Recovery Act
Preliminary Observations on the Implementation of Broadband Programs Gao ID: GAO-10-192T October 27, 2009Access to broadband service is seen as vital to economic, social, and educational development, yet many areas of the country lack access to, or their residents do not use, broadband. To expand broadband deployment and adoption, the American Recovery and Reinvestment Act (the Recovery Act) provided $7.2 billion to the Department of Commerce's National Telecommunications and Information Administration (NTIA) and the Department of Agriculture's Rural Utilities Service (RUS) for grants or loans to a variety of program applicants. The agencies must award all funds by September 30, 2010. This testimony provides preliminary information on the challenges NTIA and RUS face; the steps taken to address challenges; and the remaining risks in (1) evaluating applications and awarding funds and (2) overseeing funded projects. This statement is based on related ongoing work that GAO expects to complete in November. To conduct this work, GAO is reviewing relevant laws and program documents and interviewing agency officials and industry stakeholders. While this testimony does not include recommendations, GAO expects to make recommendations in its November report.
Application evaluation and awards. NTIA and RUS face scheduling, staffing, and data challenges in evaluating applications and awarding funds. NTIA, through its new Broadband Technology Opportunities Program, and RUS, through its new Broadband Initiatives Program, must review more applications and award far more funds than the agencies formerly handled through their legacy telecommunications grant or loan programs. NTIA and RUS initially proposed distributing these funds in three rounds. To meet these challenges, the agencies have established a two-step application evaluation process that uses contractors or volunteers for application reviews and plan to publish information on applicants' proposed service areas to help ensure the eligibility of proposed projects. While these steps address some challenges, the upcoming deadline for awarding funds may pose risks to the thoroughness of the application evaluation process. In particular, the agencies may lack time to apply lessons learned from the first funding round and to thoroughly evaluate applications for the remaining rounds. Oversight of funded projects. NTIA and RUS will oversee a significant number of projects, including projects with large budgets and diverse purposes and locations. In doing so, the agencies face the challenge of monitoring these projects with far fewer staff per project than were available for their legacy grant and loan programs. To address this challenge, NTIA and RUS have hired contractors to assist with oversight activities and plan to require funding recipients to complete quarterly reports and, in some cases, obtain annual audits. Despite these steps, several risks remain, including a lack of funding for oversight beyond fiscal year 2010 and a lack of updated performance measures to ensure accountability for NTIA and RUS. In addition, NTIA has yet to define annual audit requirements for commercial entities funded under the Broadband Technology Opportunities Program.
GAO-10-192T, Recovery Act: Preliminary Observations on the Implementation of Broadband Programs
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Testimony:
Before the Committee on Commerce, Science, and Transportation, U.S.
Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 2:30 p.m. EDT:
Tuesday, October 27, 2009:
Recovery Act:
Preliminary Observations on the Implementation of Broadband Programs:
Statement of Mark L. Goldstein, Director Physical Infrastructure
Issues:
GAO-10-192T:
GAO Highlights:
Highlights of [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-10-
192T], a testimony before the Committee on Commerce, Science, and
Transportation, U.S. Senate.
Why GAO Did This Study:
Access to broadband service is seen as vital to economic, social, and
educational development, yet many areas of the country lack access to,
or their residents do not use, broadband. To expand broadband
deployment and adoption, the American Recovery and Reinvestment Act
(the Recovery Act) provided $7.2 billion to the Department of Commerce‘
s National Telecommunications and Information Administration (NTIA) and
the Department of Agriculture‘s Rural Utilities Service (RUS) for
grants or loans to a variety of program applicants. The agencies must
award all funds by September 30, 2010.
This testimony provides preliminary information on the challenges NTIA
and RUS face; the steps taken to address challenges; and the remaining
risks in (1) evaluating applications and awarding funds and (2)
overseeing funded projects. This statement is based on related ongoing
work that GAO expects to complete in November. To conduct this work,
GAO is reviewing relevant laws and program documents and interviewing
agency officials and industry stakeholders. While this testimony does
not include recommendations, GAO expects to make recommendations in its
November report.
What GAO Found:
Application evaluation and awards. NTIA and RUS face scheduling,
staffing, and data challenges in evaluating applications and awarding
funds. NTIA, through its new Broadband Technology Opportunities
Program, and RUS, through its new Broadband Initiatives Program, must
review more applications and award far more funds than the agencies
formerly handled through their legacy telecommunications grant or loan
programs (see fig.) NTIA and RUS initially proposed distributing these
funds in three rounds. To meet these challenges, the agencies have
established a two-step application evaluation process that uses
contractors or volunteers for application reviews and plan to publish
information on applicants‘ proposed service areas to help ensure the
eligibility of proposed projects. While these steps address some
challenges, the upcoming deadline for awarding funds may pose risks to
the thoroughness of the application evaluation process. In particular,
the agencies may lack time to apply lessons learned from the first
funding round and to thoroughly evaluate applications for the remaining
rounds.
Oversight of funded projects. NTIA and RUS will oversee a significant
number of projects, including projects with large budgets and diverse
purposes and locations. In doing so, the agencies face the challenge of
monitoring these projects with far fewer staff per project than were
available for their legacy grant and loan programs. To address this
challenge, NTIA and RUS have hired contractors to assist with oversight
activities and plan to require funding recipients to complete quarterly
reports and, in some cases, obtain annual audits. Despite these steps,
several risks remain, including a lack of funding for oversight beyond
fiscal year 2010 and a lack of updated performance measures to ensure
accountability for NTIA and RUS. In addition, NTIA has yet to define
annual audit requirements for commercial entities funded under the
Broadband Technology Opportunities Program.
