Recovery Act
Agencies Are Addressing Broadband Program Challenges, but Actions Are Needed to Improve Implementation Gao ID: GAO-10-80 November 16, 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 (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 report addresses the challenges NTIA and RUS face; steps taken to address challenges; and remaining risks in (1) evaluating applications and awarding funds and (2) overseeing funded projects. The Government Accountability Office (GAO) reviewed relevant laws and program documents and interviewed agency officials and industry stakeholders.
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, including NTIA's largest legacy grant program, Public Safety Interoperable Communications. NTIA and RUS initially proposed distributing these funds in three rounds, but recently adopted two rounds. To meet these challenges, the agencies have established a two-step application evaluation process that uses contractors or unpaid, independent experts 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. 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 goals 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.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-10-80, Recovery Act: Agencies Are Addressing Broadband Program Challenges, but Actions Are Needed to Improve Implementation
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
November 2009:
Recovery Act:
Agencies Are Addressing Broadband Program Challenges, but Actions Are
Needed to Improve Implementation:
GAO-10-80:
GAO Highlights:
Highlights of GAO-10-80, a report to congressional committees.
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
(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 report addresses the challenges NTIA and RUS face; steps taken to
address challenges; and remaining risks in (1) evaluating applications
and awarding funds and (2) overseeing funded projects. GAO reviewed
relevant laws and program documents and interviewed agency officials
and industry stakeholders.
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, including NTIA‘s largest legacy grant program, Public Safety
Interoperable Communications (see figure). NTIA and RUS initially
proposed distributing these funds in three rounds, but recently adopted
two rounds. To meet these challenges, the agencies have established a
two-step application evaluation process that uses contractors or
unpaid, independent experts 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 goals 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 Programs Are Larger Than Legacy
Programs:
[Refer to PDF for image: horizontal bar graph]
NTIA and RUS programs:
RUS legacy grant and loan programs (FY 2002-2009): Appropriations for
Recovery Act broadband programs and average annual appropriations for
legacy programs (in million of dollars): $13 (legacy program).
RUS Broadband Initiatives Program (FY 2009-2010): Appropriations for
Recovery Act broadband programs and average annual appropriations for
legacy programs (in million of dollars): $2,500 (Recovery Act program).
NTIA other legacy grant programs (FY 1994-2009): Appropriations for
Recovery Act broadband programs and average annual appropriations for
legacy programs (in million of dollars): $23 (legacy program).
NTIA Public Safety Interoperable Communications Program (FY 2007):
Appropriations for Recovery Act broadband programs and average annual
appropriations for legacy programs (in million of dollars): $1,000
(legacy program).
NTIA Broadband Technology Opportunities Program (FY 2009-2010):
Appropriations for Recovery Act broadband programs and average annual
appropriations for legacy programs (in million of dollars): $4,700
(Recovery Act program).
Source: GAO analysis of NTIA and RUS data.
Note: Because RUS provides loans, in addition to grants, the award
amount can exceed the appropriation.
[End of figure]
What GAO Recommends:
The Secretaries of Commerce and Agriculture should ensure sufficient
time to review applications in the second funding round, develop
contingency plans for oversight beyond fiscal year 2010, and develop
program performance measures. The Secretary of Commerce should also set
annual audit requirements for commercial grantees. NTIA and RUS agreed
with GAO‘s recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-10-80] or key
components. For more information, contact Mark L. Goldstein at (202)
512-2834 or goldsteinm@gao.gov.
[End of section]
Contents:
Letter:
Background:
NTIA and RUS Have Taken Steps to Address Challenges, Including
Scheduling and Staffing, Associated With Evaluating Applications and
Awarding Funds; However, Some Risks Remain:
NTIA and RUS Face Staffing Challenges in Overseeing Funded Projects,
and Despite Steps Taken, Several Risks to Project Oversight Remain:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Stakeholder Organizations or Individuals Interviewed:
Appendix II: Comments from the Department of Agriculture:
Appendix III: Comments from the Department of Commerce:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Summary of Broadband Program Provisions in the Recovery Act:
Table 2: Estimated NTIA and RUS Full-Time-Equivalent Staff for Grant
and Loan Programs:
Table 3: Annual Audit Requirements for BTOP and BIP Funding Recipients:
Figures:
Figure 1: Recovery Act Broadband Program Milestones:
Figure 2: Average Annual Appropriations for NTIA Telecommunications and
RUS Broadband Programs:
Figure 3: Average Annual Applications--NTIA Telecommunications and RUS
Broadband Programs:
Abbreviations:
BIP: Broadband Initiatives Program:
BTOP: Broadband Technology Opportunities Program:
DHS: Department of Homeland Security:
DOC: Department of Commerce:
FCC: Federal Communications Commission:
GPRA: Government Performance and Results Act of 1993:
kbps: kilobits per second:
NOFA: Notice of Funds Availability:
NTIA: National Telecommunications and Information Administration:
OMB: Office of Management and Budget:
PSIC: Public Safety Interoperability Communications:
RUS: Rural Utilities Service:
USDA: Department of Agriculture:
[End of section]
United States Government Accountability Office: Washington, DC 20548:
November 16, 2009:
The Honorable John D. Rockefeller, IV: Chairman: The Honorable Kay
Bailey Hutchison: Ranking Member: Committee on Commerce, Science, and
Transportation: United States Senate:
The Honorable Henry A. Waxman:
Chairman:
The Honorable Joe Barton:
Ranking Member:
Committee on Energy and Commerce:
House of Representatives:
Increasingly, access to affordable broadband telecommunications
[Footnote 1] is viewed as critical to economic, educational, and social
development. For example, broadband technology makes it possible for
patients to visit local clinics and receive medical attention from
specialists hundreds of miles away; allows students to access
information not available from their local libraries; and gives school
systems a means of using one teacher to provide advanced courses to
students in multiple schools. According to the Federal Communications
Commission (FCC), broadband technology is a key driver of economic
growth. The ability to share large amounts of information at ever-
greater speeds increases productivity, facilitates commerce, and drives
innovation. Broadband is particularly critical in rural areas, where
advanced communications can reduce the distances that isolate remote
communities. Yet millions of Americans do not have access to, or do not
use, broadband.
Enacted on February 17, 2009, the American Recovery and Reinvestment
Act[Footnote 2] (Recovery Act) appropriated $7.2 billion[Footnote 3] 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 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 and 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.[Footnote 4]
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.
This report is part of GAO's ongoing efforts to monitor Recovery Act
programs. In addition, it builds on prior reports by GAO and the
Inspectors General of USDA, DOC, and FCC that found that broadband
programs pose certain challenges--including difficulties in identifying
broadband coverage, targeting rural areas, and completing projects--and
may present risks of waste, fraud and abuse. Accordingly, this report
addresses two questions: (1) what are 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) what
are the challenges and risks, if any, the agencies face in overseeing
funded projects and the steps they have taken to address identified
risks?
To address these questions, we reviewed NTIA, RUS, and FCC program
documentation. We also interviewed relevant staff from the three
agencies regarding their agencies' efforts to implement the broadband
provisions of the Recovery Act. We reviewed relevant laws and
regulations; guidance from the Office of Management and Budget (OMB),
DOC, the Department Justice, and the Domestic Working Group, an
intergovernmental audit community of 19 federal and state agencies; and
prior GAO reports. We compared the agencies' efforts to relevant 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 reviewed the Single Audit
Act,[Footnote 5] agency regulations and documents, and OMB guidance,
and interviewed agency officials. We reviewed these audit requirements
to determine which requirements would apply to the different types of
applicants, including commercial (for profit) applicants, nonprofit
organizations, and state or local governments; we did not evaluate
which audit requirements would be most effective for providing
oversight of awarded funds. In addition, we did not evaluate how NTIA
or RUS have reviewed and analyzed submitted audit reports in the past
to determine the effectiveness of their review of these audit reports.
Finally, we interviewed 15 stakeholders representing a range of
interests, including associations representing wireline, wireless,
cable, and satellite service providers; consumer advocates;
telecommunications policy researchers; and state telecommunications
regulators to obtain their views on the potential challenges and risks
facing the agencies. See appendix I for a list of the stakeholders we
interviewed.
We conducted our work from April through November 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.
