January 27, 2004 Minutes

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

Two members joined the meeting in progress:

Buller, Karen

Hughes, Alison

Other Officers of the Corporation present:

Carroll, Kristy

USAC

Cheng, Anita

FCC

Divak, Helen

Telcordia

Howard, Cathy

USAC

Krzos, Joe

USAC

Miller, Linda

USAC

Mitchell, Jeff

USAC

Parry, John

NECA Services, Inc.

Sandy, Colin

NECA

Trew, Anne Marie

USAC

a1.

Annual Election of Officers and Committee Chairs and Vice Chairs.  Ms. Parrino reported to the Board the nominations for officers and Committee Chairs and Vice Chairs as recommended by the Nominating and Audit Committees 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. Wayne Jortner as Treasurer; Mr. Robert Haga as Assistant Secretary; and Mr. Mark Carmichael as Assistant Treasurer for the term of one year that shall begin at the conclusion of the January 2004 quarterly Board meeting and that shall conclude at the close of the January 2005 quarterly Board meeting; and,

               RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendations of the USAC Audit Committee to elect Mr. Ed Eichler as Chair and Ms. Anne Campbell as Vice Chair of the Audit Committee for the term of one year that shall begin at the conclusion of the January 2004 quarterly Board meeting and that shall conclude at the close of the January 2005 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. Kevin Hess 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 2004 quarterly Board meeting and that shall conclude at the close of the January 2005 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. Jimmy Jackson 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 2004 quarterly Board meeting and that shall conclude at the close of the January 2005 quarterly Board meeting; and,

               RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendations of the USAC Schools & Libraries Committee to elect Dr. Brian Talbott as Chair and Dr. Anne Bryant as Vice Chair of the USAC Schools & Libraries Committee for the term of one year that shall begin at the conclusion of the January 2004 quarterly Board meeting and that shall conclude at the close of the January 2005 quarterly Board meeting.

a3. 

Reports from the Committee Chairs.  Each of the Chairs of the USAC programmatic Committees reported on issues discussed and action taken by each Committee since the October 2003 quarterly meetings:  Dr. Talbott reported on the Schools & Libraries Committee meetings of December 11, 2003, and January 26, 2004; Dr. Sanders reported on the Rural Health Care Committee meeting of January 26, 2004; Mr. Hess reported on the High Cost & Low Income Committee meetings of December 3, 2003, and January 26, 2004; Mr. Eichler reported on the Audit Committee meetings of December 11, 2003, and January 22 and 26, 2004; and Mr. Gumper reported on the Executive Committee meeting of January 22, 2004.

The minutes of each Committee meeting provide a full accounting of the discussions and actions taken by the Committees. 

Approval of April 2005 - January 2006 Board of Directors Quarterly Meeting Schedule.  Ms. Howard introduced this item.  She indicated that the Board has the option of choosing from a Monday/Tuesday meeting schedule or a Tuesday/Wednesday meeting schedule for the quarterly meetings beginning in April 2005.  The Board determined to choose the Tuesday/Wednesday schedule and subsequently amended the resolution to change the previously established schedule beginning with the July 2004 quarterly meetings to a Tuesday/Wednesday schedule as well. 

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

               RESOLVED, That the USAC Board of Directors adopts the following Board of Directors and Committee quarterly meetings schedule for April 2005 - January 2006:

               RESOLVED FURTHER, That the USAC Board of Directors hereby revises the previously established schedule beginning with the July 2004 quarterly meetings to the following schedule:

a6.  

Approval of 2004 Annual and 2^nd Quarter USAC Consolidated and Common Budgets.  Mr. Carmichael introduced this item.  Dr. Bryant noted that the annual budget shows a major increase mainly due to audits and process changes in the Schools and Libraries Support Mechanism, but that the audits and changes are necessary in order to maintain the integrity of the program.  She encouraged the Board to continue to look at ways to simplify the mechanisms.  Mr. Gumper reminded the Board that the budget does not include contingencies for potential program changes that USAC may be directed to implement by the FCC because it is too difficult to assess the work that such changes might entail and that such contingencies added in previous years were imprecise estimates at best.  On behalf of the Board, he requested that USAC's General Counsel continue to keep the Board and appropriate Committees timely apprised of any potential major program changes and requested USAC staff to continue to assess the possible budgetary impact of each. 

