002 annual consolidated budget is 3 percent greater than the 2001 budget. She noted that the increase is driven by recent FCC actions as explained in Attachment F, including increased audit costs and the additional costs associated with implementing the Rural Task Force Order and the MAG Order. She emphasized that USAC continues to bring more work in-house in an effort to improve service and reduce costs, notably in the area of audits and in the maintenance of USAC's web site.

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 1st Quarter 2002 USAC common budget of $1,048,400; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve a 1st Quarter 2002 USAC consolidated budget of $12,454,300.

Board member Ms. Bryant joined the meeting at this point.

a6.

Approval of 1st Quarter 2001 Revenue Projections and Resolution for the December 2, 2001, FCC Filing. Mr. Haga noted that a revised Attachment B had been distributed prior to the meeting, but that it contained incorrect information and will need to be revised again. A copy will be sent to each Board member. Mr. Haga stated that there is no reason at this point to indicate that the contribution base as stated will change beyond the established variance threshold; therefore, the Executive Committee will likely not need to meet to approve the December 2 filing.

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 the December 2, 2001, FCC filing requirements, accepts the recommendation of the USAC Executive Committee to authorize staff to proceed with the required December 2, 2001, filing to the FCC on behalf of USAC. Staff may make adjustments in accordance with the approved $1.25 billion variance threshold.

a7.

Approval of Guidelines for Settlement of Litigation Involving the Universal Service Support Mechanisms and Report on Settlement of Pending Litigation Matters - Confidential & Proprietary - Executive Session. Mr. Barash stated that the discussion of this issue is no longer confidential and proprietary because the Executive Committee approved the settlements of three pending litigation matters at a special meeting on October 2, 2001; however the analysis contained in the issue paper is confidential because it represents legal advice to the board. Because USAC has taken steps to implement the settlements previously approved by the Executive Committee, the terms of the settlements are now a matter of public record and are presented in the issue paper for information purposes only. Mr. Barash further stated that staff and the Executive Committee recommend that the Board approve guidelines for settling future litigation matters. Specifically, staff recommends that the CEO be given authority to settle litigation or other claims against USAC where the amount in controversy is $100,000 or less. This recommendation is in line with the CEO's authority to enter contracts for $100,000 or less without requesting approval from the Board. Mr. Barash pointed out, however, that any matters involving novel issues would still come before the Board regardless of the dollars involved.

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 USAC Executive Committee to authorize the CEO to approve the settlement or compromise of litigation or other claims against USAC where the amount in controversy is $100,000 or less; provided that any matters involving novel issues or matters of significant policy continue to be brought before the Board of Directors regardless of the amount in controversy.

a8.

Miscellaneous.

• Settlement of a Schools and Libraries Support Mechanism Subcontractor Claim - Confidential & Proprietary - Executive Session. The issue paper for this item was distributed at the meeting. In accordance with the guidelines regarding Executive Session approved by the USAC Board of Directors, Mr. Barash recommended that, because this settlement is not final, because the advice of counsel had been sought concerning the settlement, and because of the potential for litigation, details of the proposed settlement should be discussed in Executive Session.

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

  RESOLVED, That the USAC Board of Directors determines that discussion of the staff recommendation concerning resolution of a claim for additional compensation for 1999 by a subcontractor performing services for the Schools and Libraries Support Mechanism shall be conducted in Executive Session.

  See Executive Session for a report on action taken by the Board on this matter.

i1.

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

i2.

Assistant Treasurer's Report. A copy of the revised issue paper and a copy of the revised Attachment A were distributed at the meeting. For information only. No discussion held.

i3.

Regulatory Report. For information only. No discussion held.

i4.

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

i5.

Disposition of Administrator Appeals by USAC Staff. For information only. No discussion held.

i6.

Update on Universal Service Support Mechanisms Enforcement Trends. For information only. No discussion held.

i7.

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

i8.

Status of Transition to PricewaterhouseCoopers and LaSalle Bank for Financial Support Services for USAC. For information only. No discussion held.o discussion held.

i9.

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

i10.

Status of Report on USAC Audits. For information only. No discussion held.

i11.

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

i12.

Miscellaneous. None.

i13.

High Cost and Low Income Support Mechanisms Update. For information only. No discussion held.

i14.

Review of 1st Quarter 2002 High Cost and Low Income Programmatic Budgets and Information on Estimated 2002 Annual Budget. For information only. No discussion held.

i15.

