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Wednesday, June 13, 2012

Secret Rule Changes

Here's an appeal decision that changes a rule, only no one knows it, because the rule is secret.  I mean, this rule wouldn't even be in the 700-page tome of secret rules.  It is a rule that dare not speak its name.  It's only known to those of us who have watched enough FRNs go into the USAC black box that we can discern how things are done.  And to send something into this particular black box, you had to have had a COMAD recovery, which means few people have much experience with it.

Up to this point, if USAC needed to recover funds (if they COMADed an FRN which already had disbursements, usual the result of an audit), they would go after whichever party submitted the voucher.  So if the service provider filed a SPI, USAC would pursue recovery from the service provider.  If the applicant filed a BEAR, they'd go after the applicant.

That's a little surprising, since in the Fourth Report and Order, which set the rules for recovery, the FCC said, "recovery actions should be directed to the party or parties that committed the rule or statutory violation in question."  But in a lot of cases, it's tough to say who violated the rules, so USAC seemed to be just going after whoever filed the invoice.

I gave a presentation on selecting a payment method yesterday, and I listed this practice as an advantage to choosing discounts over reimbursements; if you choose to have the service provider do a SPI, in the unlikely event of recovery, USAC releases the hounds on the service provider.  I guess the FCC heard me, because the same day, they pulled the rule out from under me.

In this appeal, the service provider installed a bunch of equipment in a charter school and submitted a SPI and got paid.  Later, USAC discovered that the school had closed before the equipment was installed.  Since the invoice was a SPI, USAC pursued the service provider.  (Actually, since the violation occurred before the Fourth Report & Order, USAC properly followed the COMAD Order, which said USAC should always collect from the service provider.)  The service provider appealed, saying it had no way of knowing the school was closed.  And the FCC agreed.

I'm afraid this means that in the future, USAC will feel obligated to try to figure out who was at fault, and pursue that person.  So a secret rule may just have changed.  Of course, we won't know if the rule has changed until we've seen enough recovery cases to discern what rules are in USAC's black box.

Meanwhile, this appeal covers more than half a million dollars in funding that USAC is now supposed to recover from a non-existent school.  Bummer.  And I wonder what happened to the equipment, which was worth $560,498.52?

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