In response to a question regarding the proposed Director of Strategic Planning position contained in the budget, Ms. Parrino stated that USAC staff and she believe that USAC would greatly benefit from one position within the company implementing, tracking, coordinating, and managing USAC's many projects and contracts rather than dividing this task among many positions.  She further stated that she believes that there are enough USAC projects and contracts to justify this full-time position.  Mr. Gumper suggested waiting to fill the proposed Director of Strategic Planning position until after the new CEO has an opportunity to review USAC's organizational structure.  The Board agreed with Mr. Gumper's recommendation, and suggested that the new CEO might want to consider either an Ad Hoc Committee of the Board or hiring an outside consultant to help with the review of the organizational structure. 

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 2^nd Quarter 2004 USAC common budget of $3,750,300; and

               RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve a 2004 annual USAC common budget of $14,659,300; and

               RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve a 2^nd Quarter 2004 USAC consolidated budget of $17,797,800; and

               RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve a 2004 annual USAC consolidated budget of $70,575,600.

a8.   

Approval of Course of Action Regarding Performance of FCC Form 499 Data Collection Operations - Confidential & Proprietary - Executive Session Recommended.  In accordance with the approved criteria and procedure for conducting USAC Board and Committee business in Executive Session, Mr. Barash recommended that discussion of this item be conducted in Executive Session because discussion of this matter, which relates to USAC's procurement strategy and contract negotiations, and public disclosure of this matter would compromise USAC's negotiation strategy to the detriment of the corporation and the Universal Service Fund.  Moreover, certain matters to be discussed implicate the attorney-client privilege and, therefore, should not be discussed in open 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 proposed course of action regarding the performance ofFCCForm 499 Data Collection function shall be conducted in Executive Session.

See Executive Session for a report of this discussion and action taken.

a9.   

Annual Review and Approval of Revised Audit Committee Charter and Audit Committee Meeting Planner.  Mr. Scott introduced this item.  There was no further discussion. 

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

               RESOLVED, That the USAC Board of Directors, having reviewed the proposed changes to the Audit Committee Charter and the Audit Committee Meeting Planner as presented by the USAC Internal Audit Division, accepts the recommendation of the USAC Audit Committee and approves the proposed changes.

USAC CEO Transitional Plan.

_01.     Temporary Grant of Executive Authority to Frank Gumper, Chairman of the USAC Board of Directors.  Mr. Gumper explained that there would be a one-month gap between when the current USAC CEO leaves and the new CEO begins on March 1, 2004.  Mr. Gumper and other Board members considered the appointment of an interim CEO, but determined that it would be less complicated to provide the Chairman of the Board, on a limited and temporary basis, the necessary approval authorities of the CEO to maintain USAC operations during this one-month gap.  Mr. Gumper indicated that he reviewed this option with his employer, Verizon, and that they are agreeable to this arrangement.  Mr. Gumper said he would not be paid for providing services to USAC but would be requesting approval from the Board for reimbursement of travel expenses to travel to USAC once a week during the month of February to attend to USAC business (see next agenda item #aBOD12_02).  He said that the resolutions before the Board were prepared by outside counsel and reviewed by USAC's General Counsel.  He reported that the USAC Executive Committee approved this plan of transition at its quarterly meeting on January 22, 2004.  Mr. Gumper noted that, as he is the Chairman of the Board, he would be extremely sensitive to any issues that may raise any apparent or actual conflict of interest and would discuss any such matters with the General Counsel as well as bring them to the Board if necessary. 

On a motion duly made and seconded, the Board adopted the following resolutions; Mr. Gumper abstained:

      WHEREAS, the USAC Board of Directors has granted certain executive authority to the Chief Executive Officer in resolutions dated January 25 & 26, 1999; July 24, 2001; and October 23, 2001, among others; and

      WHEREAS, the office of Chief Executive Officer will be vacant upon the resignation of Cheryl L. Parrino on January 31, 2004, until the appointment of Lisa M. Zaina becomes effective on March 1, 2004, pursuant to her approval by the Chairman of the FCC; and

      WHEREAS, this Board seeks to temporarily vest certain executive authority in Frank Gumper, Chairman of the Board, during the interim period that the office of Chief Executive Officer will be vacant;

      NOW, THEREFORE, IT IS RESOLVED, that the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to resolve that during the period beginning February 1, 2004, and ending February 29, 2004, the Chairman of the Board, in addition to any other responsibilities associated with that office:

Shall be primarily responsible for the implementation of the direction of the Board of Directors and shall have authority over the general management and direction of the business and operations of the Corporation, subject to the authority of the Board of Directors;

May sign and execute in the name of the Corporation contracts, share certificates, deeds, mortgages, bonds, and other instruments, except only in cases where the signing and the execution thereof shall be expressly reserved to the Board of Directors or delegated by the Board of Directors or the By-laws of the Corporation to some other officer or agent of the Corporation or shall be required by law otherwise to be signed or executed;