Figure: Recovery Act Broadband Grant and Loan Programs Are Larger Than
Legacy Programs:
[Refer to PDF for image: graph]
NTIA and RUS programs: NTUA Broadband Technology Opportunities Program
(FY 2009-2010);
Recovery Act programs: 4,700.
NTIA and RUS programs: NTIA Public Safety Interoperable Communications
Program (FY 2007);
Legacy programs: 1,000.
NTIA and RUS programs: NTIA other legacy grant programs (FY 1994-2009);
Legacy programs: 23.
NTIA and RUS programs: RUS Broadband Initiatives Program (FY 2009-
2010);
Recovery Act programs: 2,500.
NTIA and RUS programs: RUS legacy grant and loan programs (FY 2002-
2009);
Legacy programs: 13.
Appropriations for Recovery Act broadband programs and average annual
appropriations for legacy programs (in millions of dollars).
Source: GAO analysis of NTIA and RUS data.
[End of figure]
View [hyperlink, http://www.gao.gov/products/GAO-10-192T] or key
components. For more information, contact Mark L. Golstein at (202) 512-
2834 or goldsteinm@gao.gov.
[End of section]
Mr. Chairman and Members of the Committee:
We appreciate the opportunity to participate in this hearing to discuss
the implementation and oversight of the broadband programs funded
through the American Recovery and Reinvestment Act[Footnote 1] (the
Recovery Act). As you know, access to broadband is seen as vital to
economic, social, and educational development, yet many areas of the
country lack access to, or their residents do not use, broadband. The
Recovery Act appropriated $7.2 billion to extend access to broadband
throughout the United States. Of the $7.2 billion, $4.7 billion was
appropriated for the Department of Commerce's (DOC) National
Telecommunications and Information Administration (NTIA) and $2.5
billion for the Department of Agriculture's (USDA) Rural Utilities
Service (RUS). Specifically, the Recovery Act authorized NTIA, in
consultation with the Federal Communications Commission (FCC), to
create the Broadband Technology Opportunities Program (BTOP) to manage
competitive grants to a variety of entities for broadband
infrastructure, public computer centers, and innovative projects to
stimulate demand for, and adoption of, broadband. Of the $4.7 billion,
up to $350 million was available pursuant to the Broadband Data
Improvement Act for the purpose of developing and maintaining a
nationwide map featuring the availability of broadband service, with
some funds available for transfer to FCC for the development of a
national broadband plan to help ensure that all people in the United
States have access to broadband. Similarly, RUS established the
Broadband Initiatives Program (BIP) to make loans and to award grants
and loan/grant combinations for broadband infrastructure projects in
rural areas.
NTIA and RUS have taken many important steps to implement the broadband
provisions in the Recovery Act. NTIA, RUS, and FCC held a series of
public meetings in March 2009, explaining the overall goals of the new
broadband programs. NTIA and RUS also sought public comments from
interested stakeholders on various challenges that the agencies would
face in implementing the broadband programs through these meetings and
by issuing a Request for Information. NTIA and RUS received over 1,500
comments. FCC, in a consultative role, provided support in developing
technical definitions and participated in the public meetings. NTIA and
RUS initially indicated that they would award Recovery Act broadband
program funds in three jointly-conducted rounds. On July 1, 2009, Vice
President Joe Biden, Secretary of Commerce Gary Locke, and Secretary of
Agriculture Tom Vilsack announced the release of the first joint Notice
of Funds Availability (NOFA) detailing the requirements, rules, and
procedures for applying for BTOP grants and BIP grants, loans, and
loan/grant combinations.[Footnote 2] Subsequently, the agencies held 10
joint informational workshops throughout the country for potential
applicants to explain the programs, the application process, and the
evaluation and compliance procedures, and to answer stakeholder
questions. NTIA and RUS coordinated and developed a single online
intake system whereby applicants could apply for either BTOP or BIP
funding. NTIA and RUS must award all funds by September 30, 2010, and
both BTOP and BIP projects must be substantially complete within 2
years and fully complete no later than 3 years following the date of
issuance of their award.
My testimony today discusses (1) the challenges and risks, if any, NTIA
and RUS face in evaluating applications and awarding funds, and the
steps they have they taken to address identified risks, and (2) the
challenges and risks, if any, the agencies face in overseeing funded
projects, and the steps they have taken to address identified risks. My
testimony presents preliminary observations based on ongoing work we
expect to complete this fall.