Background:
Both NTIA's BTOP and RUS's BIP programs focus primarily on broadband
infrastructure deployment, but the programs have some differences based
on provisions in the Recovery Act (see table 1). BTOP funds are
intended to expand broadband access to unserved and underserved areas.
[Footnote 6] BTOP funds can also be awarded to projects that promote
broadband demand and adoption and provide equipment, training, and
access for higher education, job creation, public safety and health,
and other facilities that serve vulnerable populations. BIP focuses on
rural areas[Footnote 7] and its funds can be used solely for broadband
infrastructure deployment. The agencies also have different project
eligibility requirements. For example, the Recovery Act requires that
BTOP applicants demonstrate that a project would not have been
implemented during the grant period without federal grant assistance;
the Recovery Act does not include a similar requirement for RUS
broadband applicants.[Footnote 8]
Table 1: Summary of Broadband Program Provisions in the Recovery Act:
Requirement: Purpose;
Agencies: NTIA BTOP: Infrastructure: Provide access to consumers
residing in unserved areas and improved access to consumers residing in
underserved areas. Access and education: Provide broadband access,
education, awareness, training, equipment, and support to schools,
libraries, health care providers, job-creating strategic facilities,
and other organizations serving vulnerable populations. Public safety:
Provide improved access to, and use of, broadband service by public
safety agencies. Sustainable adoption: Stimulate the demand for
broadband, economic growth, and job creation; Agencies: RUS BIP:
Infrastructure: Make funding available for grants, loans, and loan-
grant combinations for broadband infrastructure in rural areas without
sufficient access to high-speed broadband service to facilitate rural
economic development.
Requirement: Funding;
Agencies: NTIA BTOP: $4.7 billion total funding with the following
provisions:
* not less than $4.35 billion for competitive broadband grants,
including not less than $200 million for public computer centers, and
not less than $250 million for sustainable broadband adoption programs;
* $10 million for DOC Inspector General;
* up to $350 million may be expended pursuant to the Broadband Data
Improvement Act for the development and maintenance of a comprehensive,
searchable, nationwide broadband inventory map; and;
* some of the funding may be transferred to FCC for development of a
national broadband plan or other related purposed with appropriate
notification to Congress; Agencies: RUS BIP: $2.5 billion for the cost
of broadband grants, loans, and loan guarantees.[A]
Requirement: Project eligibility;
Agencies: NTIA BTOP: Awardees must demonstrate that;
* the project conforms with statutory purposes;
* the project would not have been implemented but for federal grant
assistance;
* the project budget is reasonable; and;
* the federal share will not exceed 80 percent of the total budget,
except if the Secretary of Commerce grants a waiver for financial
assistance[B]; Agencies: RUS BIP: At least 75 percent of the area to be
served by a project shall be in a rural area without sufficient access
to high-speed broadband service to facilitate rural economic
development as determined by the Secretary of Agriculture.
Requirement: Priority for awarding funds; Agencies: NTIA BTOP: The
Assistant Secretary of Commerce for Communications and Information
shall to the extent practical: (1) award at least 1 grant in each
state; (2) consider whether an application to deploy infrastructure
will, for the greatest population of users; (a) increase affordability
and subscribership; (b) provide the greatest broadband speed possible;
(c) enhance service for health care, education, or children; and; (d)
not result in unjust enrichment through funding from another federal
program; and; (3) consider whether the applicant is a socially and
economically disadvantaged small business; Agencies: RUS BIP: Priority
shall be given to project applications that: (1) deliver end users a
choice of more than one service provider; (2) provide service to the
highest proportion of rural residents that do not have access to
broadband service; (3) include current or former RUS telecommunications
borrowers; (4) demonstrate that all project elements will be fully
funded; (5) can commence and be completed; and; (6) demonstrate that no
area of a funded project may receive funding to provide broadband
service under BTOP.
Source: GAO analysis of Recovery Act broadband provisions.
[A] Although the Recovery Act included loan guarantees, RUS indicated
that it would not offer loan guarantees.
[B] Awardees will be required to provide matching funds of at least 20
percent toward the total eligible project costs. State and local
government applicants must demonstrate that they will appropriate funds
required to meet the 20 percent match requirement.
[End of table]
To implement the Recovery Act, NTIA and RUS will fund several types of
projects. The agencies will fund last-mile and middle-mile network
infrastructure projects to extend broadband service in unserved or
underserved areas. According to NTIA and RUS, last-mile projects are
those infrastructure projects whose predominant purpose is to provide
broadband service to end users or end-user devices. Middle-mile
projects mostly do not provide broadband service to end users or end-
user devices, but instead provide relatively fast, large-capacity
connections between backbone facilities--long-distance, high-speed
transmission paths for transporting massive quantities of data--and
last-mile projects. NTIA is also funding public computer centers and
sustainable adoption projects.
Both NTIA and RUS have experience with similar broadband grant or loan
programs. Before receiving Recovery Act funding, NTIA implemented the
Technology Opportunities Program; this program promoted the innovative
use of information and communication technologies, primarily in
underserved population segments, to promote public benefits.
Additionally, NTIA implemented other, nonbroadband programs, such as
the Public Safety Interoperability Communications (PSIC) program, which
provides funding to public safety organizations; the digital television
transition coupon program; and the Public Telecommunications Facilities
Program, which provides funding to public broadcasters. RUS has prior
and ongoing experience with several broadband-specific programs--
including the Rural Broadband Access Loan and Loan Guarantee (Broadband
Access Loan) Program which funds the construction, improvement, and
acquisition of facilities and equipment for broadband service in
eligible rural communities, and the Community Connect broadband grant
program, which funds broadband on a "community-oriented connectivity"
basis to currently unserved rural areas for the purpose of fostering
economic growth and delivering enhanced health care, education, and
public safety services.
To implement the broadband provisions in the Recovery Act, NTIA and RUS
coordinated their efforts and developed program milestones (see figure
1). OMB tasked agencies implementing Recovery Act programs to engage in
aggressive outreach with potential applicants. NTIA and RUS, with FCC
coordination, 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 first kick-off meeting. 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 9] 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 initially indicated that they would award
Recovery Act broadband program funds in three jointly-conducted rounds
and initially expected to issue the NOFA for a second funding round
before the end of calendar year 2009 and for a third round in 2010. In
a draft version of this report, we recommended that the agencies
combine the second and third funding rounds. Subsequently, on November
10, 2009, the agencies announced that they would award the remaining
program funds in one round, instead of two.[Footnote 10] 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.
Figure 1: Recovery Act Broadband Program Milestones:
[Refer to PDF for image: illustration]
Date: February 17, 2009;
Schedule: Recovery Act signed. (Program set-up activities)
Date: March 10, 2009;
Schedule: Public outreach: RUS, NTIA, and FCC hold first of 7 joint
meetings. (Program set-up activities)
Date: March 12, 2009;
Schedule: First request for information (RFI) published, public comment
period begins. (Program set-up activities)
Date: April 13, 2009;
Schedule: Public comment period closes. (Program set-up activities)
Date: June 12, 2009;
Schedule: RUS contractor selection (target date). (Program set-up
activities)
Date: June 30, 2009;
Schedule: NTIA contractor selection (target date). (Program set-up
activities)
Date: July 1, 2009;
Schedule: First notice of funds availability (NOFA) published by RUS
and NTIA. (1st funding round activities)
Date: July 31, 2009;
Schedule: Electronic application system opens. (1st funding round
activities)
Date: July 31, 2009;
Schedule: RUS contractor selected (actual date). (Program set-up
activities)
Date: August 3, 2009;
Schedule: NTIA contractor selected (actual date). (Program set-up
activities)
Date: August 14, 2009;
Schedule: Deadline for application submission, initial review begins
(target date). (1st funding round activities)
Date: August 20, 2009;
Schedule: Extended deadline for all applications in progress by August
14 deadline. (1st funding round activities)
Date: August 24, 2009;
Schedule: Extended deadline for all attachments for applications filed
by August 20. (1st funding round activities)
Date: September 14, 2009;
Schedule: Initial selections made (target date), agencies request
documentation to verify application information. (1st funding round
activities)
Date: September 15, 2009;
Schedule: Initial proposed service areas published for public comment
(target date). (1st funding round activities)
Date: October 15 (or 30 days after applicant notified of selection):
Schedule: Deadline for submitting documentation for further review. Due
diligence review begins. (1st funding round activities)
Date: November 7;
Schedule: Begin awarding first round funds (target date). (1st funding
round activities)
Date: October-December, 2009;
Schedule: Second RFI and NOFA published (target dates). (2nd funding
round activities)
Date: December 31, 2009;
Schedule: Finish awarding first round funds (target date). (1st funding
round activities)
Date: March 1, 2010;
Schedule: NTIA broadband mapping data due (target date).