May, pursuant to authority previously granted to the Chief Executive Officer by the Board of Directors, designate those officers, employees, or agents of the Corporation who may be authorized from time to time to sign or otherwise lawfully endorse any and all checks, drafts, orders, and electronic transfers against any bank accounts established by the Corporation;

May approve expenses on behalf of the Corporation for all contracts and employee expenses in amounts prescribed by the revised schedule of authorizations currently approved by the Board of Directors with respect to contracts and employee expenses;

Shall manage and supervise all the personnel of the Corporation and otherwise shall discharge and perform all duties usually and customarily incident to the office of chief executive officer and president of a not-for-profit corporation and such other duties as from time to time may be assigned by the Board of Directors; and

Shall recognize and be sensitive to actual, potential, and/or perceived conflict of interest issues, not participate in any decisions or seek or obtain any information that could represent an actual, potential, and/or perceived conflict of interest, pursuant to the Statement of Ethical Conduct previously adopted by this Board of Directors, and shall consult with counsel and/or the Board of Directors regarding actual, potential, and/or perceived conflict of interest issues should circumstances warrant; and, it is

FURTHER RESOLVED, That the responsibilities set forth in the resolution immediately above shall be deemed part of the responsibilities of the office of the Chairman of the Board during the term described in such resolution.

_02.     Approval for Reimbursing a Board Member to Attend an Event Other Than a USAC Board or Committee Meeting or Event.  Mr. Gumper introduced this item noting that in this item he is requesting approval for reimbursement of travel to Washington, DC once a week during the month of February to attend to USAC business as outlined in agenda item #aBOD12_01 above.

On a motion duly made and seconded, the Board adopted the following resolution; Mr. Gumper abstained:

      RESOLVED, That in accordance with the Procedures for Requesting Approval and Reimbursing a Member of the Board of Directors for Expenses Incurred in Conducting USAC Business other than Board of Directors Meetings approved by the USAC Board of Directors, the USAC Board of Directors authorizes the Corporation to reimburse the USAC Chairman of the Board, Mr. Frank Gumper, for travel expenses incurred by him to visit the USAC Washington, DC office once a week during the month of February 2004 in order to attend to USAC business.

Miscellaneous.

_01.     Solicit Ideas for April 2004 Board Agenda.  Mr. Gumper reminded Board members that they may offer suggestions for agenda items at each quarterly meeting or by contacting him between quarterly meetings.

i1.    

Report on Legislative and Media Activity - Confidential & Proprietary - Executive Session Recommended.  Mr. Gumper informed the Board that USAC staff would provide a report on the proposed GAO audit and the ongoing oversight investigation of the Schools and Libraries Support Mechanism.  He stated that in accordance with the approved criteria and procedure for conducting USAC Board and Committee business in Executive Session, he recommended that discussion of these items be conducted in Executive Session because discussion of specific audit plans, internal controls, and /or confidential company data would constitute a "[d]iscussion of internal rules and procedures concerning the administration of the universal service support mechanisms where discussion of the matter in open session would result in disclosure of confidential techniques and procedures that would compromise program integrity."  No other matters were discussed in open session on this issue.

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 the legislative affairs and audits of the Schools and Libraries Support Mechanism shall be conducted in Executive Session.

See Executive Session for a report of this discussion.

Miscellaneous.

_01.     Brief Description of the Nature of the Universal Service Fund.  Mr. Gumper informed the Board that USAC has requested that the FCC endorse a description of the nature of Universal Service Fund (USF or Fund) and the FCC has now approved such a description.  He confirmed that, based on binding legal precedent, even though the USF contribution requirement is not a tax, the FCC views the USF as "federal funds."  This determination is part of the basis for the requirement that USAC follow generally accepted accounting principles for federal agencies (Federal GAAP) in administering the Fund. 

i9.   

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

i13.  

Review of Annual 2004 and 2^nd Quarter 2004 Programmatic Budgets.  For information only.  No discussion held.

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

Hess, Kevin

Cornell, Diane

Two members joined the meeting in progress:

Eichler, Ed

Sanders, Dr. Jay

Other Officers of the Corporation present:

Carroll, Kristy

USAC

Cheng, Anita

FCC

Howard, Cathy

USAC

Krzos, Joe

USAC

Miller, Linda

USAC

Mitchell, Jeff

USAC

Trew, Anne Marie

USAC

a8.   

Approval of Course of Action Regarding Performance of FCC Form 499 Data Collection Operations - Confidential & Proprietary.  Mr. Carmichael introduced and briefly discussed this item. 