To conduct our work, we are reviewing FCC, NTIA, and RUS program
documentation. We are also interviewing relevant staff from the three
agencies regarding their agencies' efforts to implement the broadband
provisions of the Recovery Act. We are reviewing relevant laws and
regulations; guidance from the Office of Management and Budget (OMB),
DOC and the Department of Justice, and the Domestic Working Group; and
prior GAO reports. We are comparing the agencies' efforts to the laws,
regulations, and guidance to identify strengths and weaknesses in their
efforts. To determine what reporting and audit requirements will apply
to recipients of NTIA and RUS funding, we are reviewing the Single
Audit Act,[Footnote 3] agency regulations and documents, and OMB
guidance, and interviewing agency officials. Finally, we are
interviewing stakeholder organizations representing a range of
interests, including associations representing wireline, wireless,
cable, and satellite service providers; consumer advocates;
telecommunication policy researchers; and state telecommunications
regulators to obtain their views on the potential challenges and risks
facing the agencies. We are conducting this performance audit, which
began in April 2009, in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
NTIA and RUS Have Taken Steps to Address Scheduling, Staffing, and Data
Challenges; However, Some Risks Remain:
NTIA and RUS face scheduling, staffing, and data challenges in
evaluating applications and awarding funds. The agencies have taken
steps to meet these challenges, such as adopting a two-step evaluation
process, utilizing nongovernmental personnel, and publishing
information on the applicant's proposed service area. While these steps
address some challenges, the agencies lack the needed time to apply
lessons learned from the first funding round and face a compressed
schedule to review new applications. As a result, the agencies may risk
awarding funds to projects that are not sustainable or do not meet the
priorities of the Recovery Act.
NTIA and RUS Face Scheduling, Staffing, and Data Challenges in the
Evaluation of Applications and Awarding of Funds:
Scheduling challenges. The agencies have 18 months to establish their
respective programs, solicit and evaluate applications, and award all
funds. While in some instances a compressed schedule does not pose a
challenge, two factors enhance the challenges associated with the 18-
month schedule. First, NTIA must establish the BTOP program from
scratch, and RUS has existing broadband grant and loan programs, albeit
on a much smaller scale than BIP. Second, the agencies face an
unprecedented volume of funds and anticipated number of applications
compared to their previous experiences.
The funding associated with BTOP and BIP exceed NTIA's and RUS's prior
experience with other grant or loan programs (see fig. 1). In
comparison to the $4.7 billion appropriation NTIA received for BTOP,
its Public Telecommunications Facilities Program received an average of
$23 million annually and its Telecommunications Opportunities Program
received $24 million annually. NTIA also administered the one-time
Public Safety Interoperable Communications Program (PSIC), with an
appropriation of about $1 billion, in close coordination with the
Department of Homeland Security (DHS). In comparison to the $2.5
billion appropriation RUS received for BIP,[Footnote 4] its Community
Connect Program's average annual appropriation was $12 million and its
Broadband Access Loan Program's average annual appropriation was $15
million.
Figure 1: Average Annual Appropriations for NTIA and RUS
Telecommunication Grant and Loan Programs:
[Refer to PDF for image: graph]
NTIA and RUS programs: NTIA BTOP (FY 2010);
Recovery Act programs: 4700.
NTIA and RUS programs: NTIA Public Safety Interoperable Communications
Program;
Legacy programs: 1000.
NTIA and RUS programs: NTIA Public Telecommunications Facilities
Program;
Legacy programs: 23.
NTIA and RUS programs: NTIA Technology Opportunities Program;
Legacy programs: 24.
NTIA and RUS programs: RUS BIP (FY 2010);
Recovery Act programs: 2500.
NTIA and RUS programs: RUS Community Connect Grant Program;
Legacy programs: 12.
NTIA and RUS programs: RUS Rural Broadband Access Loan and Loan
Guarantee Program;
Recovery Act programs: 15.
Program appropriations for BTOP and BIP; and average annual
appropriations for legacy programs (in millions of dollars).
Source: GAO analysis of NTIA and RUS data.
Note: RUS's loan allocation will support a principal amount exceeding
the appropriation. For example, RUS expects the $500 million allocated
to loans under BIP will support a total principal amount of loans of
about $7 billion. Similarly, RUS officials indicated that, on average,
the corresponding annual total principal amount for loans under the
Broadband Access Loan Program was $300 million.
[End of figure]
NTIA and RUS also face an increase in the number of applications that
they must review and evaluate in comparison to similar programs (see
fig. 2). According to preliminary information from the agencies, they
received approximately 2,200 applications requesting $28 billion in
grants and loans in the first funding round. Of these 2,200
applications, NTIA received 940 applications exclusively for BTOP and
RUS received 400 applications exclusively for BIP and 830 dual
applications that both agencies will review. In comparison, NTIA
received an average of 838 applications annually for the
Telecommunications Opportunities Program; for PSIC, NTIA and DHS
received 56 applications from state and territorial governments
containing a total of 301 proposed projects. RUS received an average of
35 applications annually for the Broadband Access Loan program and an
average of 105 applications annually for the Community Connect Program.
Figure 2: Average Annual Applications for NTIA and RUS
Telecommunication Grant and Loan Programs:
[Refer PDF for image: graph]
NTIA and RUS programs: NTIA BTOP (first funding round);
Applications received: 940;
Applications received by both BIP and BTOP: 830;
Total: 1,770.
NTIA and RUS programs: NTIA Public Safety Interoperable Communications
Program;
Applications received: 56[A].
NTIA and RUS programs: NTIA Technology Opportunities Program;
Applications received: 838.
NTIA and RUS programs: RUS BIP (first funding round);
Applications received: 400;
Applications received by both BIP and BTOP: 830;
Total: 1,230.
NTIA and RUS programs: RUS Community Connect Grant Program;
Applications received: 105.
NTIA and RUS programs: RUS Rural Broadband Access Loan and Loan
Guarantee Program;
Applications received: 35.
Source: GAO analysis of NTIA and RUS data.
