Reminder to Cost-Allocate Ineligible Users/Services/Components from Requests
Message Posted February 3, 2003

This message is a reminder to you that the SLD requires strict cost-allocation for ineligible services, entities and users and uses. If the SLD determines that more than 30% of a single FRN is ineligible, it will be denied. Therefore, it's extremely important for you to carefully review all services and products that are presented on your 471 and especially Item 21 attachments to make sure they don't contain funding requests for ineligibles. These are the SLD pages that discuss cost allocation and provide examples of different methods:

www.sl.universalservice.org/reference/costallocationguide.asp

Below are some reminders and updates regarding the issue for each category of service:

TELECOM SERVICE

* Subtract all fees for additional directory listings, directory advertising, unpublished # fees, voice mail, payphones and late fees. Directory assistance fees are OK.

* Make sure you only request discounts on eligible cell phone users. The SLD says they have to be involved with curriculum or instruction, and we've found that normally these titles fit this criteria: Superintendents, Principals, Teachers and Aides, Curriculum Directors, Guidance Counselors, and sometimes School Psychologists (if you explain that they review and approve IEPs). Generally, the SLD has been denying requests if more than 30% of the users include Business Managers, Custodians, Technology Coordinators (unless they teach), Technicians, Athletic Directors (unless they teach), School Nurses (unless they teach), and Bus Drivers.

INTERNET ACCESS

* Subtract all fees for Filtering, Firewall and Web Hosting Services. I've been hearing that schools are trying to get filtering paid for through E-rate by just having their ISP bundle it in with their lump monthly cost. This is not permitted under the rules of the program. If the service provider normally charges a separate price for the service, but at your request is bundling it together, you must do a cost allocation and break out the cost of the ineligible service. If the service provider has always just included filtering in with the Internet Access with no additional cost, and you did not request it to be bundled together, the SLD may pay for it as ancillary.

According to the SLD, "In general, funding requests that provide only a single price for a product or service that contains both eligible and ineligible functionality are fully ineligible. However, cost allocation may be used to provide separated pricing for the eligible and ineligible components. In addition, in certain limited cases, an eligible product or service can include ineligible components on an ancillary basis. The full product may be eligible in this case if the following conditions apply:

• The package represents the most cost-effective bid for the eligible product or service.

• The consideration of cost-effectiveness must be made without considering ineligible features.

• The package is a standard product offering that includes the ineligible features as an intrinsic part, with no separated pricing available.

• The applicant is not specifically seeking one or more of the ineligible components.

• Any added content must be minimal.

Please don't jeopardize your Internet Access request by trying to get the SLD to pay for your filtering.

INTERNAL CONNECTIONS

File Servers:

www.sl.universalservice.org/reference/costalloc_fileservers.asp

Network file servers can be either eligible or ineligible for discounts, depending on how the product is used. When the same file server is used for a combination of eligible and ineligible functions, the applicant must submit a cost allocation in order to request discounts for the eligible functionality. The above link provides different methods of doing such a cost allocation.

For your information, here are the servers and eligibility of uses:

Eligible uses of servers:

DHCP Server
Domain Name Server
E-Mail Server
Terminal Server

Ineligible uses include:

Archive or Data Warehouse Server
Application Server
Database Server
Caching Server
Firewall Server
Print Server
Proxy Server

A Web server used to provide information to users of the Internet is eligible for discount. A Web server used to provide substantial software applications, database functions or storage of end user files is considered an Application Server, Database Server, or Archive Server, respectively, and therefore is not eligible.

A Remote Access Server (also called a Communications Server) is only eligible if you certify that it won't be used for remote access.

Julie Tritt Schell