(1) Generally, an invoice (either an applicant BEAR or a vendor SPI) submitted after the associated invoice deadline will not be paid and the funding will be lost. An invoice for FY 2003 recurring service submitted after October 28th can be paid if, and only if, the invoice deadline for that FRN has been extended. An invoice deadline may have been extended if: (a) the funding was granted late in the year; (b) a SPIN change or service substitution was granted; or (c), an invoice extension request was approved. Invoice extensions can be checked on the SLD Web site at FRN Extension.

A request to extend an invoice deadline can be submitted in letter format to the SLD as discussed in the SLD's Reference Area at Deadline Extension Request.

(2) A Form 486 submitted after the associated deadline results in a decrease in available funding. This happens because the Service Start Dates for all affected FRNs are reset to 120 days prior to the eventual filing date for the late Form 486. Example: If a Form 486, subject to the October 29th deadline, is not actually submitted until November 29th, the Service Start Dates on all the FRNs included would be changed from July 1, 2004, to August 1, 2004 (i.e., 120 days before November 29th), and the funding commitments for each FRN would be reduced proportional (i.e., by one-twelfth).

Note that the penalties for missing later Form 486 deadlines are actually more severe. Example: The Form 486 deadline for an applicant funded in FY 2004 Wave 9, released August 3rd, is December 1. If this deadline is missed by one month (i.e. it is submitted January 1st), the Service Start Dates would be changed from July 1, 2004, to September 3, 2004, and the funding commitments for each FRN would be reduced proportional (i.e., by roughly one-sixth).

At least two approaches are being considered to resolve the basic cash-to-obligation ratio problem. One is emergency legislation to exempt the Fund from the newly applied Federal accounting standards; another is to change the E-rate funding process to provide "soft" commitments that would not be considered legal obligations.

In the absence of changes that would eliminate or ease the accounting problem, the SLD has little alternative but to limit new funding commitments to excess cash available. The good news is that additional cash is being infused each quarter from telecom carrier contributions and that the SLD is working hard to identify previously committed funds that will not be used. As a result, we expect new E-rate commitments to begin flowing again sometime in November. It may take some time, however, for actual commitments to catch up with the number of applications that have already been reviewed, have been internally approved, and are awaiting release.

One roadblock to the end of the freeze was eliminated last week when the FCC agreed to a priority policy to be used in making funding commitments if, as is now the case, unobligated cash is insufficient to issue all pending commitments. The key points of this policy for E-rate applicants are as follows:

(1) FCDLs for FY 2003 (and earlier) will have priority over FCDLs for FY 2004. Although we believe that there are several hundred millions of dollars worth of applications (and appeals) still pending approval and commitments from earlier years, this apparently does not mean that all such applications must be processed before any more commitments can be made for FY 2004. It means only that those that have completed application review will be funded first. For illustrative purposes, consider the following example:

(2) Within a given funding year - and we would assume this would apply primarily to FY 2004 - Priority 1 services (Telecommunications and Internet Access) will have priority over Priority 2 services (Internal Connections). Again, this does not necessarily mean that all remaining Internal Connection requests for FY 2004 will be committed last (perhaps as late as next summer), but probably that the next few waves of FY 2004 funding will be Priority 1 only. Applications containing both Priority 1 and Priority 2 services, which have completed review, will probably receive FCDLs showing Priority 1 FRNs as funded and showing Priority 2 FRNs "As Yet Unfunded."

(3) Within any of these categories, funding priority will be set based on the date of completion of application review. As has always been the case, therefore, it behooves applicants to work closely with PIA reviewers to resolve any outstanding issues on their applications.