[A] In 2007, through the PSIC grant program, NTIA coordinated with the
DHS's grants office to review 56 grant applications from states and
territories, representing about 301 individual projects, and awarding
almost $1 billion in grant funds to assist public safety agencies in
enhancing communications interoperability nationwide.
[End of figure]
Staffing challenges. NTIA and RUS will need additional personnel to
administer BTOP and BIP. NTIA's initial risk assessment indicated that
a lack of experienced and knowledgeable staff was a key risk to
properly implementing the program in accordance with the priorities of
the Recovery Act. In its fiscal year 2010 budget request to Congress,
NTIA estimated that it will need 30 full-time-equivalent staff in
fiscal year 2009 and 40 more full-time-equivalent staff for fiscal year
2010. While RUS already has broadband loan and grant programs in place
and staff to administer them, it also faces a shortage of personnel.
RUS's staffing assessments indicated that the agency will need 47
additional full-time-equivalents to administer BIP.
Data challenges. NTIA and RUS lack detailed data on the availability of
broadband service throughout the country that may limit their ability
to target funds to priority areas. According to the agencies, priority
areas include unserved and underserved areas. The agencies require
applicants to assemble their proposed service areas from contiguous
census blocks and to identify the proposed service area as unserved or
underserved. However, the agencies will be awarding loans and grants
before the national broadband plan or broadband mapping is complete.
FCC must complete the national broadband plan by February 17, 2010, and
NTIA does not expect to have complete, national data on broadband
service levels at the census block level until at least March
2010.[Footnote 5]
NTIA and RUS Have Taken Steps That Address Some Challenges in the
Evaluation of Applications and Awarding of Funds:
Two-step evaluation process. To address the scheduling and staffing
challenges, NTIA and RUS are using a two-step process. In the first
step, the agencies will evaluate and score applications based on the
criteria in the NOFA, such as project purpose and project viability.
During this step, the agencies will select which applications proceed
to the second step. After the first step is complete and the pool of
potential projects is reduced, the agencies intend to conduct the
second step--due diligence, which involves requesting extra
documentation to confirm and verify information contained in an
application. Since not all applications will proceed to the second
step, not all applicants will be required to submit extra documentation
which will reduce the amount of information the agencies must review.
Use of nongovernmental personnel. Both NTIA and RUS are using
nongovernmental personnel to address anticipated staffing needs
associated with the evaluation of applications and awarding of funds.
To evaluate applications, NTIA is using a volunteer peer review system,
in which three unpaid, expert reviewers examine and score applications;
these volunteers must have significant expertise and experience in
broadband-related activities, such as the construction and operation of
a broadband network. In addition, NTIA will use contractors in an
administrative role to assist the expert reviewers. RUS will also use
contractors to evaluate and score applications. Regardless of who
reviews the application, the final selection and funding decisions are
to be formally made by a selecting official in each agency.
Publish applicant information. To address the challenge of incomplete
data on broadband service, NTIA and RUS require applicants to identify
and attest to the service availability--either unserved or underserved-
-in their proposed service area. In order to verify these self-
attestations, NTIA and RUS will post a public notice identifying the
proposed funded service area of each broadband infrastructure
applicant. The agencies intend to allow existing service providers in
the proposed service area to question an applicant's characterization
of broadband service in that area. If this information raises
eligibility issues, RUS may send field staff to the proposed service
area to conduct a market survey. RUS will resolve eligibility issues by
determining the actual availability of broadband service in the
proposed service area. NTIA has no procedure for resolving these types
of issues.
The Agencies' Remaining Schedule May Pose Risks to the Review of
Applications:
During the first funding round, the compressed schedule posed a
challenge for both applicants and the agencies. As mentioned
previously, NTIA and RUS initially proposed to utilize three separate
funding rounds during the 18-month window to award the $7.2 billion. As
such, each funding round would operate under a compressed schedule.
Eight of the 15 industry stakeholders with whom we spoke expressed
concern that a small entity would have difficulties in completing an
application in a timely manner. The compressed schedule also posed
challenges for the agencies. During the first funding round, the
agencies missed several milestones. For example, RUS originally
intended to select a contractor on June 12, 2009, and NTIA intended to
select a contractor on June 30, 2009; however, both agencies missed
their target dates, with RUS selecting its contractor on July 31, 2009,
and NTIA selecting its contractor on August 3, 2009.
Because of the compressed schedule within the individual funding
rounds, NTIA and RUS have less time to review applications than similar
grant and loan programs. In the first funding round, the agencies have
approximately 2 months to review 2,200 applications. In contrast, from
fiscal year 2005 through 2008, RUS took from 4 to 7 months to receive
and review an average of 26 applications per year for its Broadband
Access Loan Program. NTIA's Public Telecommunications Facilities
Program operated on a year-long grant award cycle. For the PSIC
program, NTIA and DHS completed application reviews in roughly 6
months.
Based on their experience with the first funding round, NTIA and RUS
are considering reducing the number of funding rounds from three to
two. In the second and final funding round, the agencies anticipate
extending the window for entities to submit applications. This change
will help mitigate the challenges the compressed schedule posed for
applicants in the first funding round. However, it is unclear whether
the agencies will similarly extend the amount of time to review the
applications and thereby bring the review time more in line with the
experiences of other broadband grant and loan programs. NTIA officials
indicated that the agency would like to make all awards by summer 2010,
to promote the stimulative effect of the BTOP program. Alternatively,
RUS officials indicated that the agency will make all awards by
September 30, 2010, as required by the Recovery Act, indicating a
potentially longer review process.
