1. Commitment Adjustment and Recovery Process Andrew Eisley Train-the-Trainer Workshop September 27-29, 2004 Schools & Libraries Division

2. Slide #2Schools and Libraries Division What is a Commitment Adjustment or COMAD? uSLD determines that funds were committed in violation of the statute or program rules. uWhen a COMAD is discovered, SLD must then adjust those funding commitments. uApplicants and Service Providers receive letters detailing the funds that are being recovered and the reason for the recovery.

3. Slide #3Schools and Libraries Division Examples of COMADs uFunding approved for ineligible services uFunding approved at a discount rate higher than that which can be supported uFunding for services requiring a tech plan, when no tech plan is in place uFunding provided when the competitive bidding requirements have not been met

4. Slide #4Schools and Libraries Division How are potential COMADs discovered? uCOMADs are discovered through the normal review processes, such as: n PIA Review n Invoicing Review n Service Substitution Review n Appeal Review n Selective Review n Whistleblower Calls n Audits

5. Slide #5Schools and Libraries Division When does a COMAD require the recovery of disbursed funds? uIf the amount of funds disbursed exceeds the Adjusted Funding Commitment amount uNOTE: If the amount of funds disbursed is less than the Adjusted Funding Commitment amount, the SLD will continue to process properly filed invoices

6. Slide #6Schools and Libraries Division Non-COMAD recoveries u If SLD discovers that funds were disbursed in error, but the decision to commit the funds was correct, then SLD will seek recovery of the improperly disbursed funds. However, the SLD will not adjust the commitment amount. uOnce the improperly disbursed funds have been repaid, the SLD will pay any valid invoices for the funding request.

7. Slide #7Schools and Libraries Division Non-COMAD Recovery Examples uFunds disbursed in excess of the services delivered uFunds disbursed for services not approved on the Form 471 (assuming the Service Substitution requirements are not met) uNon-COMAD recoveries are generally discovered via the audit process.

8. Slide #8Schools and Libraries Division New Orders Affecting COMAD uThe Order on Reconsideration and Fourth Report and Order (FCC 04-181) n Recovery possible from applicants as well as service providers uFifth Report and Order and Order (FCC 04-190) n De minimis standard for COMADs n Five-year administrative limitation period on initiation and completion on inquiries that may lead to COMAD n Eliminates offset option n Implements DCIA and Red Light Rule

9. Slide #9Schools and Libraries Division 4 th Report & Order Changes uThe original COMAD Orders (FCC 99-291 and FCC 99-292) directed SLD to seek recovery from the service provider. uIn accordance with FCC 04-181 recovery will now be directed at whichever party or parties have committed the statutory or rule violation. uRecovery will not be directed at Good Samaritans unless the Good Samaritan is at fault.

10. Slide #10Schools and Libraries Division General Recovery Guidelines uService Provider recovery situations: n Failure to properly bill for supported services n Failure to deliver services within the relevant funding year n Delivering services that were not approved on the Form 471 uSchool or Library recovery situations: n Violation of the competitive bidding requirements n Insufficient resources to make use of the supported services n Incorrect calculation of the discount percentage n Failure to pay the non-discount portion

11. Slide #11Schools and Libraries Division Determining Who Is At Fault uSLD has used the guidelines (explained in the previous slide) to create a more expansive list that is under consideration with the FCC. u These are general guidelines, but each recovery situation will be evaluated on its own merits.

12. Slide #12Schools and Libraries Division Recovering When All Are At Fault uIf both parties are at fault for a violation, SLD will seek recovery of the total from each party until the debt has been repaid. u If both parties are at fault for separate violations, SLD will seek recovery of the funds from each party for the respective value of their violations.

13. Slide #13Schools and Libraries Division 4 th Report & Order Effective Date uIt becomes effective on October 17, 2004. uThe rule change only applies to those funding requests where the Commitment Adjustment Letter or the 1 st Demand Payment Letter has not yet been issued. uIf the 1 st Demand Payment Letter has already been issued, recovery will continue to be directed towards the service provider.

