Commitment Adjustment and Recovery Process Andrew Eisley

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

2. What is a Commitment Adjustment or COMAD? • SLD determines that funds were committed in violation of the statute or program rules. • When a COMAD is discovered, SLD must then adjust those funding commitments. • Applicants and Service Providers receive letters detailing the funds that are being recovered and the reason for the recovery.

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

4. How are potential COMADs discovered? • COMADs are discovered through the normal review processes, such as: • PIA Review • Invoicing Review • Service Substitution Review • Appeal Review • Selective Review • Whistleblower Calls • Audits

5. When does a COMAD require the recovery of disbursed funds? • If the amount of funds disbursed exceeds the Adjusted Funding Commitment amount • NOTE: If the amount of funds disbursed is less than the Adjusted Funding Commitment amount, the SLD will continue to process properly filed invoices

6. Non-COMAD recoveries • 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. • Once the improperly disbursed funds have been repaid, the SLD will pay any valid invoices for the funding request.

7. Non-COMAD Recovery Examples • Funds disbursed in excess of the services delivered • Funds disbursed for services not approved on the Form 471 (assuming the Service Substitution requirements are not met) • Non-COMAD recoveries are generally discovered via the audit process.

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

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

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

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

12. Recovering When All Are At Fault • If both parties are at fault for a violation, SLD will seek recovery of the total from each party until the debt has been repaid. • 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. 4th Report & Order Effective Date • It becomes effective on October 17, 2004. • The rule change only applies to those funding requests where the Commitment Adjustment Letter or the 1st Demand Payment Letter has not yet been issued. • If the 1st Demand Payment Letter has already been issued, recovery will continue to be directed towards the service provider.

14. 5th Report & Order Changes • Generally, SLD will not seek recovery when the administrative cost is greater than the recovery amount (de minimis amount). • There will be a five-year administrative limitation period for SLD to initiate recovery (measured from the last day services are delivered).

15. 5th Report & Order Changes • The offset option for debt repayment has been eliminated. This means that future invoices can’t be used to pay the debt. • However, this action does not affect administrative offset under the FCC’s DCIA rules. • Implementation of the “Red Light Rule”

16. What is Administrative Offset? • If the applicant/service provider fails to repay a debt: • SLD will not pay valid invoices. • The value of the invoices will be used to offset the debt. • Invoices will not be paid until the entire debt has been repaid.

17. DCIA (Debt Collection Improvement Act of 1996) • DCIA governs the collection of claims owed to the United States. • SLD has been directed to implement DCIA with the new federal fiscal year (starting October 1, 2004). • Bigger consequences for failing to repay an obligation.

18. DCIA Consequences • SLD can charge an 8% administrative late fee. • Additional interest, penalties, and late fees if the debt is transferred to the FCC. • “Red Light Rule” • Debt can be transferred to the U.S. Treasury for collection.

19. What is the “Red Light Rule”? • The 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. Applying the “Red Light Rule” • USAC 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. • The “Red Light Rule” will not be applied if there is a pending administrative appeal on the administrative debt.

21. Red Light Rule Consequences • Stops payment on all FRNs. • No invoices will be paid. • Forms 471 can be dismissed without PIA review. • Can affect other federal subsidies.

22. Old COMAD Timeline • Timeline was driven by FCC 00-350 • Issue notification letter • If cash recovery is necessary: • 1st Demand Payment Letter – 60 days after notification letter • If debt not satisfied within 30 days • 2nd Demand Payment Letter • If debt not satisfied within 30 additional days • Refer to the FCC

23. New COMAD Timeline • Issue notification letter • If cash recovery is necessary • 1st Demand Payment Letter – 60 days after notification letter • If debt not satisfied within 30 days • 2nd Demand Payment Letter • 8% administrative late fee can be assessed • “Red Light Rule” in effect

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

25. COMAD Appeals • Can be appealed to SLD or the FCC after the Commitment Adjustment Letter or the Notification of Improperly Disbursed Funds Letter is issued. • Same rules apply as other appeals (e.g., must be postmarked/received within 60 days of Notification) • The FCC is deciding if an appeal to the SLD or FCC should halt the recovery process.

26. QUESTIONS