Findings from the latest E-Rate investigation by the Federal Communications Commission (FCC) Office of Investigator General (OIG) points to potential fraud as at least 100 schools have been found with discrepancies in the data that they have submitted to the Universal Service Administrative Company (USAC) as part of the E-Rate application process; data that shows the percentage of students eligible for the National School Lunch Program.

The National School Lunch Program (NSLP) is a federal program that provides students from low-income families with free and reduced price lunch. NSLP data is often used as a proxy measure for student poverty by educational researchers and policymakers. Moreover, NSLP data sets serve as eligibility criteria for federal programs such as E-Rate. Food and Nutrition Service (FNS), the agency that administers NSLP under the United States Department of Agriculture (USDA), maintains that State and local educational agencies (SEAs and LEAs) are responsible for ensuring the accuracy of eligibility determinations. However, a semi-annual report, delivered to Congress by the FCC OIG reveals discrepancies between NSLP data that schools reported to the USAC and the percentages of NSLP-eligible students that schools reported to the State (FCC OI, 2017).

The following information on eligibility criteria serves to clarify how discounts are determined and why NSLP data discrepancies may cost school districts more than an E-Rate discount.

E-Rate Eligibility & Discounts Explained

The Universal Service Administrative Company (USAC), a non-profit that operates under the FCC, confirms eligibility of E-Rate applicants and reimburses service providers for E-Rate discounts given to schools and libraries. The degree of discounted services that schools will receive under E-Rate is generally based on two factors: (1) the percentage of students eligible for the National School Lunch Program (or an equivalent measure) and (2) the rural or urban status of the school location. (See table.)



E-Rate applicants use FCC Form 741 to calculate their E-Rate discounts and report NSLP data to the USAC. School districts with poverty level indicators that are close to transition points on the USAC’s E-Rate Discount Matrix (above) may find that even an incremental increase of 1-5% in student eligibility could add 10% or more to their E-Rate discount. But be advised: NSLP data reported to the State as well as the USAC will be reviewed for program integrity assurance purposes. Therefore, careful calculations and diligent documentation are crucial to avoid errors and to validate accurate reporting during the E-Rate filing process. For districts, data miscalculations may mean more than forgoing deeper discount rate for Internet connectivity products and services.

How is student eligibility for NSLP determined?

During the E-Rate filing process, schools must calculate the percentage of students that are eligible for free and reduced price lunch. Two types of eligibility are as follows: categorical eligibility and income eligibility.

Categorical (Automatic) Eligibility

Students are automatically eligible for free school meals when they or their household participates in:

  • Supplemental Nutrition Assistance Program (SNAP)
  • Temporary Assistance for Needy Families (TANF)
  • Food Distribution Program on Indian Reservations (FDPIR)
  • Head Start programs

Foster youth as well as migrant, homeless or runaway youth are also automatically (categorically) eligible for free school meals.

Community Eligibility Provision (CEP) allows schools and districts in high poverty areas to serve students school meals at no cost. Instead of collecting household applications for participation in the NSLP, schools and school districts are reimbursed based on the percentage of students directly certified in federal assistance programs such as SNAP and TANF.

Income Eligibility

If a student is not “categorically eligible,” the student may qualify for free and reduced price meals based on household income, otherwise known as “income eligibility.” Typically, a school determines student income eligibility by sending an application home to parents. The application requests several types of information: names all of the members in the household, the total amount of household income, including the amount and source of income from each family member, the last four digits of the parent or guardian’s social security number and his or her signature. The school then compares the number of household members on the application to the Federal Income Eligibility Guidelines.

  • Students whose household income is less than 130% of the poverty line are eligible for free lunch.
  • Students whose household income is between 130-185% of the poverty line are eligible for reduced-price lunch.
How E-Rate Eligibility Calculations are Made Based on NSLP Data

To calculate eligibility percentages for E-Rate, first, the school must determine the number of students eligible for NSLP. Then, the school must divide the number of NSLP-eligible students by the total population of students. As for schools that participate in CEP, districts will maintain the percentage of directly certified students and the total student population of the school. The percentage of directly certified students is then multiplied by the CEP national multiplier (currently 1.6) to calculate the effective number of students eligible for NSLP (USAC, 2018). This calculation is capped at 100% of the student population for the purpose of determining the discount.

Note that the E-rate Modernization Order change the way schools calculate their E-rate Program discounts. According to the USAC, starting in FY2015, “Regardless of which schools within the district are receiving service, schools that are part of a school district must now calculate their discounts on a district-wide basis instead of calculating school-specific discounts. This means every school in a school district will now have the same discount rate.” Read more here.

E-Rate Eligibility Data Collection Challenges

According to data from FNS, approximately 30 million students participated in NSLP in FY 2017 (FNS, 2018). However, not all students who are eligible for NSLP will participate in the program. First of all, secondary students who are eligible are less likely to participate in the program than elementary students due to the possibility of social stigma [1]. Secondly, school districts have primarily distributed and collected paper applications from families, and paper-based application often get lost in transit between school and home. Thirdly, potentially eligible families may not take the time to complete and return the application to their child’s school. Therefore, as a method of collecting eligibility data, paper-based forms fall short. Subsequently, schools and school districts may be missing out on potential E-Rate funding due to missed collection of NSLP eligibility data. Moreover, schools may find that determining the percentage students that are eligible for NSLP can be more of a challenge than identifying the number and percentage of students that have submitted application for free and reduced lunch or that are “categorically eligible.” As a solution to issues with paper-based applications, some districts are offering online applications for NSLP. These online apps are more convenient, and of course, privacy and security are paramount, but the risk of data breach and identity theft is ever-present when personally identifiable information is transmitted digitally. In sum, collecting an accurate percentage of NSLP eligible students versus participating students has its challenges. While districts may find verifiable means to determine NSLP eligibility data and maximize E-Rate funding, unsubstantiated claims may be exposed during ongoing E-Rate investigations.

[1] Source:

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