The e-Rate audit: What it takes to be prepared

e-Rate audits are increasingly becoming a fact of life for e-Rate applicants. The Federal Communications Commission (FCC) has been allowed to spend more and more money to examine applicants to ensure they are compliant with e-Rate rules and regulations. The key to surviving an e-Rate audit is to always be prepared for one by maintaining proper documentation about your e-Rate activities.

If you do receive notification that you are to undergo an audit, the quality and detail of the documentation of your e-Rate activities will be the primary factor in determining if you are in compliance with program rules. It’s important to keep in mind that being the subject of an audit does not mean that you are suspected of wrongdoing. Audits are just one of the many ways the FCC and the Universal Service Administrative Co. (USAC) are making sure that e-Rate dollars are being committed and used properly. 

Five-year documentation rules

A fundamental e-Rate rule requires that you maintain all of the documents associated with a funding commitment for a period of five years from the last date of service. That means you’ll have a lot of documents covering many years of services at any one time. The list of documentation related to a funding commitment is too long to list here, but it covers everything from the technology plan upon which your request is based to copies of bank statements showing that you deposited reimbursement checks from your service provider.

For the list of key documents commonly requested during an e-Rate audit, see the "e-Rate Binder" available from USAC’s web site.

Prepare for audits as you go

Here are two questions to ask yourself continually as you go about the business of procuring services, requesting and using e-Rate funding, and maintaining documents:

1. Am I doing anything that is in violation of my local rules or e-Rate rules?

Applicants know they must follow all applicable local rules and e-Rate regulations–but it’s a good idea to ask yourself this question on a regular basis. During the course of an audit, if your organization is found to be in violation of local or e-Rate rules, it might be required to pay money it received in e-Rate discounts back to the program. This also could result in additional scrutiny in future years to ensure you’ve appropriately addressed the problems that were found.

2. Do I have the necessary documentation to prove I’m in compliance with e-Rate rules and regulations?

This goes beyond just retaining copies of your e-Rate forms, bid evaluations, and discount calculation documents. It also should include any additional information that demonstrates your compliance with e-Rate rules. Because an audit can cover anything that has happened in the last five years, don’t just rely on your memory to recall the specifics of a certain situation. Save copies of e-Rate-related eMail messages, and keep a file of notes and any other documentation that shows you followed both your local rules and e-Rate rules.

Maintain historical perspective

e-Rate rules have evolved and will continue to evolve from one year to the next. You should keep these changes in mind when looking at things your organization did in prior years. Throughout the history of the program, there have been changes in service eligibility, procurement practices, and documentation-retention requirements that could come into play during an audit.

Knowing how the program has changed can help you avoid some audit findings, if you find yourself in a situation where an auditor is applying today’s e-Rate rules to activities that took place several years ago. Throughout the audit process, you might have to provide this historical perspective to demonstrate your compliance with e-Rate rules at the time a given activity took place.

Common bid-document requirements

Applicants often ask my e-Rate consulting firm, Funds For Learning LLC, about the types of documents they should retain to demonstrate compliance with e-Rate rules and regulations. Most applicants know to keep a copy of their Form 470, the Request for Proposals (if applicable), and the winning bid; but you also should keep copies of the losing bids, bid scoring criteria, and evaluation worksheets. In addition, you should keep any supplemental documentation that shows you conducted a fair and open competitive-bidding process–such as copies of correspondence between you and the service provider, call logs, and minutes from any meetings you had where the procurement was an item of discussion.

Some best practices for conducting a fair and open competitive-bidding process include:

• If you are posting a Form 470 along with an RFP, it is best to release the RFP at the same time your Form 470 is posted.
• If you hold a required bid meeting related to an RFP, hold the meeting after the initial 28-day posting period has elapsed. Remember, the 28-day period is intended to allow potential service providers to become involved in the process.
• If you find yourself in a situation where you receive only one response to your Form 470 or RFP, send yourself an eMail message to make that note.
• Any time you want to keep a historical record of events, send yourself an eMail. The date/time stamp from the message can be used to provide a great audit trail if there are questions about what happened at a given time.


With all of the hats you wear within your organization–in addition to taking care of e-Rate procedures–keeping well-organized documentation as you go is the best way to know you’re prepared in the event of an e-Rate audit.

Scott Weston is the executive director of communications for e-Rate consulting firm Funds  For Learning LLC.