Elite Fund, Inc.

 

Transferring Equipment (Schools and Libraries News Brief - 10/24/08)

 

In general, equipment purchased with E-rate discounts cannot be sold, resold, or transferred for money or any other thing of value. There are two exceptions to this general rule:

 

• If a school or library is closing – either temporarily or permanently – equipment purchased with E-rate funds can be transferred to another eligible entity. You must notify USAC of the transfer if the date of purchase of the equipment is less than three years ago.
• After three years from the date of purchase, equipment purchased with E-rate funds can be transferred to another eligible entity. You are not required to notify USAC of the transfer.

Below we discuss each of these situations in more detail.

 

Transfers due to school or library closings

Equipment can be transferred from the original entity to another eligible entity less than three years after the date the equipment was purchased — even if the receiving entity is at a lower discount level — if the entity where the service was originally installed is temporarily or permanently closed. This includes equipment serving part of a facility, such as equipment serving individual classrooms, if that part of the facility is temporarily or permanently closed.

 

If a facility is closed and equipment is transferred to another entity, USAC must be notified of the transfer. To do this, mail, fax, or email a letter to USAC that contains entity and contact information for both the original and the receiving entity and the date and reason for the transfer. You can find a complete list of the information you must include in the letter in the Transfers of Equipment guidance document on the USAC website.

 

• Note that moving equipment is not necessarily the same as a transfer. For example, a school district with an elementary school, a junior high school, and a high school purchases a router with E-rate funding to serve all three schools and installs it in the elementary school. After a year, the district decides that the router should be moved to the high school to better serve those three schools. As long as the router continues to serve the same recipients of service, no transfer has taken place.

Transfers after three years

Starting three years after the date of purchase of E-rate funded equipment, an entity can transfer that equipment to another eligible entity. The receiving entity can be at a lower discount level, and it does not have to appear on the Block 4 worksheet associated with the funding request. For example, a school at a 90% discount level can, after three years, transfer a piece of E-rate funded equipment to a library at a 20% discount level that has never before applied for Internal Connections.

 

If the transferred equipment was purchased at least three years ago, you do not have to notify USAC of the transfer.

 

Transfers of equipment and the Two-in-Five Rule

When you submit a Form 471 Block 5 funding request for a shared service, you identify the entity or entities that will be receiving the service in Item 22 of the funding request. If USAC makes a commitment on an Internal Connections funding request, the entity or entities identified in Item 22 of that funding request are considered to have used a year under the Two-in-Five Rule. (This rule limits the receipt of Internal Connections to two years in any five-year period.)

 

If an entity transfers equipment to another entity, the receiving entity is not considered to have used a year under the Two-in-Five Rule. The original entity, however, retains its status under the Two-in-Five Rule – that is, USAC still considers it to have used a year of Internal Connections even though it no longer has the equipment.

 

Record retention requirements

When equipment is transferred from one entity to another, both entities should maintain complete records of the transfer. In particular, the asset registers or other inventory tracking mechanisms of both entities should feature information on the transfer of the equipment and reflect the new location of the equipment.

 

Correspondence or other documentation relating to the transfer – including the notification to USAC of an equipment transfer due to the closing of a facility – must be retained for at least five years.

 

Disposal or trade-in of equipment

Outside of the exceptions discussed above, equipment purchased with E-rate funds cannot be sold, resold, or transferred for money or any other thing of value. Outdated equipment and equipment that is no longer being used are still subject to this requirement.

 

• You can dispose of outdated equipment or equipment that is no longer being used. We suggest that you do so in an environmentally responsible way. However, remember that – even though the equipment may be considered salvage – you cannot accept money or any other thing of value for that equipment.
• You can, however, trade in equipment. If the equipment was purchased with E-rate funds, the trade-in amount is applied to the purchase of new eligible equipment and the pre-discount amount on the Form 471 funding request for the new equipment is reduced by the trade-in amount. Note that the trade-in amount must be a reasonable estimate of the value of the equipment. Applicants interested in trade-ins should also review the Free Services Advisory posted on the USAC website.