Depending on the timeframes NTIA and RUS select, the risks for both
applicants and the agencies may persist with two funding rounds. In
particular, these risks include:
* Limited opportunity for "lessons learned." Based on the current
schedule, NTIA and RUS will have less than one month between the
completion of the first funding round and the beginning of the second
funding round. Because of this compressed time frame, applicants might
not have sufficient time to analyze their experiences with the first
funding round to provide constructive comments to the agencies.
Further, the agencies might not have sufficient time to analyze the
outcomes of the first round and the comments from potential applicants.
As such, a compressed schedule limits the opportunity to apply lessons
learned from the first funding round to improve the second round.
* Compressed schedule to review applications. Due to the complex nature
of many projects, NTIA and RUS need adequate time to evaluate the wide
range of applications and verify the information contained in the
applications. NTIA is soliciting applications for infrastructure,
public computer center, and sustainable adoption projects. Therefore,
NTIA will receive applications containing information responding to
different criteria and it will evaluate the applications with different
standards. Even among infrastructure applications, a wide variability
exists in the estimates, projections, and performance measures
considered reasonable for a project. For example, in RUS's Broadband
Access Loan Program, approved broadband loans for the highest-cost
projects, on a cost-per-subscriber basis, ranged as much as 15, 18, and
even 70 times as high as the lowest-cost project, even among projects
using the same technology to deploy broadband.
* Continued lack of broadband data and plan. According to NTIA,
national broadband data provide critical information for grant making.
NTIA does not expect to have complete data for a national broadband map
until at least March 2010. Also, as mentioned previously, FCC must
deliver to Congress a national broadband plan by February 17, 2010. By
operating on a compressed schedule, NTIA and RUS will complete the
first funding round before the agencies have the data needed to target
funds to unserved and underserved areas and before FCC completes the
national broadband plan. Depending on the time frames the agencies
select for the second funding round, they may again review applications
without the benefit of national broadband data and a national broadband
plan.
NTIA and RUS Face Staffing Challenges in Overseeing Funded Projects,
and Despite Steps Taken, Several Risks to Project Oversight Remain:
NTIA and RUS will need to oversee a far greater number of projects than
in the past, including projects with large budgets and a diversity of
purposes and locations. In doing so, the agencies face the challenge of
monitoring these projects with far fewer staff per project than were
available in similar grant and loan programs they have managed. To
address this challenge, NTIA and RUS procured contractors to assist
with oversight activities and will require funding recipients to
complete quarterly reports and, in some cases, obtain annual audits.
Despite the steps taken, several risks remain to adequate oversight.
These risks include insufficient resources to actively monitor funded
projects beyond fiscal year 2010 and a lack of updated performance
measures for NTIA and RUS. In addition, NTIA has yet to define annual
audit requirements for commercial entities funded under BTOP.
A Large Number of Projects to Oversee Creates Staffing Challenges:
NTIA and RUS will need to oversee a far greater number of projects than
in the past. Although the exact number of funded projects is unknown,
both agencies have estimated that they could fund as many as 1,000
projects each--or 2,000 projects in total--before September 30,
2010.[Footnote 6] In comparison, from fiscal year 1994 through fiscal
year 2004, NTIA awarded a total of 610 grants through its Technology
Opportunities Program--or an average of 55 grants per year. From fiscal
year 2005 through fiscal year 2008, RUS awarded a total of 84 Community
Connect grants, averaging 21 grants per year; and through its Broadband
Access Loan Program, RUS approved 92 loans from fiscal year 2003
through fiscal year 2008, or about 15 loans per year.
In addition to overseeing a large number of projects, the scale and
diversity of BTOP-and BIP-funded projects are likely to be much greater
than projects funded under the agencies' prior grant programs. Based on
NTIA's estimated funding authority for BTOP grants and RUS's estimated
potential total funding for BIP grants, loans, and loan/grant
combinations, if the agencies fund 1,000 projects each, as estimated,
the average funded amount for BTOP and BIP projects would be about
$4.35 million and $9 million, respectively. In comparison, from fiscal
year 1994 to fiscal year 2004, NTIA's average grant award for its
Technology Opportunities Program was about $382,000 and from fiscal
year 2005 to fiscal year 2008, RUS awarded, on average, about $521,000
per Community Connect grant award. Further, the agencies expect to fund
several different types of projects that will be dispersed nationwide,
such as infrastructure and public computer center projects.
Because of the volume of expected projects, NTIA and RUS plan to
oversee and monitor BTOP-and BIP-funded projects with fewer staff
resources per project than the agencies used in similar grant and loan
programs (see table 1). NTIA reported that it will need 41 full-time-
equivalent staff to manage BTOP; at the time of our review it had
filled 33 of these positions. Based on NTIA's estimate of funding 1,000
projects and its estimated 41 full-time-equivalent staff needed, NTIA
will have about 1 full-time-equivalent staff available for every 24
projects. NTIA reported that it is continually assessing its resources
and is considering additional staff hires. Similarly, RUS reported that
it will need 47 full-time-equivalent staff to administer all aspects of
BIP, and the majority of these positions were to be filled by the end
of September 2009. These 47 staff members are in addition to the 114
full-time-equivalent staff in the Rural Development Telecommunications
program which support four existing loan or grant programs.[Footnote 7]
If RUS funds a total of 1,000 projects, as estimated, based on the 47
staff assigned to BIP, it would have 1 staff of any capacity available
for every 21 funded projects. RUS reported that it could use other
staff in the Rural Development Telecommunications program to address
BIP staffing needs, if necessary.
