January 24, 2002 Minutes

Fifteen of the nineteen members were present, representing a quorum:

Bryant, Anne

Hess, Kevin

Buller, Karen

Jackson, Jimmy

Cornell, Diane

Lineberry, Isiah - by telephone

Davis, Fr. Bill

Lubin, Joel

Eichler, Ed

Parrino, Cheryl

Gonzalez, Dan

Swanson-Hull, Camie

Gregg, Billy Jack

Talbott, Brian

Gumper, Frank

Two members joined the meeting in progress:

Coltharp, James

Rivera, Robert

Two members were absent:

Campbell, Anne

Sanders, Dr. Jay

Officers of the Corporation present:

Haga, Robert - Assistant Treasurer

Barash, D. Scott - Assistant Secretary

Others present for the meeting:

Name

Company

Aylward, Jillian

USAC

Blackwell, Mel

USAC

Faunce, Donna

USAC

Flannery, Irene

USAC

Howard, Cathy

USAC

Khan, Sameer

USAC

Krzos, Joe

USAC

Law Hsu, Diane

FCC

McDonald, George

USAC

McLaren, Kirk

USAC

Miller, Linda

USAC

Rodda, Jim

USAC

Scott, Wayne

USAC

a1.

Annual Election of Officers and Committee Chairs and Vice Chairs. Mr. Lineberry, Chair of the Nominating Committee, reported to the Board the nominations for officers and Committee Chairs and Vice Chairs as resolved by the Nominating Committee and the respective programmatic Committees.

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

RESOLVED, That the USAC Board of Directors accepts the recommendations of the USAC Nominating Committee to elect Mr. Frank Gumper as Chair of the Board of Directors; Mr. Joel Lubin as Vice Chair; Mr. Jimmy Jackson as Secretary; Mr. Ed Eichler as Treasurer; Mr. D. Scott Barash as Assistant Secretary; and Mr. Robert Haga as Assistant Treasurer for the term of one year that shall begin at the conclusion of the January 2002 quarterly Board meeting and that shall conclude at the close of the January 2003 quarterly Board meeting; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendations of the USAC High Cost & Low Income Committee to elect Mr. Ed Eichler as Chair and Mr. Joel Lubin as Vice Chair of the USAC High Cost & Low Income Committee for the term of one year that shall begin at the conclusion of the January 2002 quarterly Board meeting and that shall conclude at the close of the January 2003 quarterly Board meeting; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendations of the USAC Rural Health Care Committee to elect Dr. Jay Sanders as Chair and Mr. Isiah Lineberry as Vice Chair of the USAC Rural Health Care Committee for the term of one year that shall begin at the conclusion of the January 2002 quarterly Board meeting and that shall conclude at the close of the January 2003 quarterly Board meeting; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendations of the USAC Schools & Libraries Committee to elect Mr. Brian Talbott as Chair and Mr. Kevin Hess as Vice Chair of the USAC Schools & Libraries Committee for the term of one year that shall begin at the conclusion of the January 2002 quarterly Board meeting and that shall conclude at the close of the January 2003 quarterly Board meeting; and

RESOLVED FURTHER, That the USAC Board of Directors establishes a policy that in the event that the chairmanship of a programmatic committee becomes vacant during the term of the incumbent chair, the Vice Chair of the Committee shall be designated as the Chair of the Committee and shall assume all responsibilities of the Chair, including serving on the Executive Committee, until the Board elects a new Chair for the Committee.

a2.

Approval of the Minutes. On a motion duly made and seconded, the Board approved the minutes as distributed of the meetings of Tuesday, October 23, 2001, and Monday, December 17, 2001.

a3.

Reports from the Committee Chairs. Each of the following Board members presented a report on the activities of each of their January quarterly Committee meetings, respectively: Mr. Hess (Vice Chair) - Schools & Libraries Committee; Mr. Eichler (Vice Chair) - High Cost & Low Income Committee; Mr. Lineberry (Vice Chair) and Mr. Blackwell (USAC staff) - Rural Health Care Committee; and Mr. Gumper - Executive Committee. Mr. Gumper noted that Mr. Eichler would report during Executive Session on the selection of a vendor to perform support services concerning the new Interstate Common Line Support Mechanism. See Executive Session for a report of this discussion.

a4.