Date: April-June, 2010;
Schedule: Third RFI and NOFA released (target dates). (3rd funding
round activities)
Date: September 30, 2010;
Schedule: All BTOP and BIP funds must be awarded.
Date: February 17, 2011;
Schedule: NTIA publishes national broadband map (statutory deadline).
Source: GAO analysis of NTIA and RUS data.
[End of figure]
NTIA and RUS Have Taken Steps to Address Challenges, Including
Scheduling and Staffing, Associated With Evaluating Applications and
Awarding Funds; 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, including the adoption of a two-step
evaluation process, utilization of nongovernmental personnel, and
publication of information on the applicant's proposed service area.
While these steps address some challenges, the agencies' remaining
schedule may pose risks to the review of applications. In particular,
the agencies may lack the needed time to apply lessons learned from the
first funding round and may face a compressed schedule to review new
applications, thereby increasing the risk of awarding funds to projects
that may not be 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. Under the provisions of the Recovery Act, NTIA
and RUS must award all funds by September 30, 2010. Thus, the agencies
have 18 months to establish their respective programs, solicit and
evaluate applications, and award funds. While in some instances a
compressed schedule does not pose a challenge, two factors increase the
challenges associated with the 18-month schedule. First, while RUS has
existing broadband programs, albeit on a much smaller scale than BIP,
NTIA must establish the BTOP program from scratch. Second, the agencies
face an unprecedented volume of funds and anticipated number of
applications compared to their previous experiences.
The volume of funds to be awarded exceeds previous broadband-related
programs implemented by NTIA and RUS. While NTIA and RUS have prior
experience in administering grant or loan programs, these programs had
less budgetary authority than the programs in the Recovery Act (see
figure 2). Of the $7.2 billion appropriated in the Recovery Act, NTIA
received $4.7 billion for BTOP. In comparison, NTIA administered the
PSIC program, a one-time grant program with an appropriation of about
$1 billion for a single year, in close coordination with the Department
of Homeland Security (DHS). Additionally, NTIA's Public
Telecommunications Facilities Program received an average of $23
million annually and its Telecommunications Opportunities Program
received $24 million annually. RUS received $2.5 billion from the
Recovery Act for BIP.[Footnote 11] In comparison, RUS's Community
Connect program's average annual appropriation was $12 million and its
Broadband Access Loan Program's average annual appropriation was $15
million.[Footnote 12] 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. Based on the
number of applications received and the funds requested, the average
amount an applicant sought was $12.7 million, or almost half the size
of the total average appropriation for NTIA's Technology Opportunities
Program.
Figure 2: Average Annual Appropriations for NTIA Telecommunications and
RUS Broadband Programs:
[Refer to PDF for image: horizontal bar graph]
NTIA and RUS programs:
NTIA BTOP (FY 2010):
Program appropriations for BTOP and BIP; and average annual
appropriations for legacy programs (in million of dollars): $4700.
(Recovery Act Program)
NTIA Public Safety Interoperable Communications Program: Program
appropriations for BTOP and BIP; and average annual appropriations for
legacy programs (in million of dollars): $1000. (legacy program)
NTIA Public Telecommunications Facilities Program: Program
appropriations for BTOP and BIP; and average annual appropriations for
legacy programs (in million of dollars): $23. (legacy program)
NTIA Technology Opportunities Program: Program appropriations for BTOP
and BIP; and average annual appropriations for legacy programs (in
million of dollars): $24. (legacy program)
RUS BIP (FY 2010):
Program appropriations for BTOP and BIP; and average annual
appropriations for legacy programs (in million of dollars): $2500.
(Recovery Act Program)
RUS Community Connect Grant Program: Program appropriations for BTOP
and BIP; and average annual appropriations for legacy programs (in
million of dollars): $12. (legacy program)
RUS Rural Broadband Access Loan and Loan Guarantee Program: Program
appropriations for BTOP and BIP; and average annual appropriations for
legacy programs (in million of dollars): $15. (Recovery Act Program)
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 in budget
authority allocated to loans under BIP will support a total program
level of about $7 billion. Similarly, RUS officials indicated that the
corresponding annual total loan level under the Broadband Access Loan
Program was $300-$400 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
figure 3). As mentioned previously, the agencies indicated that for the
first round of funding alone, they received 2,200 applications.
[Footnote 13] Of these 2,200 applications, NTIA received 940
applications exclusively for BTOP and RUS received 400 applications
exclusively for BIP and 830 dual applications for both programs. Both
NTIA and RUS will review the dual applications; if RUS does not fund
the project through the BIP program, NTIA can consider funding the
project through the BTOP program. By 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. In addition,
since BTOP and BIP will not carry over applications between rounds,
applicants who do not receive funding in the first round must reapply
to be eligible for consideration for funding in the second round.
Therefore, a single proposed project may be evaluated multiple times by
BTOP and BIP reviewers. Fourteen of 15 stakeholders with whom we spoke
expressed concern that the agencies will face challenges in adequately
reviewing the large number of expected applications in the time frame
allotted.
Figure 3: Average Annual Applications--NTIA Telecommunications and RUS
Broadband Programs:
[Refer to PDF for image: horizontal bar graph]
NTIA and RUS programs:
NTIA BTOP (first funding round):
Applications received: 940;
Applications reviewed by both BIP and BTOP: 830; Total: 1,770.
NTIA Public Safety Interoperable Communications Program: Applications
received: 56[A].
NTIA Technology Opportunities Program: Applications received: 838.
RUS BIP (first funding round):
Applications received: 400;
Applications reviewed by both BIP and BTOP: 830; Total: 1,230.
RUS Community Connect Grant Program: Applications received: 105.
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 Public Safety Interoperable Communications
grant program, NTIA coordinated with DHS's grants office to review 56
grant applications from states and territories, representing about 301
individual projects, and awarded 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 is establishing a new program with BTOP
and will for the first time award grants to commercial entities. 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 some
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. Prior to the Recovery Act, RUS had 23 full-time-
equivalent staff in fiscal year 2008 for its Broadband Access Loan
Program and no full-time-equivalent staff dedicated to the Community
Connect program; RUS utilized personnel from the Broadband Access Loan
Program for the Community Connect program. RUS indicated that it would
have Broadband Access Loan Program staff also assist with 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 NTIA and RUS, priority
areas include unserved and underserved areas. NTIA and RUS require
applicants to assemble their proposed service areas from contiguous
census blocks[Footnote 14] and to identify the proposed service area as
unserved or underserved. However, RUS and NTIA will be awarding loans
and grants before the national broadband plan or broadband mapping is
complete. NTIA does not expect to have complete, national data on
broadband service levels at the census block level until at least March
2010.[Footnote 15] Eight of 15 stakeholders with whom we spoke said
that the agencies face challenges determining whether proposed service
areas meet the requirements for underserved and unserved in order to
effectively award funds. To work around this problem, the agencies plan
to use existing FCC data[Footnote 16] on broadband service levels (Form
477 data) and state broadband service maps where available. However,
the data collected by FCC are at the census tract level, not the census
block level. In addition, although FCC and NTIA have discussed NTIA's
access to and use of the Form 477 data, the agencies have not developed
formal procedures; RUS has not discussed use of the Form 477 data with
FCC. Finally, not all states have broadband maps.[Footnote 17]
NTIA and RUS Have Taken Steps to Address Challenges in Evaluating
Applications and Awarding Funds:
Two-step evaluation process. To address the scheduling and staffing
challenges, NTIA and RUS are conserving scarce staff resources by
screening applications and therefore reducing the number of
applications subject to a comprehensive review by using a two-step
process. In the first step, the agencies will evaluate and score
applications based on the criteria delineated 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. This will reduce the amount of information
the agencies must review. In the NOFA, the agencies indicated that
using this two-step process balances the burdens on applicants with the
needs of the agencies to efficiently evaluate applications.