Table 1: Estimated NTIA and RUS Full-Time-Equivalent Staff for Grant
and Loan Programs:
Program: NTIA BTOP (FY 2010) (NTIA estimate);
Average number of projects funded per year: 1,000 in FY 2010;
Average full-time- equivalent staff per year: 41;
Ratio of funded projects to full-time- equivalent staff: 24 to 1.
Program: NTIA Technology Opportunities Program[A];
Average number of projects funded per year: 55;
Average full-time-equivalent staff per year: 16;
Ratio of funded projects to full-time-equivalent staff: 3 to 1.
Program: RUS BIP (FY 2010) (RUS estimate);
Average number of projects funded per year: 1,000 in FY 2010;
Average full-time-equivalent staff per year: 47;
Ratio of funded projects to full-time-equivalent staff: 21 to 1.
Program: RUS Broadband Access Loan Program[B];
Average number of projects funded per year: 15;
Average full-time-equivalent staff per year: 17;
Ratio of funded projects to full-time-equivalent staff: .9 to 1.
Source: GAO analysis of NTIA and RUS data.
Note: In our review, we did not evaluate whether the per-project
staffing levels available to NTIA for its Technology Opportunities
Program or to RUS for its Broadband Access Loan Program were
appropriate for those programs.
[A] NTIA Technology Opportunities Program data are for fiscal years
1994 through 2004.
[B] RUS Broadband Access Loan Program data are for fiscal years 2003
through 2008. RUS Community Connect Grant program data are not included
here because RUS reported that it does not have full-time staff
dedicated to this program.
[End of table]
To Address Project Oversight Challenges, NTIA and RUS Are Procuring
Contractor Services and Requiring Funding Recipient Reports and Audits:
Contractor services. NTIA and RUS will use contractors to help monitor
and provide technical assistance for BTOP and BIP projects. On August
3, 2009, NTIA procured contractor services to assist in a range of
tasks, including tracking and summarizing grantees' performance,
developing grant-monitoring guidance, and assisting with site visits
and responses to audits of BTOP-funded projects. On July 31, 2009, RUS
awarded a contract to a separate contractor for a wide range of program
management activities for BIP. RUS's contractor will be responsible for
a number of grant-monitoring activities, including developing a
workflow system to track grants and loans, assisting RUS in developing
project monitoring guidance and policies, and assisting in site visits
to monitor projects and guard against waste, fraud, and abuse.
In addition to its contractor, RUS intends to use existing field staff
for program oversight. RUS reported that it currently has 30 general
field representatives in the telecommunications program and 31 field
accountants in USDA's Rural Development mission area that may be
available to monitor broadband programs. In addition, RUS officials
told us that Rural Development has an estimated 5,000 field staff
available across the country that support a variety of Rural
Development loan and grant programs. Although these individuals do not
have specific experience with telecommunications or broadband projects,
according to RUS, this staff has experience supporting RUS's business
and community development loan programs, and this workforce could be
used for project monitoring activities if there were an acute need.
Unlike RUS, NTIA does not have field staff. According to NTIA, the
agency has been in talks with RUS about sharing some of RUS's field
staff to monitor BTOP projects, although no formal agreement is in
place.
Recipient reports and audits. To help address the challenge of
monitoring a large number of diverse projects, NTIA and RUS have
developed program-specific reporting requirements that are intended to
provide transparency on the progress of funded projects. Based on our
review of the requirements, if NTIA and RUS have sufficient capacity to
review and verify that information provided by funding recipients is
accurate and reliable, these requirements could provide the agencies
with useful information to help them monitor projects. The following
reporting requirements apply to BTOP and BIP funding recipients:
* General recovery act reports. Section 1512 of the Recovery Act and
related OMB guidance requires all funding recipients to report
quarterly to a centralized reporting system on, among other things, the
amount of funding received that was expended or obligated, the project
completion status, and an estimate of the number of jobs created or
retained through the funded project, among other information.[Footnote
8] Under OMB guidance, awarding agencies are responsible for ensuring
that funding recipients submit timely reports, and must perform a data
quality review and request further information or corrections by
funding recipients, if necessary.[Footnote 9]
* BTOP-specific reports. The Recovery Act requires BTOP funding
recipients to report quarterly on their use of funds and NTIA to make
these reports available to the public.[Footnote 10] NTIA also requires
that funding recipients report quarterly on their broadband equipment
purchases and progress made in achieving goals, objectives, and
milestones identified in the recipient's application, including whether
the recipient is on schedule to substantially complete its project no
later than 2 years after the award and complete its project no later
than 3 years after the award. Recipients of funding for infrastructure
projects must report on a number of metrics, such as the number of
households and businesses receiving new or improved access to broadband
as a result of the project, and the advertised and averaged broadband
speeds and the price of the broadband services provided.[Footnote 11]
* BIP-specific reports. RUS requires BIP funding recipients to submit
quarterly balance sheets, income and cash-flow statements, and the
number of customers taking broadband service on a per community basis,
among other information. BIP funding recipients must also report
annually on the number of households; businesses; and educational,
library, health care, and public safety providers subscribing to new or
improved access to broadband. RUS officials reported that it plans to
use quarterly reports to identify specific projects for on-site
monitoring and to determine when that monitoring should take place.