14. Slide #14Schools and Libraries Division 5 th Report & Order Changes uGenerally, SLD will not seek recovery when the administrative cost is greater than the recovery amount (de minimis amount). uThere will be a five-year administrative limitation period for SLD to initiate recovery (measured from the last day services are delivered).

15. Slide #15Schools and Libraries Division 5 th Report & Order Changes uThe offset option for debt repayment has been eliminated. This means that future invoices can’t be used to pay the debt. uHowever, this action does not affect administrative offset under the FCC’s DCIA rules. uImplementation of the “Red Light Rule”

16. Slide #16Schools and Libraries Division What is Administrative Offset? uIf the applicant/service provider fails to repay a debt: n SLD will not pay valid invoices. n The value of the invoices will be used to offset the debt. n Invoices will not be paid until the entire debt has been repaid.

17. Slide #17Schools and Libraries Division DCIA (Debt Collection Improvement Act of 1996) uDCIA governs the collection of claims owed to the United States. uSLD has been directed to implement DCIA with the new federal fiscal year (starting October 1, 2004). uBigger consequences for failing to repay an obligation.

18. Slide #18Schools and Libraries Division DCIA Consequences uSLD can charge an 8% administrative late fee. uAdditional interest, penalties, and late fees if the debt is transferred to the FCC. u“Red Light Rule” uDebt can be transferred to the U.S. Treasury for collection.

19. Slide #19Schools and Libraries Division What is the “Red Light Rule”? uThe Commission shall withhold action on any application or request for benefits made by an entity that is delinquent in its non-tax debts owed to the Commission, and shall dismiss such applications or requests if the delinquent debt is not resolved.

20. Slide #20Schools and Libraries Division Applying the “Red Light Rule” uUSAC shall dismiss any outstanding requests for funding commitments if a school or library, or service provider, as applicable, has not paid the outstanding debt, or made otherwise satisfactory arrangements, within 30 days of the date of the notice. uThe “Red Light Rule” will not be applied if there is a pending administrative appeal on the administrative debt.

21. Slide #21Schools and Libraries Division Red Light Rule Consequences uStops payment on all FRNs. uNo invoices will be paid. uForms 471 can be dismissed without PIA review. uCan affect other federal subsidies.

22. Slide #22Schools and Libraries Division Old COMAD Timeline uTimeline was driven by FCC 00-350 uIssue notification letter uIf cash recovery is necessary: n 1 st Demand Payment Letter – 60 days after notification letter uIf debt not satisfied within 30 days n 2 nd Demand Payment Letter uIf debt not satisfied within 30 additional days n Refer to the FCC

23. Slide #23Schools and Libraries Division New COMAD Timeline uIssue notification letter uIf cash recovery is necessary n 1 st Demand Payment Letter – 60 days after notification letter uIf debt not satisfied within 30 days n 2 nd Demand Payment Letter n 8% administrative late fee can be assessed n “Red Light Rule” in effect

24. Slide #24Schools and Libraries Division New COMAD Timeline uIf debt still not satisfied within 30 days n Notify the FCC that debt will be transferred if not satisfied within 30 days. uIf debt not satisfied within 30 additional days n SLD will transfer debt to FCC via DCIA. n FCC will issue a final Demand Payment Letter. n If debt not satisfied, the matter will be referred to the U.S. Treasury.

25. Slide #25Schools and Libraries Division COMAD Appeals uCan be appealed to SLD or the FCC after the Commitment Adjustment Letter or the Notification of Improperly Disbursed Funds Letter is issued. uSame rules apply as other appeals (e.g., must be postmarked/received within 60 days of Notification) uThe FCC is deciding if an appeal to the SLD or FCC should halt the recovery process.

26. Slide #26Schools and Libraries Division QUESTIONS