Use of nongovernmental personnel. Both NTIA and RUS are using
nongovernmental personnel to address anticipated staffing needs
associated with evaluating applications and awarding funds. To evaluate
applications, NTIA is using a review system, in which three unpaid,
independent expert reviewers examine and score applications.[Footnote
18] To be considered an expert reviewer, the individual must have
significant expertise and experience in at least one of the following
areas: (1) the design, funding, construction, and operation of
broadband networks or public computer centers; (2) broadband-related
outreach, training, or education; or (3) innovative programs to
increase the demand for broadband services. In addition, NTIA will use
contractors in an administrative role to assist the expert reviewers.
NTIA officials said that the agency issued three guides to be used by
the reviewers for each of the three project categories--broadband
infrastructure, public computer centers, and sustainable adoption--and
conducted more than 15 Web-based training seminars. RUS will use
contractors to evaluate and score applications. Both NTIA and RUS said
that they are confident that an expert would be able to draw
conclusions on the technical feasibility or the financial
sustainability of a project based on information provided in the
application. 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. According to the NOFA, existing
service providers will have 30 days to submit information regarding
their service offerings.[Footnote 19] 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. Currently, NTIA has no procedures in place for
resolving these types of issues, but said that it is developing these
procedures using its contractors and other means.
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 entire $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
completing an application in a timely manner. Specifically, some
stakeholders said that small entities were having trouble locating the
professional staff needed to assemble an application. 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.
Also, the agencies intended to begin awarding the first-round grants
and loans on November 7, 2009, but the agencies now expect to begin
awarding funds in December 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. With other
telecommunications grant and loan programs, agencies have taken longer
to evaluate applications and award funds. For example, 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 officials acknowledged that the BTOP timeline is
compressed compared with the timeline for the Public Telecommunications
Facilities Program, which operated on a year-long grant award cycle.
For the PSIC program, NTIA and DHS closed the application period in
August 2007 and completed application reviews in February 2008, a
period of roughly 6 months. In California, the Public Utilities
Commission took 4 to 6 months to review 54 applications and award funds
for 25 projects in the first year of the California Advanced Services
Fund, a $100 million broadband program.
Based on their experience with the first funding round, on November 10,
2009, NTIA and RUS reported that they will reduce 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
award all $4.7 billion by summer 2010, to promote the stimulative
effect of the BTOP program. RUS officials indicated that the agency
will award all $2.5 billion by September 30, 2010, as required by the
Recovery Act, indicating a potentially longer review process.
Depending on the time frames 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 limited time between the completion of
the first funding round and the beginning of the second funding round.
NTIA and RUS recently announced that the agencies will begin awarding
funds for the first funding round in December 2009. On November 10,
2009, the agencies sought public comment on approaches to improve the
application experience and strengthen BTOP and BIP; the public has 14
days to respond with comments following publication of the notice in
the Federal Register. 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
70 times as high as the lowest-cost project, even among projects using
the same technology to deploy broadband. Previous experience with
broadband loan programs also reveals the challenges inherent in
evaluating an application based on estimates provided by the applicant.
For example, as of fiscal year 2008, 55 percent of RUS broadband loan
borrowers were meeting their forecasted number of subscribers. Nine of
the 15 stakeholders that we interviewed expressed concerns that NTIA
and RUS lack staffing expertise to determine whether project proposals
will generate sufficient numbers of subscribers and revenues to cover
operating costs and be sustainable on a long-term basis.
* Continued lack of broadband data and plan. According to NTIA,
national broadband data provide critical information for grant making.
Additionally, some stakeholders, including members of Congress, have
expressed concern about awarding broadband grants and loans without a
national broadband plan. Under the Recovery Act, up to $350 million was
available pursuant to the Broadband Data Improvement Act to fund the
development and maintenance of a nationwide broadband map for use by
policymakers and consumers.[Footnote 20] NTIA solicited grant
applications to help develop the national broadband map, and grant
applicants must complete their data collection by March 1, 2010.
Additionally, based on provisions in the Recovery Act, FCC must deliver
to Congress a national broadband plan by February 17, 2010.[Footnote
21] To prepare the plan, FCC sought comment on a variety of topics,
including the most effective and efficient ways to ensure broadband
service for all Americans.[Footnote 22] 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 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 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 to adequate oversight remain.
These risks include insufficient resources to actively monitor funded
projects beyond fiscal year 2010 and a lack of updated performance
goals 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 for planning purposes that they could fund
as many as 1,000 projects each--or 2,000 projects in total--before
September 30, 2010.[Footnote 23] 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 of $4.35 billion for BTOP grants and
RUS's estimated potential total funding of approximately $9 billion for
BIP grants, loans, and loan-grant combinations, if the agencies fund
1,000 projects each, as they have 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, NTIA and RUS expect to fund several different types of
projects that will be dispersed nationwide, with at least one project
in every state.[Footnote 24] NTIA is funding several different types of
broadband projects, including last-and middle-mile broadband
infrastructure projects for unserved and underserved areas, and public
computer center and sustainable broadband adoption projects. BIP can
fund last-and middle-mile infrastructure projects in rural areas across
the country.
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 2). In its fiscal year 2010 budget request to
Congress, NTIA estimated that it would need a total of 70 full-time-
equivalent staff for fiscal year 2010 to manage BTOP, which includes
overseeing funded projects. After refining its spending and budget
plans, NTIA said that it will need 41 full-time-equivalent staff for
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. Under the Technology
Opportunities Program, NTIA had an average of 1 full-time-equivalent
staff in any capacity for every three projects funded annually from
fiscal year 1994 through fiscal year 2004.[Footnote 25] 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, including the
Telecommunications Infrastructure loan program, the Distance Learning
and Telemedicine loan and grant program, the Broadband Access Loan
Program, and Community Connect grant program. 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. Under its Broadband Access Loan Program, RUS had more than 1
full-time-equivalent staff for every loan made annually from fiscal
year 2003 through fiscal year 2008. RUS reported that it could use
other staff in the Rural Development Telecommunications program to
address BIP staffing needs, if necessary.
Table 2: 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]
NTIA and RUS Are Addressing Project Oversight Challenges by 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, in addition
to evaluating applications as discussed earlier. 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. Through its statement of work for
contracted services, NTIA estimated that its contractor will provide
about 35,000 hours of support for grants administration and postaward
support in 2010 and about 55,000 hours of support for additional
optional years.[Footnote 26] 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. RUS field accountants conduct
financial audits primarily within its telecommunications and electric
utility loan programs. Two of the 30 general field representatives are
dedicated to RUS's broadband grant and loan programs, and RUS reported
that the other general field representatives would be available to
assist with BIP oversight if needed. Of the 47 full-time-equivalent
staff that RUS has estimated needing to implement BIP, it plans to hire
a total of 10 general field representatives and 10 field accountants on
a temporary basis. 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 was an acute need.
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 or obligated, the project completion status,
and an estimate of the number of jobs created or retained through the
funded project.[Footnote 27] Under OMB guidance, awarding agencies are
responsible for ensuring that funding recipients submit reports to a
central, online portal no later than 10 calendar days after each
calendar quarter in which the recipient receives assistance.[Footnote
28] Awarding agencies must also perform their own data quality review
and request further information or corrections by funding recipients,
if necessary. No later than 30 days following the end of the quarter,
OMB requires that detailed recipient reports are made available to the
public on the Recovery.gov Web site.
* 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 29] 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 two years after the award and complete its project no later
than 3 years after the award. Recipients of funding for last-and middle-
mile infrastructure projects must report on a number of metrics,
including the number of households and businesses receiving new or
improved access to broadband as a result of the project, the advertised
and averaged broadband speeds and the price of the broadband services
provided, and the total and peak utilization of network access links.