NTIA and RUS also require some funding recipients to obtain annual,
independent audits of their projects; however, NTIA has yet to
determine what annual audit requirements, if any, will apply to
commercial grantees (see table 2). The primary tool for monitoring
federal awards through annual audits is the single audit report
required under the Single Audit Act, as amended.[Footnote 12] We
recently reported that the Single Audit is a valuable source of
information on internal control and compliance for use in a
management's risk assessment and monitoring processes--and with some
adjustments, we said, the Single Audit process could be improved for
Recovery Act oversight.[Footnote 13] The Single Audit report is
prepared in accordance with OMB's implementing guidance in OMB Circular
No. A-133.[Footnote 14] All states, local governments, and nonprofit
organizations that expend over $500,000 in federal awards per year must
obtain an annual Single Audit or, in some cases, a program-specific
audit. Commercial (for profit) entities awarded federal funding of any
amount are not covered by the Single Audit Act, and states, local
governments, and nonprofit organizations expending less than $500,000
in federal awards per year are also not required to obtain an annual
Single Audit under the Single Audit Act.[Footnote 15] RUS, however,
requires all commercial recipients of BIP funds to obtain an annual,
independent audit of their financial statements under requirements that
also apply to RUS's existing broadband grant and loan
programs.[Footnote 16] NTIA has yet to determine what annual audit
requirements, if any, will apply to commercial grantees.
Table 2: Annual Audit Requirements for BTOP and BIP Funding Recipients:
Amount of federal awards expended annually: More than $500,000;
Type of entity: Nonprofit organizations, state or local government, or
tribal authority;
BTOP annual audit requirements: Single audit, OMB Circular A-133;
BIP annual audit requirements: Single audit, OMB Circular A-133.
Amount of federal awards expended annually: More than $500,000;
Type of entity: Commercial organizations;
BTOP annual audit requirements: To be determined;
BIP annual audit requirements: Financial statement audit, 7 CFR 1773.3.
Amount of federal awards expended annually: Less than $500,000;
Type of entity: Nonprofit organizations, state or local government, or
tribal authority;
BTOP annual audit requirements: To be determined;
BIP annual audit requirements: None.
Amount of federal awards expended annually: Less than $500,000;
Type of entity: Commercial organizations;
BTOP annual audit requirements: To be determined;
BIP annual audit requirements: Financial statement audit, 7 CFR 1773.3.
Source: GAO analysis of NTIA and RUS data.
[End of table]
Several Risks to Project Oversight Remain:
Lack of sufficient resources beyond fiscal year 2010. Both NTIA and RUS
face the risk of having insufficient resources to actively monitor BTOP-
and BIP-funded projects after September 30, 2010, which could result in
insufficient oversight of projects not yet completed by that date. As
required by the Recovery Act, NTIA and RUS must ensure that all awards
are made before the end of fiscal year 2010. Under the current
timeline, the agencies do not anticipate completing the award of funds
until that date. Funded projects must be substantially complete no
later than 2 years, and complete no later than 3 years following the
date of issuance of the award. Yet, the Recovery Act provides funding
through September 30, 2010. The DOC Inspector General has expressed
concerns that "without sufficient funding for a BTOP program office,
funded projects that are still underway at September 30, 2010, will no
longer be actively managed, monitored, and closed."[Footnote 17] NTIA
officials told us that NTIA has consulted with the OMB about seeking
BTOP funding after September 30, 2010, to allow it to close grants. RUS
officials reported that given the large increase in its project
portfolio from BIP, RUS's capacity to actively monitor these projects
after its BIP funding expires may be stressed. Without sufficient
resources to actively monitor and close BTOP grants and BIP grants and
loans by the required completion dates, NTIA and RUS may be unable to
ensure that all recipients have expended their funding and completed
projects as required.
Lack of updated performance measures. The Government Performance and
Results Act of 1993 (GPRA) directs federal agencies to establish
objective, quantifiable, and measurable goals within annual performance
plans to improve program effectiveness, accountability, and service
delivery.[Footnote 18] Specifically, performance measures allow an
agency to track its progress in achieving intended results and help
inform management decisions about such issues as the need to redirect
resources or shift priorities.
NTIA has established preliminary program performance measures for BTOP,
including job creation, increasing broadband access, stimulation of
private sector investment, and spurring broadband demand. However, NTIA
has not established quantitative, outcome-based goals for those
measures. NTIA officials reported that the agency lacks sufficient data
to develop such goals and is using applications for the first round of
funding to gather data, such as the expected number of households that
will receive new or improved broadband service. According to NTIA
officials, data collected from applications for the first funding round
could be used to develop program goals for future funding rounds.
RUS has established quantifiable program goals for its existing
broadband grant and loan programs, including a measure for the number
of subscribers receiving new or improved broadband service as a result
of the programs. However, according to USDA's fiscal year 2010 annual
performance plan, RUS has not updated its measures to reflect the large
increase in funding it received for broadband programs under the
Recovery Act. In addition, RUS officials told us that the agency's
existing measure for the number of subscribers receiving new or
improved broadband access as a result of its programs is based on the
estimates provided by RUS borrowers in their applications.
