Service Categories: SLD Adjustment Process

FCC rules establish the priority to be given in making commitments on funding requests if demand on Forms 471 received within the filing window exceeds funds available. First priority is given to requests for Telecommunications Services and Internet Access. If funds are sufficient for requests in those categories, then funds are also committed on requests for Internal Connections, beginning with the most disadvantaged applicants (as measured by the discount for which the applicant qualifies).

Applicants should ensure that they accurately indicate the category of service for products and services specified in each Block 5 funding request of Form 471. The Eligible Services List, posted in the Reference Area of this web site, provides information about the proper categorization of services - Telecommunications Services, Internet Access, and Internal Connections. The SLD carefully reviews the services for which funding is requested to determine whether Internal Connections have been included in Priority 1 requests (Telecommunications Services and Internet Access). If applicants make errors in specifying the proper category of service, the SLD may adjust the category.

Once the application filing window closes, the SLD calculates the total demand for funding for that funding year. Then it determines the initial funding and denial thresholds for Internal Connections. The SLD determines the lowest discount level for Internal Connections for which funds will be sufficient through all the waves, and the highest discount level for Internal Connections for which funds are clearly insufficient. Approved Internal Connections requests at and above the funding threshold receive funding commitments as the applications are processed, and Internal Connections requests below the denial threshold receive a funding status of "Not Funded" without review. Early in the process of issuing waves of commitments, there is usually a substantial gap between funding and denial thresholds, and that gap narrows as the process goes forward.

The SLD uses the following approach for handling requests incorrectly indicated as Priority 1. If Program Integrity Assurance (PIA) Team members determine that there are Internal Connections components in Priority 1 requests, the Team members will determine if these Internal Connections components constitute 30% or more of the total request (a threshold that is subject to change in future years).

If the 30% threshold is reached, the full request will be moved to Internal Connections, and the rules for funding Internal Connections apply, as follows. As noted above, funding for Internal Connections takes place only if funds are sufficient, after first considering requests for Telecommunications Services and Internet Access. If so, then Internal Connections commitments begin with the most disadvantaged applicants (i.e., those qualifying for a 90% discount) and then working down one discount percentage at a time (through 89%, 88%, etc.), until funds are depleted. The funding request moved to Internal Connections will be approved or denied based on the ultimate funding threshold for Internal Connections.

If the cost of Internal Connections components is less than 30% of the total request, then one of three actions will be taken, depending on whether the applicant is (a) in a discount category for which Internal Connections funds are available, (b) in a discount category for which Internal Connections funds are not available, or (c) in a discount category for which it is not yet determined whether Internal Connections funds will be available.

1. If the cost of Internal Connections components is less than 30% of the total request, but the approved discount for the request is at or above the funding threshold, the request will be moved to Internal Connections so that the entire request will be approved (assuming no ineligible components).
   
   
2. If the Internal Connections are less than 30% of the request but the approved discount is less than the denial threshold, the request will be reduced by the cost of the Internal Connections (since the Internal Connections would not be funded anyway) and the Priority 1 services can be funded.
   
   
3. If the Internal Connections cost is less than 30% of the request and the approved discount is between the funding and denial thresholds, PIA will contact the applicant and ask the applicant to choose whether to recategorize the request as Internal Connections or reduce the request to eliminate the cost of the Internal Connections. While some applicants might prefer to wait until they know for sure whether funding will be sufficient to fund Internal Connections at that discount percent before making this choice, SLD must process tens of thousands of applications and cannot leave these decisions until the end and still promptly notify applicants of the decisions on their requests.

If a request is reduced to eliminate the costs of Internal Connections, that reduction will be explained in the Funding Synopsis of the Funding Commitment Decision Letter. Applicants and service providers should review that synopsis carefully and take care not to invoice the SLD for these costs. If the SLD finds Internal Connections costs in an invoice relating to a Priority 1 funding request, it will deny the invoice.

Applicants can avoid the risks attendant to including Internal Connections in Priority 1 requests by using the Eligible Services List to ensure they are properly categorizing their funding requests.

Revised 11/21/2001