[Footnote 30]
* 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. In addition, RUS requires funding recipients
to specifically state in the applicable quarter when they have received
67 percent of the award funds, which is RUS's measure for
"substantially complete." 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. The primary tool for monitoring
federal awards through annual audits is the Single Audit report
required under the Single Audit Act, as amended.[Footnote 31] 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 32] The Single Audit report is
prepared in accordance with OMB's implementing guidance in OMB Circular
No. A-133.[Footnote 33] OMB's Recovery Act guidance directed federal
agencies to review Single Audit reports and provide a synopsis of audit
findings to OMB relating to obligations and expenditures of Recovery
Act funding. 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
(referred to collectively in this report as a Single 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 34] 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 35]
However, RUS's existing audit requirements are different from the
Single Audit requirements.[Footnote 36] NTIA has yet to determine what
annual audit requirements will apply to commercial grantees; NTIA
reported that it intends to develop program-specific audit requirements
and guidelines that will apply to commercial recipients that receive
broadband grants and plans to have those guidelines in place by
December 2009. See table 3 for a description of BTOP and BIP audit
requirements.
Table 3: 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 and 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 and 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 37] NTIA
officials told us that NTIA has consulted with 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 goals. The Government Performance and
Results Act of 1993 (GPRA) directs federal agencies to establish
objective, quantifiable, and measurable goals within annual performance
plans.[Footnote 38] GPRA stresses the importance of having clearly
stated objectives, strategic and performance plans, goals, performance
targets, and measures in order to improve a program's effectiveness,
accountability, and service delivery. Specifically, performance
measures allow an agency to track its progress in achieving intended
results. Performance measures also can 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 goals 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. Although award recipients that do not expend more than
$500,000 per year in federal awards may not be subject to an annual
audit requirement, NTIA officials reported that they do not yet know
the extent to which they will make awards in this range. 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.
Conclusions:
The Recovery Act established an ambitious schedule for NTIA and RUS to
implement the broadband provisions. In particular, the agencies have 18
months to establish their respective programs, solicit and evaluate
applications, and award funds. Compounding the challenge, NTIA must
establish the BTOP program from scratch, and the agencies face an
unprecedented volume of funds and anticipated number of applications.
The agencies initially indicated that they would award Recovery Act
funds in three rounds; but, on November 10, 2009, the agencies
announced that they would consolidate the second and third funding
rounds and award the remaining funds in a single, second funding round.
However, the schedule of the new, second funding round is unclear.
Based on the experience in the first funding round and their legacy
grant and loan programs, the agencies might have little time to
thoroughly review applications to ensure that funded projects meet the
objectives of the Recovery Act. Without adequate time to gather lessons
learned from the first funding round and to thoroughly review
applications, the agencies risk funding projects that might not meet
the objectives of the Recovery Act.
In addition to reviewing an unprecedented number of applications, NTIA
and RUS must oversee funded projects to ensure the projects meet the
objectives of the Recovery Act and to guard against waste, fraud, and
abuse. All funded projects must be complete no later than 3 years
following the award of funds; therefore, some funded projects might not
be complete until September 30, 2013. However, the Recovery Act only
provided funding through September 30, 2010. Without adequate resources
beyond fiscal year 2010, the agencies may not be able to ensure that
all projects are completed as intended and to guard against waste,
fraud, and abuse.
Due to the compressed schedule and limited staff resources, NTIA and
RUS have had limited time to develop outcome-based performance goals
for their programs. However, the agencies use of sequential funding
rounds provides them with an opportunity to collect important data from
funding applicants early in the program that could be used to develop
meaningful performance goals. For example, because applicants must
provide estimates for and reports on the number of households and other
entities that will receive new or improved broadband service as a
result of the projects, NTIA and RUS should have a good basis to
establish program goals for BTOP and BIP for the second funding round
and to evaluate the effectiveness of federal spending for broadband
deployment. Without such goals, future efforts to expand broadband
deployment and adoption may lack important information on the types of
projects that were most effective at meeting subscriber goals and other
targets, thereby limiting the ability to apply federal resources to
programs with the best likelihood of success.
Finally, although NTIA and RUS have established a range of reporting
requirements for funding recipients, NTIA has yet to define what annual
auditing requirements, if any, will apply to commercial funding
recipients under BTOP. Although we have previously reported that the
Single Audit Act's annual audit requirement is not a perfect tool to
oversee Recovery Act funding, the absence of an annual audit
requirement for commercial entities would hamper NTIA's oversight of
its Recovery Act funding. For example, NTIA would lack independent
auditors' assurances that its funding recipients have important
internal controls in place to fully track expenditures and guard
against fraud, waste, and abuse.
Recommendations for Executive Action:
We recommend that the Secretaries of Commerce and Agriculture take the
following three actions:
1. To reduce the risk of awarding funds to projects that may not be
sustainable or do not meet the priorities of the Recovery Act:
* delay the issuance of the second NOFA in order to provide time to
analyze application and evaluation processes and apply lessons learned
from the first funding round, and:
* provide review time in the second funding round comparable with other
broadband grant and loan programs.
2. To ensure that all funded projects receive sufficient oversight and
technical support beyond September 30, 2010, and through their required
completion dates, develop contingency plans to ensure sufficient
resources for oversight of funded projects beyond fiscal year 2010.
3. To ensure that management has appropriate tools in place to evaluate
the effectiveness of BTOP and BIP and to apply limited resources to
achieve desired program outcomes, use information provided by program
applicants in the first funding round to establish quantifiable,
outcome-based performance goals by which to measure program
effectiveness.
We also recommend that the Secretary of Commerce take the following
step:
To ensure that NTIA has sufficient insight into the expenditure of
federal funding by commercial entities that may receive BTOP grants,
determine whether commercial entities should be subject to an annual
audit requirement.
Agency Comments and Our Evaluation:
We provided a draft of this report to the departments of Commerce and
Agriculture, to OMB, and to FCC for review and comment. In the draft
report, we recommended that NTIA and RUS combine the second and third
planned funding rounds into one extended funding round. The departments
of Commerce and Agriculture agreed with our recommendations; FCC and
OMB did not comment on our recommendations. Subsequently, on November
10, 2009, NTIA and RUS announced that they would award the remaining
program funds in one round, instead of two. Therefore, we removed this
recommendation from the final report. In its comments, NTIA noted that
the agency will take all appropriate additional steps to apply the
lessons learned and address GAO's concerns, including utilizing
experiences from the first round of funding to improve the program,
establishing outcome-based performance measures, and implementing
reasonable audit requirements for commercial grantees. NTIA's full
comments appear in appendix III. For the recommendations directed to
RUS, RUS described steps it is exploring that are consistent with our
first recommendation. RUS agreed with the second and third
recommendations. FCC, NTIA, OMB, and RUS provided technical comments
that we incorporated, as appropriate.
In its comments, RUS noted that it has extensive experience awarding
and managing grants and loans for rural America, including grants and
loans for electric and telecommunications projects. RUS noted that by
focusing on budget authority, our report does not reflect the true
scope of its telecommunications programs. In particular, RUS noted that
the Broadband Access Loan Program operated with a program level of $300
to $400 million. We chose to report the budget authority for the
various programs to provide comparability between the grant and loan
programs operated by NTIA and RUS. We acknowledge that RUS's legacy
programs operate at the program level exceeding the budget authority;
however, the BIP program will also operate at a program level exceeding
the $2.5 billion budget authority. RUS also noted that our report does
not reflect the full scale of its existing staffing levels. In
particular, RUS noted that it has 114 full-time staff dedicated solely
to telecommunications programs and 30 General Field Representatives who
can assist with oversight of the BIP program. In our report, we note
the number of staff dedicated to RUS's broadband programs, and we also
note that RUS has additional staff, including 30 General Field
Representatives, that the agency can draw upon for the BIP program.
RUS's full comments appear in appendix II.
We are sending copies of this report to the Secretary of Agriculture,
the Secretary of Commerce, the Director of the Office of Management and
Budget, the Chairman of the Federal Communications Commission, and
interested congressional committees. The report also is available at no
charge on the GAO Web site at [hyperlink, http://www.gao.gov].
If you have any questions about this report, please contact me at (202)
512-2834 or goldsteinm@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. Major contributors to this report are listed in
appendix IV.