Consequently, these program goals do not reflect actual program
outcomes, but rather the estimates of applicants prior to the execution
of their funded projects.
Undefined audit requirements for commercial recipients. At the time of
our review, NTIA did not have audit requirements or guidelines in place
for annual audits of commercial entities receiving BTOP grants. NTIA
officials reported that because BTOP is the first program managed by
NTIA to make grants to commercial entities, the agency does not have
existing audit guidelines for commercial entities. However, NTIA
reported that it intends to develop program-specific audit requirements
and guidelines that will apply to commercial recipients that receive
broadband grants and it plans to have those guidelines in place by
December 2009. In the absence of clear audit requirements and
guidelines for commercial recipients of BTOP funding, NTIA will lack an
important oversight tool to identify risks and monitor BTOP grant
expenditures.
Mr. Chairman and Members of the Committee, this concludes my prepared
statement. Our future work, which we expect to complete in November,
will provide additional information on the implementation and oversight
of the broadband programs. We also expect to make recommendations at
that time. I would be pleased to respond to any questions that you or
other members of the committee might have.
For questions regarding this statement, please contact Mark L.
Goldstein at (202) 512-2834 or goldsteinm@gao.gov. Contact points for
our Offices of Congressional Relations and Public Relations can be
found on the last page of this statement. Michael Clements, Assistant
Director; Eli Albagli; Matt Barranca; Elizabeth Eisenstadt; Dean
Gudicello; Tom James; Kim McGatlin; Sara Ann Moessbauer; Josh Ormond;
and Mindi Weisenbloom also made key contributions to this statement.
[End of section]
Footnotes:
[1] Pub. L. No.111-5, 123 Stat. 115 (2009).
[2] 74 Fed. Reg. 33104 (2009).
[3] 31 U.S.C. ch. 75.
[4] RUS received $2.5 billion for both grants and the cost of loans.
RUS stated that it will allocate $2 billion for grants and $500 million
for loans. RUS expects the $500 million allocation to support loans
with a total principle amount of approximately $7 billion.
[5] As required by the Recovery Act, NTIA must make available a
national broadband map by February 17, 2011.
[6] Based on the average request in the first funding round, NTIA and
RUS may fund fewer projects than they originally estimated, but those
funded projects may be of higher cost. For example, according to NTIA
and RUS data, the average funding request for infrastructure projects
in the first round was more than $20 million for BTOP, more than $12
million for BIP, and more than $15 million for projects requesting
funding from either agency. If NTIA and RUS fund projects at the
average requested funding amount--and based on the total available
funding for the different types of projects--NTIA and RUS would award
about 930 projects in total.
[7] These programs are RUS's Telecommunications Infrastructure loan
program, the Distance Learning and Telemedicine loan and grant program,
the Broadband Access Loan Program, and Community Connect grant program.
[8] Pub. L. No. 111-5, div. A, tit. XV, § 1512(c),(d) (2009).
[9] See OMB memorandum, M-09-21, Implementing Guidance for the Reports
on Use of Funds Pursuant to the American Recovery and Reinvestment Act
of 2009 (June 22, 2009).
[10] Pub. L. No. 111-5, div. B, tit. VI, § 6001(i)(1) (2009).
[11] BTOP recipients of sustainable adoption and public computer center
funding must report project-specific information, such as the increase
in the number of households, businesses, and community anchor
institutions subscribing to broadband service and the primary uses of
the public computer center. 74 Fed. Reg. 33104, 33125.
[12] 31 U.S.C. ch. 75. A Single Audit consists of (1) an audit and
opinions on the fair presentation of the financial statements and the
Schedule of Expenditures of Federal Awards; (2) gaining an
understanding of and testing internal control over financial reporting
and the entity's compliance with laws, regulations, and contract or
grant provisions that have a direct and material effect on certain
federal programs (i.e., the program requirements); and (3) an audit and
an opinion on compliance with applicable program requirements for
certain federal programs. The audit report also includes the auditor's
schedule of findings and questioned costs, and the auditee's corrective
action plans and a summary of prior audit findings that includes
planned and completed corrective actions. Auditors are also required to
report on significant deficiencies in internal control and on
compliance associated with the audit of the financial statements.
Entities that expend federal awards under only one program may elect to
have a program-specific audit in lieu of the single audit.
[13] See GAO, Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-580]
(Washington, D.C.: Apr. 23, 2009), and Recovery Act: States' and
Localities' Current and Planned Uses of Funds While Facing Fiscal
Stresses, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-831T]
(Washington, D.C.: July 8, 2009).
[14] OMB Circular No. A-133, Audits of States, Local Governments, and
Non-Profit Organizations.
[15] Under DOC regulations, for-profit hospitals and commercial and
other organizations not subject to the Single Audit Act may be subject
to an audit requirement to the extent one is included in the federal
award document. See 15 C.F.R. § 14.26.
[16] 7 C.F.R. § 1773.3. All RUS commercial grantees must obtain an
annual audit of their financial statements by an independent, certified
public accountant meeting the standards set by RUS.
[17] Department of Commerce, Office of Inspector General Recovery Act
Flash Report: NTIA Should Apply Lessons Learned from Public Safety
Interoperable Communications Program to Ensure Sound Management and
Timely Execution of $4.7 Billion Broadband Technology Opportunities
Program (Washington, D.C., March 2009).
[18] 31 U.S.C. § 1115.
[End of section]
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