As with other changes in status, disposal or trade-in of equipment should be carefully recorded on your asset register and inventory tracking documents. Any documentation related to the disposal or trade-in should also be retained.

 

See Transfers of Equipment for more detailed guidance on equipment transfers.

 

 

Special Edition News Briefs on Audits

(3/14/08)

 

This week, USAC issued a series of four short News Briefs, each covering basic program guidance in the four subject areas where audit findings and comments from last year's audits were most common – Document Retention, Technology Plans, Discount Calculations, and Invoicing. The findings and comments from these audits, conducted under the Improper Payments Information Act (IPIA), are summarized in the Understanding Audits area of the USAC website. Applicants that had findings or comments identified during this series of audits received copies by email of the four Special Edition News Briefs.

An audit finding identifies a program rule violation. Examples of program rule violations include:

• An applicant received Internet Access or Internal Connections but did not have an approved technology plan.
• An applicant did not conduct an open and fair competitive bidding process.
• An applicant invoiced USAC for services that were not delivered.

In general, an audit comment identifies a situation where, even if a program rule is not violated, good accounting practices are not being followed. Examples of comments include:

• An applicant did not file a Form 500 to return an unused commitment to USAC.
• An applicant did not perform an invoice reconciliation.
• An asset listing was not kept up to date, even though the applicant was able to locate the equipment purchased with program funds.

Following are links to the four short Special Edition News Briefs and a description of the most common findings or comments pertaining to that subject.

Document Retention

Auditors found that a number of applicants had findings and comments related to document retention. The most common were:

• Asset registers were incomplete or not maintained.
• Equipment purchased with program funds could not be located.
• Technology plan approval letters could not be located.
• Consortium leaders could not locate Letters of Agency and/or Forms 479 for all consortium members.
• Applicants did not follow their own document retention policy or did not have a policy.

Technology Plans

Two of the three findings for technology plans were that the plans were deficient (in other words, they did not adequately address the five elements) or that they were not approved. The third finding, that the technology plans were not approved before the Form 470 was filed, is no longer a program requirement.

Discount Calculations

The two most common findings related to discount calculations were that entities were not listed on the Form 471 or the discount calculation could not be verified.

Invoicing

Findings and comments related to invoicing spanned a number of issues, including:

• The invoice does not support the request.
• Documentation on the invoice is not available.
• The invoice does not agree with the contract.
• Invoice detail is insufficient.
• An applicant could not provide evidence of payment of the non-discount share or the non-discount share was not paid.
• A product or service was substituted for the approved product or service without requesting and obtaining approval for a service substitution.

From the information above, you can see that maintaining complete and accurate records and carefully following program rules will assist you to demonstrate compliance with program rules during an audit. 

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Tech Plans (6/26/2006 E-rate Central News)

 

E-rate rules clearly require the plans to be approved by the date(s) discounted services are provided.  The actual Form 486 certification states: “I certify that the technology plan(s) for the services received as indicated on this Form 486 have been approved as necessary.”  If, as is often the case, the Funding Year Service Start Date (Column F in Block 3) is 07/01/2006, the technology plan covering the FY 2006 funding year must have been approved by that date. If it is not, the applicant is not entitled to discounts on the service(s) until the plan is approved.

 

For completeness, while discussing upcoming technology plan deadlines, we should remind applicants whose currently approved technology plans expire next year (June 30, 2007) to start updating those plans now. Although those plans will not have to be approved until July 1, 2007, updated plans covering at least the full year 2007-2008 must be written before Form 470s are filed for FY 2007. In particular:

 

• The written plans should at least include a preliminary budget for 2007-2008;
• The plans should cover all products and services that the applicants intend to include in their Form 470s; and 
• Pre-Form 470 dated copies of the written technology plans should be retained for potential audit documentation purposes.

Guidance for writing E-rate applicable technology plans, with particular emphasis on the five core requirements for approval, is available in the Applications Tips section of the E-Rate Central Web site (see http://www.e-ratecentral.com/applicationTips/techPlan/default.asp).