July 20, 2004 Minutes

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

Askin, Jonathan - by telephone

Gumper, Frank – Chair

Baker, Dave

Hess, Kevin

Bryant, Anne

Hughes, Alison - by telephone

Buller, Karen

Jortner, Wayne – Treasurer

Campbell, Anne

Lubin, Joel – Vice Chair– by telephone

Cornell, Diane

Sanders, Dr. Jay

Duff, Bridget

Sanford, Jo Anne

Eichler, Ed

Zaina, Lisa – CEO

Three members were absent:

Christensen, Doug

Talbott, Brian

Jackson, Jimmy – Secretary

Other Officers of the Corporation present:

Carroll, Kristy

USAC

Delmar, Teleshia

USAC

Faunce, Donna

USAC

Johnson, Daniel

USAC

Kraft, Mick

USAC

Lamoureux, Renee

USAC

Noran, John

USAC

Stephens, Mark

FCC

Trew, Anne Marie

USAC

a1.

Approval of the Minutes. On a motion duly made and seconded, the Board approved the meeting minutes as distributed of Tuesday, April 20, 2004.

a2. 

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 April 2004 quarterly meetings: Mr. Eichler reported on the Audit Committee meeting of July 19, 2004; Mr. Gumper reported on the Executive Committee meetings of June 18, 2004 and July 15, 2004; Mr. Hess reported on the High Cost & Low Income Committee meeting of July 19, 2004; Dr. Sanders reported on the Rural Health Care Committee meeting of July 19, 2004; and Ms. Bryant reported on the Schools & Libraries Committee meetings of July 1 and 19, 2004.

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

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 to approve a 4th Quarter 2004 USAC common budget of $3,794,200; and

               RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the Executive Committee recommends to approve a 4th Quarter 2004 USAC consolidated budget of $19,408,000.

a4.  

Approval of 4th Quarter 2004 Revenue Projections and Resolutions for the September 1, 2004 FCC Filing. Mr. Carmichael introduced this item and discussed the current drawdown policy as well as HCLI prior period adjustments and its affect on the contribution base. The Board members expressed interest in more detailed information on projections and requested that Mr. Carmichael schedule a presentation in the afternoon following the October board meeting.

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

               RESOLVED, That the USAC Board of Directors, having reviewed at its meeting on July 20, 2004 a summary of the current status of the September 1, 2004 FCC filing requirements, accepts the recommendation of the USAC Executive Committee to authorize staff to proceed with the required September 1, 2004 filing to the FCC on behalf of USAC using a preliminary estimate of $18,827.379 million for the Universal Service Fund contribution base. Staff may make adjustments in accordance with the approved $1.25 billion variance threshold.

Approval of Revised Investment Guidelines. Mr. Carmichael introduced the proposed changes to the USAC Funds: Guidelines for Investments being proposed to improve the oversight and implementation of the USAC’s investment policies, as approved by the USAC Investment Committee on May 11, 2004.

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 Investment and Executive Committees and adopts the revised USAC Funds: Guidelines for Investments as presented by USAC management.

a6.   

Approval of Late Payment Fee Basis. Mr. Carmichael responded to inquiries regarding the motivation behind the change in the rate, advising that the FCC Office of the General Counsel staff directed a review and substantiation of the basis for the late payment fee rate. USAC and the FCC agreed that it would be appropriate to evaluate the rate every two years.

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

               RESOLVED, That the USAC Board of Directors approves the course of action proposed by USAC staff to set the Late Payment Fee annual rate at 8% beginning October 2004 and that this rate remain in effect for two years.

a7.   

Preliminary Review of USAC 2003 Independent Audit of USAC Financial Statements and Agreed Upon Procedures Review. Mr. Scott presented the 2003 financial and operational audits performed by USAC’s independent auditor, Deloitte Touche.

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 Audit Committee and directs that the USAC 2003 financial audit report as submitted by Deloitte and Touche LLP be deemed final; and

               RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Audit Committee and directs that the USAC 2003 agreed upon procedures review report as submitted by Deloitte and Touche LLP be deemed final; and

               RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Audit Committee and authorizes the USAC CEO to submit a management response to Deloitte Touche LLP, with a copy to the FCC, accepting the USAC 2003 financial audit report and agreed upon procedures review report and committing to take the actions necessary to address the issues that were identified in the agreed upon procedures review report; and

               RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Audit Committee and authorizes Deloitte and Touche LLP to file the final USAC 2003 financial audit report and agreed upon procedures review report with the FCC.

Miscellaneous.

i1.    

Assistant Treasurer’s Report. For information only. No discussion held.

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

               RESOLVED, That the USAC Board determines that consideration of the report from counsel on certain corporate matters shall be conducted in Executive Session..

See Executive Session for a report of this discussion.

Status of Discussions with the FCC Concerning Investment Alternatives. Confidential & Proprietary – Executive Session Recommended. In accordance with the approved criteria and procedures for conducting USAC Board and Committee business in Executive Session, Mr. Barash recommended that discussion of pre-decisional matters before a governmental agency or instrumentality to which USAC is privy, where discussion of such matters in open session would undermine the agency’s deliberative process or would result in the disclosure of an agency’s conclusions or rationales before the agency had formally decided the matter.

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

               RESOLVED, That the USAC Board determines that discussion of this matter shall be conducted in Executive Session.

See Executive Session for a report of this discussion.

• Expiring Board Terms. Mr. Gumper advised the Board of the status of the current member terms. The Board directed Ms. Zaina to forward a letter to the FCC regarding the expiring terms for further action.

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 this matter shall be conducted in Executive Session.

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

i7.   

Report on Corporate Issues. Confidential & Proprietary – Mr. Barash reviewed a report on certain corporate governance issues. The Board agreed to revisit this issue at the January 2005 Board meeting.

Status of Discussions with the FCC Concerning Investment Alternatives. Confidential & Proprietary – Mr. Carmichael provided a summary of recent discussion with the FCC regarding various investment alternatives for USF.

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

               RESOLVED, That the USAC Board of Directors directs the Treasurer and Assistant Treasurer of the corporation to lengthen current maturities of the Universal Service Fund under investment in a prudent manner in order to increase interest income while maintaining appropriate liquidity of the investment portfolio.

Miscellaneous.

• The Board reviewed and discussed a letter recently received from the Hispanic Caucus regarding funding the status of funding in Puerto Rico.

Status Report of Ongoing USAC Audits – Confidential & Proprietary. Mr. Scott reviewed the findings of a recent High Cost audit. Ms. Zaina discussed plans for future outreach efforts. After discussion, the Board directed the staff to present a detailed outreach plan at the October Board meeting and authorized USAC staff to retain the services of a professional PR firm to assist in developing such a plan. The Board also discussed recent discussions with the FCC and IG regarding increased USF oversight.

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

               RESOLVED, That the USAC Board of Directors authorize staff to work with the FCC and USAC’s current outside auditor to incorporate the existing plan for one hundred audits into a three-way agreement with KPMG and the FCC; and

               RESOLVED FURTHER, That the USAC Board of Directors authorizes USAC staff to work with the FCC to prepare and release an RFP for a three-way agreement to conduct overall USF oversight.