Signed by:
Mark L. Goldstein:
Director, Physical Infrastructure:
[End of section]
Appendix I: Stakeholder Organizations or Individuals Interviewed:
We conducted interviews with the following individuals or
representatives from the following organizations:
American Cable Association:
Alliance for Public Technology:
Robert C. Atkinson, Columbia Institute for Tele-Information:
California Public Utilities Commission:
Consumer Federation of America:
Communications Workers of America:
Dr. William Lehr, Massachusetts Institute of Technology:
National Association of Regulatory Utility Commissioners:
National Association of Telecommunications Officers and Advisors:
National Cable & Telecommunications Association:
National Telecommunications Cooperative Association:
Dr. Raul Katz, Columbia Institute for Tele-Information:
Satellite Industry Association:
United States Telecom Association:
Wireless Internet Service Providers Association:
[End of section]
Appendix II: Comments from the Department of Agriculture:
USDA:
United States Department of Agriculture: Rural Development: Office of
the Under Secretary:
Committed to the future of rural communities.
"USDA is an equal opportunity provider, employer and lender." To file a
complaint of discrimination write USDA, Director, Office of Civil
Rights, 1400 Independence Avenue, S.W., Washington, DC 20250-9410 or
call (800) 795-3272 (Voice) or (202) 720-6382 (TDD).
October 30, 2009:
Mark L. Goldstein:
Director, Physical Infrastructure Issues: United States Government
Accountability Office: 441 G Street, NW: Washington, DC 20548:
Dear Mr. Goldstein:
Thank you for providing the United States Department of Agriculture
(USDA) Rural Development and the Rural Utilities Service (RUS) your
Government Accountability Office (GAO) draft report entitled, "Recovery
Act: Agencies Are Addressing Broadband Program Challenges, but Actions
Are Needed to Improve Implementation" Report Number GAO-10-80. For your
consideration, Rural Development offers the following comments to the
draft report and requests that a copy of these comments be included in
your final report. Rural Development's response is limited to a
discussion primarily of the Broadband Initiatives Program (BIP)
administered by RUS.
We commend GAO for providing this Report and recommendations and most
importantly, for sharing in our mutual interest of making the BIP
program a success. USDA considers this unprecedented $2.5 billion
investment in rural broadband infrastructure an integral part of the
economic recovery and future of rural America. Broadband erodes the
barriers of time and distance that traditionally have hindered rural
communities from enjoying the access to health care, educational
opportunities and financial markets. Today, broadband is a key
foundation of our economy and necessary for rural businesses to survive
and remain competitive. USDA intends to use this $2.5 billion in budget
authority to deliver up to $7 to $9 billion in loans, grants and loan
grant combinations, potentially nearly tripling the taxpayer's
investment.
To underscore the importance of broadband in renewing the rural
economy, Secretary Vilsack directed the USDA's Economic Research
Service (ERS) to examine the economic effects of having broadband
access in rural communities. In August, ERS published a report,
entitled "Broadband Internet's Value for Rural America," which
concluded that employment growth was higher and non-farm private
earnings greater in counties with a longer history of broadband
availability.
The report also cited certain key benefits of broadband access in rural
communities. Such benefits include access to online course offerings
for students in remote areas and the access to telemedicine and
telehealth services which often reduce transportation costs for
patients living in rural areas in need of urgent care. Agricultural
workers and farm based businesses arc also more reliant on internet
access to conduct sales transactions, marketing and advertising,
monitor real time changes in the commodities markets and track global
trends that impact US crop prices, in order to stay in business and
compete in a global economy.
Since 1935, beginning with the Rural Electrification Administration, we
have been a premier lender for rural infrastructure investment. Our
current infrastructure loan portfolio exceeds $54 billion and includes
financing for water and wastewater, telecommunications, broadband,
electric, and renewable energy infrastructure projects.
We are now tasked with applying the technical skills and historical
knowledge we have amassed in issuing financing for electricity,
telecommunications and water over the past 75 years to obligate the
funds over the next year to construct next generation broadband
facilities in rural areas to serve as many customers as possible with
the funds provided. Our goal is to recreate the successes we have
achieved in financing the electric grid for rural utilities toward
building new broadband networks in the most rural and remote regions of
the country.
Equally important, RUS is part of the Rural Development mission area
which delivers over 40 major loan and grant programs providing
financial resources for rural economic development. Our programs build
renewable energy facilities, finance businesses and cooperatives, build
affordable single and multi-family housing, and finance essential
community facilities such as town halls, tribal colleges, fire stations
and critical access hospitals. Programs are administered by over 6,000
Rural Development staff (which includes RUS) with over 470 Field
offices throughout rural America. Field staff are well-trained rural
developers who can work across program lines. The Secretary has placed
a high priority on all of Recovery Act programs with particular
emphasis on BIP. Recently, Rural Development held a National training
and policy conference with hundreds of Rural Development Field staff
and educated them about BIP. To that end, our 47 State Directors have
all committed to make local Rural Development staff available to BIP.
Also, Rural Development staff from across the country attended the 10
joint BIP and Broadband Technology Opportunities Program (BTOP)
Training and Workshops and our State Directors were integral to many of
these events.
Rural Development is uniquely positioned with staff in headquarters and
the field to implement all Recovery Act programs. In fact, Rural
Development has obligated funds in all other Recovery Act programs.
These are some highlights of our Recovery Act successes to date:
* Almost 80,000 Recovery Act homeownership loans have been obligated
totaling nearly $10 billion.
* Over 480 rural communities have received Water and Environmental
Program loans and grants to bring clean, safe and affordable drinking
water to rural families.
* Over 800 Community program loans and grants have been obligated to
bring essential community facilities to rural America.
Your recent Report highlights several challenges to delivering the BIP
program. Namely, these include:
1. Scheduling Challenges;
2. Staffing Challenges;
3. Data Challenges.
I'd like to address the findings in your Report and highlight several
areas that require clarification.
Scheduling Challenges: Rural Development concurs that the delivery of
an estimated $7 to $9 billion in an 18-month timeframe is ambitious.
The charts included in your Report highlight some of RUS'
telecommunication programs but do not reflect the true scope of the
Agency's telecommunication programs. For example, the Chart at Figures
two and three reflect the budget authority for only half of RUS'
telecommunication programs and does not adequately reflect the
deliverable program levels. If this format were used for RUS' electric
program, it would reflect no funds, yet, because of prudent loan
underwriting, RUS delivered $6.6 billion in electric loans in Fiscal
Year (FY) 2009. In its telecommunication programs, RUS delivered almost
$2 billion in telecommunication loans and grants in FYs 2008 and 2009.
The charts presented in your Report would only indicate that RUS
delivered $17 million. From 2001 to 2009, in fact, RUS approved 832
loans for $7.9 billion and 1,203 grants for $418 million, for a total
of $8.3 billion in telecommunications program levels. By focusing only
on budget authority and not program levels, your draft does not portray
an accurate depiction of the magnitude of our current programs.
Staffing Challenges: Rural Development agrees that staffing is critical
to the success of this program. While we appreciate your Report's
reference to staffing levels for certain RUS telecommunication
programs, it does not provide a full picture of our existing staffing
levels. RUS has 114 full-time staff dedicated solely to its
telecommunications programs. Staff is trained in telecommunications,
including broadband, and work collectively as a Team. Your Report
highlights that RUS has no staff dedicated solely to our Community
Connect program. This is because of our Team approach to program
delivery. Experienced staff throughout the telecommunications programs
reviewed over 280 applications for the Community Connect program
totaling $203 million in FY 2009. These applications were competing for
$13.5 million ” an oversubscription rate of 15 to one. This is far
greater than that experienced in the first round of BIP applications.
In addition, your Report highlights our General Field Representatives
(GFRs) who constitute our "boots on the ground" throughout rural
America. Your Report indicates that only two of 30 are dedicated solely
to our existing broadband program. All GFRs are part of the
telecommunications Team and work across all telecommunication programs.
Moreover, all will be actively involved in the BIP program. In
addition, RUS is hiring 10 additional Recovery Act GFRs and 10
additional Recovery Act field accountants to assist with program
delivery.
We were pleased that the Recovery Act recognized the salary and expense
needs of Rural Development and authorized up to three percent of the
appropriated funds could be used for these purposes. As pointed out in
your Report, RUS is hiring approximately 47 additional temporary
Recovery Act staff to assist with this project. In addition, RUS hired
a contractor with extensive economic development experience to assist
the Agency with the review of applications. RUS believes that these
resources will be sufficient to deliver the BIP program.
