Private non-profit schools providing education to school-age children (K to 12) and Head Start programs are entitled to specific discounts for telecommunication and internet services and related equipment under the Federal E-Rate program. These funds are not given directly to schools, but instead, the school’s vendors provide them with discounts to schools and then seek reimbursement for these discounts from the Universal Service Administrative Company (USAC).
What’s covered under E-Rate?
While E-Rate funds can provide discounts across multiple areas of technology spending, independent schools see the most significant benefit in two areas: monthly bills for internet access and purchases of wireless technology equipment (switches, routers, access points, etc.). During construction and renovation years, schools may also apply for significant discounts for cabling installation and other equipment.
Who can apply for E-Rate?
Almost all independent K to 12 schools are eligible for E-Rate except:
- for-profit schools
- schools with an endowment valued at more the $50 million dollars
If a school does apply for E-Rate, it should ensure that it has in place a written policy outlining its current standards for internet access filtering. In order for a school to qualify for E-Rate, it must filter according to “community standards” (these are the standards that a school community has already determined for the current filtering situation).
How much of a discount does a school get?
The amount of discount a school receives can range between 40% and 90% and is based on the percentage of students in the school who are deemed “low income” according to Federal Free and Reduced Lunch Guidelines. The school is not required to create a student list or actually provide a free lunch; they just need to count how many students qualify. Most schools will qualify for a 40% discount.
Can I use my current provider or are there special providers that I must use?
Federal guidelines require schools to review bids and utilize the lowest responsible bidder to provide appropriate internet service or technology equipment. This doesn’t mean the lowest bid, it means you must establish appropriate criteria, and select the provider that best meets those criteria, the process and your selection should be appropriately documented. The bids should be received at least 28 days before the selection is made.
How difficult is it to apply for E-Rate?
You will be required to complete numerous forms and properly submit them. Approximately two-thirds of all schools that apply for E-Rate utilize an outsourced consultant to assist them with the filing process. Each school will need to evaluate whether it is worth it for them to go through the process. For smaller schools, the benefit may be too small based upon their annual internet charges but may make sense to do in years where new equipment or construction takes place. In making the determination as to whether E-Rate is appropriate for your school, school officials should examine how much the school has spent on internet access, as well as large purchases of network switches and access points over the last five years and multiply that by 40% (the minimum a school can expect to receive).
During the process, a school’s application will go through a process known as “Program Integrity Assurance,” which usually includes a Q&A style communication with the USAC as the application is assessed. Common inquiries include:
- School enrollment and the number of free and reduced lunch eligible children
- The budget status to ensure alignment with budget requirements
- The cost and eligibility of products and services that discounts were requested for
What can be expected for E-Rate going forward?
The FCC hasn’t announced any substantial changes to the E-rate program for the funding year 2020. Even so, there are a few things schools should watch for:
- A formal decision on regulatory changes to the current five-year budget cycle; this is especially important for those schools that are reaching the end of their eligibility.
- The possible elimination of the current Category One amortization requirement, which mandates that special construction costs exceeding a designated threshold be amortized over a number of years.
- An updated eligible services list as USAC solicits comments as to what types of new products and services should be eligible in the funding year 2020.
Discounts are great, but where can a school get the balance of the needed funding for technology expenditures?
Approximately 84% of E-Rate applicants report that funds from the program are not sufficient to meet their needs. Unfortunately, E-Rate will only provide funding for certain technology projects, and, since it is a discount program, it requires schools to provide matching funds for projects. So where do those matching funds come from? There are numerous grant programs available to help fund technology projects. Although many of these grants are not necessarily technology-based grants, their funds can be used to supplement technology funding. Some of the available grants are competitive, while others are formula grants, such as Title I-Part A funding. Be sure to consider competitive and formula grants at the federal and state levels and look at foundations that provide grant funding to K-12 institutions. In addition, schools can consider financing technology purchases. Financing can happen through traditional bank financing or through suppliers. Companies, like Cisco, have a capital loan program to help finance equipment purchases. Additionally, Schools can look to a capital campaign to raise the funds needed to subsidize E-Rate funding.
Turning to E-Rate to finance internet charges and related technology may not the right fit for everyone, but it is something that Schools should consider.
This article was also featured in our newsletter The Report Card Vol. 3
Shari Diamond, CIA
Partner
Shari has been with Cerini & Associates, LLP since 2008 where she works primarily with the firm’s school district clients providing internal audit and claims audit services. She has over twenty years’ experience performing internal audits, risk assessments, and compliance reviews, as well as recommending processes to strengthen the internal controls environment while increasing efficiencies. Her prior experience at PWC and Northrop Grumman included performing Information Technology audits.
