Client Alert
E-Rate: FCC Evaluates Appeals Based Upon Former Gifting Guidelines
November 10, 2011
In a recent decision, the FCC granted the appeals of multiple applicants that were denied funding by USAC due to alleged violations of the competitive bidding process because the applicants had accepted gifts, including meals, gift cards or gift certificates, from their service provider. Because the appeals involved alleged violations that occurred prior to the release of the 2010 Order, the Commission reviewed the appeals based upon the competitive bidding rules in place prior to the September 2010 Schools and Libraries Sixth Report and Order (“2010 Order”), which adopted specific standards and guidance for the FCC’s gift rules in line with federal gifting standards.
Upon a review of the record in each of the cases, the Commission found that the applicants had participated in a fair and open competitive bidding process, as required by the rules. In all cases, the gifts were spread out over a period of several years and were minimal -- none totaled more than $50 per person, and most were less than $35 per person. In a number of instances, the employee that had received the gift was not involved in the competitive bidding process. In one case, an employee of one of the applicants had been sent to a service provider-sponsored conference for which the service provider covered about $450 worth of travel costs. The Commission, though, found that the employee was sent to the conference months after the close of the competitive bidding process and the conference was held to discuss technology issues and did not involve leisure activities.
While the Commission granted the appeals based upon a review of the competitive bidding rules in effect prior to the 2010 Order, the Commission emphasized that its analysis would not have been the same had the cases been reviewed under the current post-2010 Order rules. The following summarizes some of the requirements based on the post-2010 Order:
- Gifts to family and personal friends made using personal funds of the donor, which are not related to a business transaction or relationship, do not violate the rules;
- Charitable donations to E-rate entities are OK as long as they are not: (1) directly or indirectly related to E-rate procurement or decisions; or (2) intended to circumvent the competitive bidding process or other E-rate requirements;
- De minimis gifts, i.e., items worth $20 or less, are permitted, so long as the total for all items per person in a single year does not exceed $50;
- Service providers may not solicit for or pay for attendance for an employee at an E-rate-funded school to speak at a service provider-sponsored event, where the intent of having the speaker is to promote the provider’s service. The employee may also not attend for free if he or she is going to speak or present on behalf of their school or library;
- Where a school employee is required by state law to sit on the governing board of a service provider, meals, lodging, airfare and other travel expenses that are part of their board duty are not considered gifts;
- Note that the Commission defers to state or local provisions that are more stringent than the Commission’s requirements.
If you have any questions, contact Mark Palchick, Rebecca Jacobs or any member of the firm’s Communications Law Group.
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