Data Challenges: Rural Development agrees that there is a lack of data
on broadband availability throughout the country. We were particularly
pleased that the Recovery Act recognized this shortfall and fully
funded a State Broadband Mapping program which will be of invaluable
assistance in the future. In the interim, RUS will use existing State
maps, Federal Communications Commission (FCC) data and other reliable
information to determine the availability of broadband service. Rural
Development also developed the mapping tool used by applicants to draw
their proposed service territories. This same mapping tool will be used
by the public and incumbent service providers to provide comments on
whether proposed service territories may have broadband service. In
addition, RUS will use GFRs and Rural Development Field staff as needed
to ensure that proposed service territories meet the requirements of
the statute and Notice of Funding Availability (NOFA).
On page 10 of the draft report, please clarify the comparison of budget
information about the Broadband Recovery Act funding level and the
ongoing Farm Bill Broadband Loan Program funding levels. The draft
report compares the Recovery Act program level to the Farm Bill
Broadband Loan Program budget authority. This is misleading as the Farm
Bill program has consistently operated with a program level of $300-
$400 million. Therefore, please make the following changes on page I0:
(1) first sentence after "$15 million" add, "in budget authority that
supported an estimated program level of $300-$400 million," (2) in the
graph change "15" to "300," and (3) under graph and in Note paragraph,
after "$500 million" add, "in budget authority" after "BIP will support
a total" remove "principal amount of loans" and add "program level,"
and after "corresponding annual total" remove "principal amount for
loans," and add "loan level."
In addition to responding to your Recommendation, Rural Development is
pleased to provide more insight into how we will accomplish the task
before us:
1. RUS brings 75 years of history making electric, telecommunication,
water and environmental loan, grant and technical assistance to rural
America. RUS manages a $54 billion loan portfolio with a success rate
envied by the private sector financial markets. The Department of
Commerce's National Telecommunications and Information Administration
(NTIA) brings years of experience as the President's chief advisor on
telecommunication policy in America. Collectively, both RUS and NTIA
have marshaled our resources to develop and publish the BIP and BTOP
initiatives. The Agencies, together with guidance and collaboration
with the White House and the FCC, are working together as a team to
make the programs a success.
2. RUS has 1I4 full-time staff dedicated solely to the
telecommunications program that work collectively as a Team. This Team
administers RUS' existing telecommunication programs including:
* Farm Bill Broadband Loan Program;
* REAct Infrastructure Loan Program;
* Distance Learning and Telemedicine Loan and Grant Program;
* Community Connect Grant Program.
3. RUS will hire approximately 47 additional temporary Recovery Act
employees to assist with the BIP program. These challenging economic
times have afforded RUS all opportunity to hire extremely well
qualified applicants for these positions. This is a 40 percent increase
in the telecommunications Team.
4. RUS is part of the Rural Development mission area. Rural
Development, including RUS, has over 6,000 employees in Washington,
D.C., and throughout rural America. This staff has extensive commercial
loan experience and stands ready and able to assist the
telecommunications Team with BIP as needed. The Secretary has made the
success of all Recovery Act programs and BIP a top priority.
5. Rural Development has successfully obligated funds in all of its
other Recovery Act programs. For example, in our homeownership
programs, Rural Development has obligated almost $I0 of $II billion in
funding assisting almost 80,000 families to become homeowners in rural
America. In our Rural Business Enterprise Grant program, almost 80
percent of available funds have been obligated and nearly half of our
Community Facility funds have been obligated.
6. Beyond the Rural Development mission area, the RUS Telecommunication
Team is supported by the assistance of an experienced contractor ”ICF
International. ICF has extensive experience in working with economic
development programs including other Rural Development programs, USDA's
Farm Service Agency and the Department of Housing and Urban
Development. ICF has assisted State governments with disaster recovery
and has the ability to ramp-up staff resources to quickly deliver
results. ICF was able to ramp-up staff immediately when the results of
the first funding round were announced.
In response to your Recommendations for Executive Action. Rural
Development offers the following:
1. To reduce the risk of awarding funds to projects that may not be
sustainable or do not meet the priorities of the Recovery Act:
a. Combine the second and third planned funding rounds into one
extended funding round to provide additional review time comparable
with other broadband grant and loan programs and make better use of
NTIA's broadband mapping data.
Rural Development Response: As indicated in your Report, both RUS and
NTIA are already exploring the potential for combining the second and
third funding rounds into one extended funding round. We believe this
approach may provide both the Agencies and the public with additional
time and ensure the program's success. In our continued efforts to seek
input from the public, both RUS and NTIA plan to publish a Request for
Information (RFI) in the Federal Register shortly to seek input into
program delivery. We welcome comments from the public on this and other
ways to enhance the effectiveness of the program.
b. Delay the issuance of the second NOFA in order to provide time to
analyze application and evaluation processes and apply lessons learned
from the first funding round.
Rural Development Response: As indicated above, both RUS and NTIA plan
to publish a RFI in the Federal Register shortly to seek input into
program delivery. We welcome comments from the public on this and other
ways to enhance the effectiveness of the program. Further, we believe
that RUS' extensive experience with loan and grant programs combined
with NTIA's extensive broadband policy experience provides a unique
collaborative process to ensure success of the program.
2. To ensure that all funded projects receive sufficient oversight and
technical support beyond September 30, 2010, and through their required
completion dates, develop contingency plans to ensure sufficient
resources for oversight of funded projects beyond FY 2010.
Rural Development Response: Rural Development fully agrees and is
committed to ensuring not only that funds are obligated by September
30, 2010, but also that adequate oversight of projects will be
available beyond FY 20I0. We fully recognize that these additional
loans and grants will expand the portfolio beyond the capacity of the
existing telecommunications staff. We continue to work all channels,
including the use of Rural Development Field staff to ensure that we
continue to be good stewards of the taxpayer's resources. We are aware
of the out-year needs to fund oversight activities that may exceed our
current budget and are working to explore options so that we are able
to properly oversee implementation.
3. To ensure that management has appropriate tools in place to evaluate
the effectiveness of BTOP and BIP and to apply limited resources to
achieve desired program outcomes, use information provided by program
applicants in the first funding round to establish quantifiable,
outcome based performance targets by which to measure program
effectiveness.
Rural Development Response: Rural Development fully agrees and is
committed to developing appropriate outcome-based performance targets
for BIP. RUS staff is working with NTIA and staff from the Office of
Management and Budget to develop such goals.
There is also a technical detail that needs correction and/or further
explanation. On Page 26, paragraph one states: "However, RUS' existing
audit requirements are different from the single audit requirements."
This comment does not consider that RUS has compliance audits performed
by RUS field accountants. Therefore it should state: "RUS' existing
audit requirements are different from the single audit act
requirements, but are supplemented with compliance audits performed by
RUS field accountants." Adopting this change would also eliminate the
need for footnote 38 in the GAO report.
Thank you for this opportunity to comment on the report. If you have
any questions, please contact John Purcell, Director, Financial
Management Division, at (202) 692-0080.
Sincerely,
Signed by:
Dallas Tonsager:
Under Secretary:
[End of section]
Appendix III: Comments from the Department of Commerce:
United States Department Of Commerce: The Secretary of Commerce:
Washington, D.C. 20230:
November 4, 2009:
Mr. Mark L. Goldstein:
Director, Physical Infrastructure Issues: Government Accountability
Office: 441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Goldstein:
Thank you for the opportunity to comment on the Government
Accountability Office's (GAO) draft report, "Recovery Act: Agencies Are
Addressing Broadband Program Challenges, but Actions Are Needed to
Improve Implementation" (GAO-10-80).
As authorized by the American Recovery and Reinvestment Act of 2009
(Recovery Act), the Department of Commerce (Department)”through its
National Telecommunications and Information Administration (NTIA)”
administers the Broadband Technology Opportunities Program (BTOP) in
order to accelerate broadband deployment in unserved and underserved
areas of the United States, stimulate broadband demand and adoption,
and enhance broadband capabilities for strategic institutions that
provide important public benefits. The Department is working to ensure
that funds from the Recovery Act are made available as quickly,
effectively, and fairly as possible.
