April 19, 2005 Minutes (Draft)

Fourteen of the nineteen members were present, representing a quorum.:

Other Board members and Officers of the Corporation present:

Others present for the meeting:

a1.

Approval of Minutes. On a motion duly made and seconded, the Committee approved the minutes of January 25, 2005.

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

Approval of the 3rd Quarter 2005 USAC Common and Consolidated Budgets. Ms. Anne Marie Trew, Acting Finance Division Head introduced the 3Q2005 common and consolidated USAC budget, along with the revised 2005 annual common and consolidated budgets for the Board’s approval.

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 approve a 3rd Quarter 2005 USAC common budget of $8,226,000; and

                RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve a revised 2005 annual USAC common budget of $29,702,300; and

                RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve a 3rd Quarter 2005 USAC consolidated budget of $34,901,500; and

                RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee to approve a revised 2005 annual USAC consolidated budget of $128,842,900.

Approval of 3rd Quarter 2005 Revenue Projections for the June 1, 2005, FCC Filing. Ms. Trew reviewed the preliminary estimate with the Board.

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 April 19, 2005, a summary of the current status of the June 1, 2005 FCC filing requirements, accepts the recommendation of the USAC Executive Committee to authorize staff to proceed with the required June 1, 2005 filing to the FCC on behalf of USAC using a preliminary estimate of $18,371.514 million for the Universal Service Fund contribution base. Staff may make adjustments in accordance with the approved $1.25 billion variance threshold.

Approval of Services Contract for Finance Department Printing Services. Confidential and 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 this matter be discussed in Executive Session because discussion of this matter, which relates to USAC’s procurement strategy and contract negotiations, and public disclosure of the matters discussed in this paper would compromise USAC’s negotiation strategy to the detriment of the corporation.

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

                RESOLVED, That the USAC Board of Directors determines that discussion of proposed Finance Division print services contracts be conducted in Executive Session.

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

Approval of Final Pricing of Partial Exercise of Option to Modify Term of Rural Health Care and Schools and Libraries Program Support Services Agreement. Confidential and 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 this matter be discussed in Executive Session because discussion of this matter, which relates to USAC’s procurement strategy and contract negotiations, and public disclosure of the matters discussed in this paper would compromise USAC’s negotiation strategy to the detriment of the corporation.

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

                RESOLVED, That the USAC Board of Directors determines that discussion of final approval of partial exercise of option to modify term of Rural Health Care and Schools and Libraries program support services agreement shall be conducted in Executive Session.

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

Consideration of Approval of Website Design Vendor. Confidential and 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 this matter be discussed in Executive Session because discussion of this matter, which relates to USAC’s procurement strategy and contract negotiations, and public disclosure of the matters discussed in this paper would compromise USAC’s negotiation strategy to the detriment of the corporation.

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

                RESOLVED, That the USAC Board of Directors determines that consideration of the proposed course of action on selecting a web design vendor shall be conducted in Executive Session.

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

a8. Consideration of Universal Service Fund Investment Alternatives. Confidential and 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 this matter in open session could reveal market-sensitive information and because this matter relates to USAC’s contract negotiations with investment firms.

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

                RESOLVED, that the USAC Board of Directors determines that consideration of Universal Service Fund Investment Alternatives shall be conducted in Executive Session.

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

Selection of Audit Firms to Conduct Audits of Universal Service Fund Support Mechanism Beneficiaries and Authorization to Engage Firms for the Audit. Confidential and 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 this matter in open session could reveal market-sensitive information and because this matter relates to USAC’s contract negotiations with investment firms.

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 proposals to select an audit firm to conduct audits of the Universal Service Fund Support Mechanism beneficiaries for USAC shall be conducted in Executive Session.

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

Miscellaneous.

Solicit Ideas for July Board Agenda. Mr. Talbott reminded members that they may offer suggestions for agenda items at each quarterly meeting or by contacting him or Ms. Zaina between quarterly meetings.

i2.

Report on Allocation of Common Costs. Ms. Trew provided the board with an explanation of the cost allocation methodology that is currently used to allocate USAC joint and common costs to the four universal service support mechanisms, including the history of changes and any proposed recommendations for changes to more fairly distribute the costs. The Board DIRECTED staff to research alternatives for allocating common costs for discussion at July’s Board meeting.

At 10:12 a.m., on a motion duly made and seconded, the Committee voted to move into Executive Session for purposes of discussing the confidential and proprietary items as noted above.

Approval of Services Contract for Finance Department Printing Services. Ms. Trew introduced this item to the Committee.

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

               RESOLVED, That the USAC Board of Directors authorizes USAC management to enter into formal contract arrangements with S&J Printing and Day & Night Printing, for a term of three (3) years each, to provide finance-related printing services.

Approval of Final Pricing of Partial Exercise of Option to Modify Term of Rural Health Care and Schools and Libraries Program Support Services Agreement. Mr. Barash reviewed the final terms and conditions of the partial exercise of the priced option provision of the program support agreement with NECA Services, Inc.

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

               RESOLVED, that the USAC Board of Directors hereby approves the final pricing as presented by USAC management of the partial exercise of USAC’s option to modify the term of the Rural Health Care and Schools and Libraries program support services agreement with NECA Services, Inc. to conclude on December 31, 2006.

Consideration of Approval of Website Design Vendor. Mr. Haga introduced this item to the Board providing a summary of the services contemplated under the proposed contract for USAC website overhaul.

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

               RESOLVED, That the USAC Board of Directors approves the selection of NavigationArts to provide website design and related services.

Consideration of Universal Service Fund Investment Alternatives. Ms. Trew introduced this item to the Committee and provided a summary of the difference between pre-ADA investments versus what is currently being proposed.

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

               RESOLVED, That the USAC Board of Directors accepts the recommendation of the USAC Executive Committee and approves adoption of USF investment strategy Scenario 2 – Obligated Money Market with One to Three Year Max Unobligated Securities; and,

               FURTHER RESOLVED, That the USAC Executive Committee accepts the recommendation of the USAC Investment Committee and recommends that the USAC Board of Directors authorize USAC management to issue the appropriate letters of direction to ABN/LaSalle, JP Morgan/ Bank One, and Wachovia/Evergreen Investments to implement and manage USF investment strategy Scenario 2 – Obligated Money Market with One to Three Year Max Unobligated Securities per the investment manager instructions herein, contingent upon any appropriate FCC approval.

Selection of Audit Firms to Conduct Audits of Universal Service Fund Support Mechanism Beneficiaries and Authorization to Engage Firms for the Audit. Mr. Scott introduced this item to the Board and provided a review of the procurement process and criteria used in the selection of the recommended audit firm.

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

               RESOLVED, That the USAC Board of Directors authorizes USAC to select the independent accounting firm of KPMG LLP to conduct audits of beneficiaries of the Schools and Libraries and High Cost Universal Service Support Mechanisms with an option to renew for up to four additional years, pending agreement on final terms and conditions of the engagement.

               RESOLVED FURTHER, That the USAC Board of Directors authorizes USAC to select the independent accounting firm of TCBA to conduct audits of beneficiaries of the Low Income and Rural Healthcare Universal Service Support Mechanisms with an option to renew for up to four additional years, pending agreement on final terms and conditions of the engagement.

Miscellaneous.

a. Schools and Libraries Process Review. Ms. Zaina and Ms. Flannery discussed with the Board issues related to the Schools and Libraries processes and procedures