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 and approves the course of action proposed by USAC management regarding the performance of FCC Form 499 Data Collection Agent functions beginning on January 1, 2005.

Approval of Revisions to USAC Collection Procedures and Reporting Requirements Concerning Bankrupt Universal Service Fund Contributors - Confidential & Proprietary.  Mr. Barash introduced this item and explained that the proposed resolutions clarify both USAC's treatment of claims in bankruptcy and USAC's treatment of sales of assets in assessing Universal Service Fund contribution requirements. 

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

               RESOLVED, That the USAC Board of Directors accepts the recommendation made by the USAC Executive Committeeto adopt the following bankruptcy collection procedures, which are consistent with FCC regulations and current USAC administrative practice in that claims for unpaid contribution obligations, while calculated quarterly, arise monthly on the 15^th of the month: 

USAC Proof of Claim Calculation:  Where the date on which a contributor's monthly contribution obligation arises precedes the date of such debtor-contributor's bankruptcy filing, USAC will assert a pre-petition claim for contribution obligations outstanding for the period from that date up through the date of the contributor's bankruptcy filing and, similarly, assert an administrative expense priority claim for any unpaid contribution obligations arising thereafter; and

Bankruptcy Account/Receivable (A/R) Transfer:  USAC shall issue a provisional credit to a debtor‑contributor's account, equal to the amount of contribution obligations outstanding as of such contributor's bankruptcy filing, in order to remove the pre‑petition balance from the debtor-contributor's invoice and indicate thereafter solely the post-petition contribution obligations to be paid during the contributor's bankruptcy case.  This shall be referred to as the "Bankruptcy A/R Transfer."  The amount of the pre-petition balance will remain on USAC's general ledger bankruptcy A/R; and

Late Payment Fees:  USAC shall not assess Late Payment Fees against a debtor-contributor's pre‑petition account balance after the bankruptcy petition filing date during the pendency of that contributor's bankruptcy case.  USAC will include in its proof of pre-petition claim all unpaid Late Payment Fees assessed up through and including the date of such contributor's bankruptcy filing.  With respect to a debtor-contributor's unpaid post‑petition contribution obligations, USAC will assess against that debtor‑contributor all applicable Late Payment Fees and will pursue collection of all such unpaid amounts as part of USAC's post-petition administrative priority expense claim.  USAC will not adjust Late Payment Fees to reflect any revision by a debtor-contributor of the amount of a debtor-contributor's underlying USF contribution obligation; and

                  FURTHER RESOLVED,That the USAC Board of Directors accepts the recommendation made by the USAC Executive Committee to adopt the USAC document titled Reporting Procedures for Contributors Involved in the Sale or Other Disposition of Assets Subject to Universal Service Assessment, and to direct USAC Staff to implement the procedures set forth in such document; and

               FURTHER RESOLVED,That the USAC Board of Directors accepts the recommendation made by the Executive Committee to maintain the current direction of strictly enforcing revenue reporting deadlines, including the prohibition against accepting from a contributor or debtor-contributor any post-deadline downward revisions to an FCC Form 499‑A or Form 499‑Q Universal Service Worksheets, unless otherwise directed by the FCC or a court of competent jurisdiction; and

                FURTHER RESOLVED,That the USAC Board of Directors accepts the recommendation made by the Executive Committee, that consistent with previous direction, USAC staff shall process, timely-filed revisions to an FCC Form 499‑A or Form 499-Q in the first month of the quarter immediately following such filing and, for non-debtor contributors, applying the resulting adjustments/credits in equal installments across the three months of the current quarter and, for debtor-contributors, applying the resulting adjustments/credits to the original invoiced period to which the revised revenue relates and allocating such adjustments/credits proportionally across the pre-petition and post-petition periods.

Miscellaneous.

_02.     Review of Consulting Contract with Ms. Cheryl L. Parrino.  Mr. Gumper informed the Board that as discussed with the Search and Executive Committees, a consulting contract between USAC and Ms. Parrino for her consulting services during the transition to the new CEO would be signed soon.

a14.  

Miscellaneous.

_02.     Adoption of Resolution to Honor Ms. Cheryl Parrino.  Mr. Gumper reminded the Board that this would be Ms. Parrino's last meeting with the USAC Board and that the Board likes to honor departing Board members, preferably before they leave.  Together the Board expressed their appreciation to Ms. Parrino and gave her a standing ovation. 

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

      RESOLVED, That the USAC Board of Directors hereby expresses its sincere and profound appreciation to Ms. Cheryl Parrino for her service on the Board of Directors for the Universal Service Administrative Company as well as the CEO since June 1998 and wishes her the best in her future endeavors.