I appreciate the GAO's observations that NTIA faces several challenges
in evaluating and awarding BTOP funds in the relatively short period
required by the Recovery Act. Your report generally recommends
modifying scheduling of certain BTOP activities, taking steps to ensure
adequate oversight and support of projects, implementing program
evaluation tools, and utilizing lessons learned to establish outcome-
based performance targets and to ensure sufficient oversight of
commercial grantees. As your report notes, NTIA has already taken a
number of steps to reduce the risks you have identified, including
adding additional review time for first round grants, recommending
shifting from three funding rounds to two, procuring contractor
support, and taking other steps to effectively evaluate, award, and
monitor BTOP grants. In the coming weeks and months, NTIA will take all
appropriate additional steps to apply lessons learned and address GAO's
concerns. These steps will include utilizing experiences from the first
round of funding to improve the program; working to establish
quantitative, outcome-based performance measures; and implementing
reasonable audit requirements for commercial grantees.
The Department of Commerce is committed to ensuring that BTOP grants
enhance broadband capabilities in the United States, create jobs, and
help lay a new foundation for growth in America. Thank you again for
the opportunity to share the Department's comments.
Sincerely,
Signed by:
Gary Locke:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Mark L. Goldstein, (202) 512-2834 or goldsteinm@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Michael Clements, Assistant
Director; Eli Albagli; Matt Barranca; Elizabeth Eisenstadt; Dean
Gudicello; Tom James; Kim McGatlin; Sara Ann Moessbauer; Josh Ormond;
and Mindi Weisenbloom made key contributions to this report.
[End of section]
Footnotes:
[1] The Federal Communications Commission (FCC) defined "broadband" as
referring to advanced communications systems capable of providing high-
speed transmission of services such as data, voice, and video over the
Internet and other networks. However, for purposes of providing
funding, the Department of Commerce and the Department of Agriculture
define broadband as two-way data transmission with advertised speed of
at least 768 kilobits per second (kbps) downstream and at least 200
kbps upstream from end users.
[2] Pub. L. No.111-5, 123 Stat. 115 (2009).
[3] While this amount is substantial, it is small relative to the
amount private industry invests. According to a major
telecommunications association, broadband service providers invest
approximately $60 billion a year in broadband.
[4] On July 8, 2009, NTIA published a Notice of Funds Availability
(NOFA) and solicitation of applications to announce the availability of
funds for the State Broadband Data and Development Grant Program
pursuant to the authority provided in the American Recovery and
Reinvestment Act of 2009, P. L. 111-5, 123 Stat. 115 (2009), and the
Broadband Data Improvement Act, Title I, P. L. 110-385, 122 Stat. 4096
(2008). 74 Fed. Reg. 32545 (2009).
[5] 31 U.S.C. ch. 75.
[6] As defined in the NOFA, an "unserved" area is a proposed funded
service area composed of one or more contiguous census blocks, where at
least 90 percent of the households in the area lack access to
facilities-based, terrestrial broadband service, either fixed or
mobile, at advertised speeds of at least 768 kbps downstream and at
least 200 kbps upstream. An "underserved" area is a proposed funded
service area of one or more contiguous census blocks that meet at least
one of the following criteria: (1) no more than 50 percent of the
households have access to facilities-based, terrestrial broadband
service with advertised speeds of greater than 768 kbps downstream and
at least 200 kbps upstream; (2) no fixed or mobile broadband service
provider advertises service speeds of at least three megabits per
second downstream in the proposed funded service area; or (3) the rate
of broadband subscribership does not exceed 40 percent of the
households in the proposed service area. 74 Fed. Reg. 33104, 33109
(2009).
[7] As defined in the NOFA, a rural area is any area, as confirmed by
the latest decennial census of the Bureau of the Census, which is not
located within (1) a city, town, or incorporated area that has a
population of greater than 20,000 inhabitants or (2) an urbanized area
contiguous and adjacent to a city or town that has a population of more
than 50,000 inhabitants. 74 Fed. Reg. 33104, 33109 (2009).
[8] Pub. L. No. 111-5, div B, tit. VI, § 6001(e)(3).
[9] 74 Fed. Reg. 33104 (2009).
[10] NTIA press release, NTIA and RUS Streamline Programs to Bring
Broadband, Jobs to More Americans: Plan to Consolidate Final Two
Funding Rounds, Seek Comment on Program Enhancements (Nov. 10, 2009).
[11] 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. Based on the conditions prescribed by the Federal Credit
Reform Act of 1990, RUS expects the $500 million allocation to support
loans with a total principal amount of approximately $7 billion.
[12] RUS officials indicated that, on average, the budget authority for
these programs supported an estimated program level of $300-$400
million.
[13] Under the first funding round, NTIA will award up to $1.6 billion
of its $4.7 billion budgetary authority, and RUS will award up to $2.4
billion in grants and loans. This $2.4 billion is out of the projected
$9 billion total award from RUS, not the $2.5 billion in budgetary
authority.
[14] Census blocks are the smallest geographic areas for which the U.S.
Bureau of the Census collects and tabulates decennial census data.
Census blocks are formed by streets, roads, railroads, streams and
other bodies of water, other visible physical and cultural features,
and the legal boundaries shown on Census Bureau maps.
[15] Under the Recovery Act, up to $350 million was available pursuant
to the Broadband Data Improvement Act and for the purpose of developing
and maintaining a nationwide map featuring the availability of
broadband service. NTIA solicited grant applications from states for
projects designed to collect data, develop state maps, conduct state
planning, and deliver data to NTIA for the national broadband map.
Grant applicants must complete the data collection by March 1, 2010. 74
Fed. Reg. 32545 (2009).
[16] FCC collects information semiannually from service providers about
broadband Internet access connections to households and businesses
through its Form 477.
[17] GAO, Telecommunications: Broadband Deployment Plan Should Include
Performance Goals and Measures to Guide Federal Investment, [hyperlink,
http://www.gao.gov/products/GAO-09-494] (Washington, D.C.: May 12,
2009).
[18] NTIA released a Call for Reviewers on the [hyperlink,
http://www.broadbandusa.gov] web site to solicit unpaid volunteer peer
reviewers.
[19] 74 Fed. Reg. 33104, 33122.
[20] Pub. L. No. 111-5, div. A, tit. II, 123 Stat. at 128 (2009).
[21] Pub. L. No. 111-5, div. B, tit. VI, § 6001(k).
[22] Federal Communications Commission, A National Broadband Plan for
Our Future, Notice of Inquiry, 24 FCC Rcd 4342 (2009).
[23] 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.
[24] As required in the Recovery Act, NTIA shall, to the extent
practical, award not less than one grant in each state. American
Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, div. B, §
6001 (h) (1).
[25] 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 sufficient
or appropriate for those programs.
[26] Based on an estimated 2,080 hours for a single staff year, the
contracted hours correspond to 17 full-time-equivalent staff for grants
administration and postaward duties in 2010 and about 26 full-time-
equivalent staff for these duties in additional option years.
[27] Pub. L. No. 111-5, div. A, tit. XV,§ 1512(c),(d) (2009).
[28] 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).
[29] Pub. L. No. 111-5, div. B, tit. VI, § 6001(i)(1) (2009).
[30] In addition, BTOP recipients developing sustainable adoption and
public computer centers must report a variety of 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.
[31] 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.
[32] See GAO, Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/products/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/products/GAO-09-831T]
(Washington, D.C.: July 8, 2009).
[33] OMB Circular No. A-133, Audits of States, Local Governments, and
Non-Profit Organizations, provides guidance to auditors on selecting
federal programs for audit and the related internal control and
compliance audit procedures to be performed. Under OMB Recovery Act
guidance, funding recipients subject to an annual Single Audit must
submit their financial reporting packages, which include independent
Single Audit reports, within 9 months after the end of the recipient's
fiscal year and the Single Audit reports are to be publicly available
on the Internet.
[34] 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.
[35] 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.
[36] For example, RUS audit requirements do not require an audit and
opinions on the fair presentation of the Schedule of Expenditures of
Federal Awards.
[37] 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).
[38] 31 U.S.C. § 1115.
[End of section]
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