Review of 1st Quarter 2002 High Cost and Low Income Support Mechanisms Projections and Resolution on the November 2, 2001, FCC Filing. A copy of the revised pages 1 and 2 of Attachment A and a copy of Attachment C were distributed at the meeting. For information only. No discussion held.

i16.

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

i17.

Review of 2001 Agreed Upon Procedures Report of Beneficiaries of the Rural Health Care Support Mechanism. For information only. No discussion held.

i18.

Review of 1st Quarter 2002 Rural Health Care Programmatic Budget and Information on Estimated 2002 Annual Budget. For information only. No discussion held.

i19.

Review of 1st Quarter 2002 Rural Health Care Support Mechanism Projections and Resolution on the November 2, 2001, FCC Filing. For information only. No discussion held.

i20.

Schools and Libraries Support Mechanism Update. For information only. No discussion held.

i21.

Review of Schools and Libraries Support Mechanism Funding Year 1 Beneficiary Agreed Upon Procedures Report - Confidential & Proprietary - Executive Session. Mr. Barash explained that staff was prepared to provide a report concerning the details of an ongoing investigation of one of the beneficiaries as a result of this review. Therefore, in accordance with the guidelines regarding Executive Session approved by the USAC Board of Directors, Mr. Barash recommended that, because this investigation is not final and because of the sensitivity of the potential allegations and the potential for enforcement action, details of the investigation be discussed in Executive Session. In addition to this matter, Mr. Barash explained that at its October 18, 2001, quarterly meeting, the USAC Executive Committee discussed whether the agreed upon procedures reports regarding beneficiaries should be considered confidential. The Executive Committee determined that this question should be put before the full Board of Directors. Furthermore, because some Executive Committee members raised the question whether certain information in the beneficiary audit report should be treated as confidential investigative information, the Committee recommended, and Mr. Barash agreed, that discussion of this matter be conducted in Executive Session.

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

RESOLVED, That the USAC Board of Directors determines that discussion of the specific ongoing investigation of a Schools and Libraries Support Mechanism beneficiary and discussion of the confidentiality of the Schools and Libraries Support Mechanism Funding Year 1 Beneficiary Agreed Upon Procedures Report be conducted in Executive Session.

See Executive Session for a report of the discussion and action taken by the Board on this matter.

i22.

Review of 4th Quarter 2001 Schools and Libraries Programmatic Budget. For information only. No discussion held.

i23.

Review of 4th Quarter 2001 Schools and Libraries Projections and Resolution on the August 2001 FCC Filing. For information only. No discussion held.

a8.

Miscellaneous.

• Settlement of a Schools and Libraries Support Mechanism Subcontractor Claim - Confidential & Proprietary - Executive Session. Mr. McDonald reviewed the history and details of the negotiations in this matter and outlined staff's recommendations for settlement. Mr. Barash provided legal advice to the Board concerning this matter.

  Board member Mr. Hess joined the meeting during the discussion.

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

  RESOLVED, That the USAC Board of Directors accepts the recommendation of staff and the USAC Schools & Libraries Committee to resolve the NCS claim for payment for 1999 services rendered on the terms and conditions set forth in this issue paper and directs staff to take the steps required to implement the terms and conditions of the agreement in principle reached with NECA concerning this matter.

i21.

Review of Schools and Libraries Support Mechanism Funding Year 1 Beneficiary Agreed Upon Procedures Report - Confidential & Proprietary - Executive Session. The Board received a report from Mr. Barash on the ongoing investigation of a Schools and Libraries Support Mechanism beneficiary. The Board also discussed whether the Schools and Libraries Support Mechanism Funding Year 1 Beneficiary Agreed Upon Procedures Report should be classified confidential. The Board discussed whether the report disclosed any confidential and proprietary information concerning program participants. Numerous Board members agreed that the information contained in the report was not likely to be viewed as confidential. In addition, once USAC has provided copies of the report to the FCC and the FCC has reviewed the report, it would be subject to disclosure under the Freedom of Information Act, and USAC would be bound by that decision. Because this issue will likely recur, the Board felt it prudent to establish a policy as to the release of similar documents in the future.

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

RESOLVED, That the USAC Board of Directors establishes a policy that reports of audits of USAC, now and in the future, that are subject to disclosure under the Freedom of Information Act as determined by the FCC, be voluntarily released to any person requesting a copy.