Photo Shoot - USAC Board of Directors. The Board members gathered in the room to have their picture taken. It will be included in USAC's annual report.

a5.

Adoption of Resolutions Honoring Departing Board Members. Ms. Parrino reviewed the resolutions and reported that plaques along with a copy of the resolution will be sent to each departing member commemorating their service on 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 to Ms. Martha Hogerty for her service on the Board of Directors of the Universal Service Administrative Company, and wishes her the best in her retirement and all future endeavors; and

RESOLVED FURTHER, That the USAC Board of Directors hereby expresses its profound appreciation to Ms. Kathleen "KG" Ouye for her service on the Boards of Directors of the Universal Service Administrative Company and the Schools and Libraries Corporation, respectively, and wishes her the best in her future endeavors; and

RESOLVED FURTHER, That the USAC Board of Directors hereby expresses its profound appreciation to Ms. Lisa Rosenblum for her service on the Board of Directors of the Universal Service Administrative Company, and wishes her the best in her future endeavors; and

RESOLVED FURTHER, That the USAC Board of Directors hereby expresses its profound appreciation to Mr. Allan Thoms for his service on the USAC Board of Directors of the Universal Service Administrative Company, and wishes him the best in his future endeavors; and

RESOLVED FURTHER, That the USAC Board of Directors hereby expresses its profound appreciation to Mr. Thomas Wheeler for his service on the USAC Board of Directors of the Universal Service Administrative Company, and wishes him the best in his future endeavors.

a6.

Approval of April 2003 - January 2004 Board of Directors Quarterly Meeting Schedule. Ms. Howard reviewed the proposed schedule of quarterly meetings.

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

RESOLVED, That the USAC Board of Directors adopts the following Board of Directors and Committee quarterly meetings schedule for April 2003 - January 2004:

Executive Committee	Programmatic Committees & Board of Directors
April 17, 2003	Wednesday & Thursday - April 23 & 24, 2003
July 17, 2003	July 21 & 22, 2003
October 16, 2003	October 20 & 21, 2003
January 15, 2004	Wednesday & Thursday - January 21 & 22, 2004

a7.

Delegation of Authority to the Executive Committee for Review and Final Approval of the USAC Annual Report to the FCC and Congress. Mr. Blackwell distributed draft copies of the 2001 Annual Report. He requested comments be provided to him by February 1. He recommended that, as in previous years, the Board delegate final approval of the report to the Executive Committee.

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

RESOLVED, That the USAC Board of Directors delegates the final review and approval of the USAC Annual Report to the Executive Committee and directs staff to provide each Board member with a copy of the final Annual Report.

a8.

Approval of Annual 2002 and 2^nd Quarter 2002 USAC Common and Consolidated Budgets. Ms. Parrino distributed a revised page 3 of the issue paper as well as a copy of the proposed USAC organization chart. Ms. Parrino reviewed the 2^nd Quarter 2002 budget and estimated 2002 annual budget. She noted that the annual 2002 budget estimate is higher than last year's budget due mainly to the anticipated implementation of additional components of the High Cost Support Mechanism (specifically the new Interstate Common Line Support Mechanism), a continued increase in audit activity, and the proposed addition of several new USAC staff members to be hired this year. The Board requested that going forward staff include in Attachment G both the total budget and expenditures to provide a better overall comparison.

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 an annual 2002 USAC common budget of $5,608,100; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve a 2^nd Quarter 2002 USAC common budget of $1,520,100; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve an annual 2002 USAC consolidated budget of $46,021,500; and

RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve a 2^nd Quarter 2002 USAC consolidated budget of $11,245,700.

a9.

Approval of 2^nd Quarter 2002 Revenue Projections and Resolutions for the March 2, 2002, FCC Filing. Mr. Haga reported that final numbers are not yet available. He noted that the 2^nd Quarter 2002 High Cost Support Mechanism filing number on Attachment B should be revised to match the projected support approved by the High Cost and Low Income Committee. The support projections will be updated again for the January filing and if the contribution base changes beyond the established variance threshold, the Executive Committee will need to meet to approve the March 2, 2002, FCC 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 March 2, 2002, FCC filing requirements, accepts the recommendation of the USAC Executive Committee to authorize staff to proceed with the required March 2, 2002, filing to the FCC on behalf of USAC. Staff may make adjustments in accordance with the approved $1.25 billion variance threshold.

a10.

