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|Letter of Guidance from NIDRR
August 1, 2001
This responds to the many questions that have been raised in recent weeks by current and prospective grantees concerning the Alternative Financing Program (AFP) under the Assistive Technology Act (ATAct). We appreciate your interest and hope that the following guidance will clarify the essential elements of alternative financing mechanisms under the AFP.
Specifically, we have addressed the minimum legal requirements describing how matching funds may be used and the timing of when the match as well as the Federal funds must be obligated. We have also included an example of an arrangement that can be used by States to establish the alternative financing mechanisms specified in section 301(b) of the ATAct, which include low-interests loans, interest buy-down programs, revolving loan funds, loan guarantee or insurance programs, and programs operated by partnerships.
While section 303(b) of the ATAct requires that the alternative financing mechanisms be established on a permanent basis, section 301(c)(1) allows the Secretary to establish a one-year grant period for the AFP, requiring the expenditure of grant funds within the one-year period. Because obligation of all AFP funds in one year is proving difficult for many reasons, ED has decided to extend all current AFP grants for another year. As a result, grantees now have a full two years to obligate their AFP funds, including both their Federal grant funds and their match funds. Further extensions can be requested and will be granted as needed on a case-by-case basis. For the upcoming competition, ED will implement a similar policy.
We also would like to highlight some provisions in the ATAct that will enable you to determine whether your alternative financing mechanisms and your required contract with a community-based organization meet the requirements for the AFP in the ATAct. According to section 303(b)(5), States must provide an assurance that:
(Emphasis added). Thus, all funds that support the AFP, including Federal funds, match funds and any funds repaid during the life of the AFP, must be placed in a permanent separate account.
(Emphasis added). It is clear from the statute that the principal of both the Federal and matching funds as well as any interest earned on these funds must be available to support the alternative financing mechanisms being carried out by each grantee and must be the property of the State or the community-based organization, as required in section 304 of the ATAct.
Based upon the foregoing, an alternative financing mechanism under which a bank provides the match by making loans is not consistent with the ATAct unless the matching funds are placed in a permanent separate account pursuant to section 303(b)(5)(A). In addition, any rights to receive the proceeds of the loans must be owned by the grantee. The mere act of a bank making a loan does not satisfy this provision unless the obligation underlying the loan becomes the property of the granteeís program. This means that the State or community-based organization must have control of the entire match obligation by the end of the project period. In addition, any return of principal or interest on the loans also must become the property of the granteeís program.
Finally, we recognize that the Education Department General Administrative Regulations (EDGAR) in 34 CFR Parts 75 and 80 are not designed for loan programs, such as those authorized under the AFP, which are established on a permanent basis. Therefore, to the extent that there is a conflict between the ATAct and EDGAR, the ATAct would prevail because it is the statutory authority.
I hope this responds to most of your questions and concerns about the operation of successful alternative financing mechanisms under the ATActís AFP. If you have any further questions, please contact Carol Cohen at (202) 205-5666 or email@example.com
1700 North Moore Street, Suite 1540
Arlington, VA 22209-1903
Phone: 703/524-6686 Fax: 703/524-6630 TTY: 703/524-6639
Email: firstname.lastname@example.org http://www.resnaprojects.org/AFTAP