Miscellaneous. None.

i1.

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

i2.

Assistant Treasurer's Report. Mr. Haga reviewed the report contained in the issue paper and explained the contribution and distribution methodology used by USAC.

Board member Anne Bryant left the meeting at this point.

i3.

Regulatory Report. For information only. No discussion held.

i4.

Report on Accounts Receivable, Bankruptcy, and Collection Efforts. Mr. Gumper called the Board's attention to the paragraph in the issue paper explaining the error in the figures reported for June and September of 2001. Accounts receivable over 30 days in relationship to the total billed for June and September 2001 has actually decreased.

i5.

Status of Transition to PricewaterhouseCoopers and LaSalle Bank for Financial Support Services for USAC. Mr. Haga informed the Committee that most aspects of the transition have gone smoothly. The banking functions are being performed well by LaSalle. However, USAC staff has identified some significant issues that will likely require modifications to the contract between USAC and PricewaterhouseCoopers. The budget includes a contingency to address those changes. USAC and PricewaterhouseCoopers staff are reviewing operations in order to determine what changes need to be made in order to complete the transition and satisfactorily maintain operations.

i6.

Disposition of Administrator Appeals by USAC Staff. Mr. Barash explained the appeals process and reviewed the outstanding appeals as listed in the issue paper.

i7.

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

i8.

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

i9.

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

i10.

USAC Internal Audit Plan and Approach and Status Report on USAC Audits; Status Report on the FCC's Fiscal Year 2001 Financial Audit of the Universal Service Fund. Mr. Gumper explained that staff has information concerning two audits that staff recommends should be discussed in Executive Session in accordance with guidelines previously approved by the Board. The Schools and Libraries Support Mechanism matter involves a pending investigation that should remain confidential. Discussion concerning the FCC financial audit relates to pre-decisional matters that, in addition, may implicate the attorney-client privilege. On a motion duly made and seconded, the Board adopted the following resolutions:

RESOLVED, That the USAC Board of Directors determines that discussion of the specific ongoing investigation of a Schools and Libraries Support Mechanism beneficiary be conducted in Executive Session; and

RESOLVED FURTHER, That the USAC Executive Committee determines that a detailed report on the status of the FCC's fiscal year 2001 financial audit of the Universal Service Fund be conducted in Executive Session.

See Executive Session for a report of these discussions.

Mr. Scott reviewed the Internal Audit Development Plan as outlined in the issue paper.

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.

Report on the Implementation of the Interstate Common Line Support Mechanism. For information only. No discussion held.

i15.

Review of the Annual 2002 and 2^nd Quarter 2002 High Cost and Low Income Programmatic Budgets. For information only. No discussion held.

i16.

Review of 2^nd Quarter 2002 High Cost and Low Income Projections and Resolution on the January 31, 2002, FCC Filing. For information only. No discussion held.

i17.

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

i18.

Review of Annual 2002 and 2^nd Quarter 2002 Rural Health Care Programmatic Budget. For information only. No discussion held.

i19.

Review of 2^nd Quarter 2002 Rural Health Care Projections and Resolution on the January 31, 2002, FCC Filing. For information only. No discussion held.

i20.

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

i21.

Review of 2002 Annual and 2^nd Quarter 2002 Schools and Libraries Programmatic Budget. For information only. No discussion held.

i22.

Review of 2^nd Quarter 2002 Schools and Libraries Projections and Resolution on the January 31, 2002, FCC Filing. For information only. No discussion held.

a3.

Reports from the Committee Chairs. Mr. Eichler reported that the High Cost & Low Income Committee has authorized USAC staff to negotiate an agreement with a vendor to perform support services in connection with the new Interstate Common Line Support Mechanism.

i10.

USAC Internal Audit Plan and Approach and Status Report on USAC Audits; Status Report on the FCC's Fiscal Year 2001 Financial Audit of the Universal Service Fund. Ms. Parrino briefed the Committee on the status of the FCC's fiscal year 2001 financial audit of the Universal Service Fund. Mr. Barash briefed the Committee on the status of an ongoing investigation of a Schools and Libraries Support Mechanism beneficiary.

The Board DIRECTED staff to develop a question and answer sheet for use in answering potential media inquiries concerning the audit of Schools and Libraries Support Mechanism beneficiaries.