Recovery Act
Further Opportunities Exist to Strengthen Oversight of Broadband Stimulus Programs Gao ID: GAO-10-823 August 4, 2010Access to affordable broadband service is seen as vital to economic growth and improved quality of life. To extend broadband access 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 are awarding funds in two rounds and must obligate all funds by September 30, 2010. This report addresses the results of the first broadband stimulus funding round, the extent to which NTIA's and RUS's application reviews substantiated application information, the challenges facing NTIA and RUS in awarding the remaining funds, and actions taken to oversee grant and loan recipients. GAO analyzed program documentation, reviewed a judgmentally-selected sample of applications from first round award recipients, and interviewed agency officials and industry stakeholders.
In the first round of broadband stimulus funding that began in July 2009 and ended in April 2010, NTIA and RUS received over 2,200 applications and awarded 150 grants, loans, and loan/grant combinations totaling $2.2 billion to a variety of entities in nearly every state and U.S. territory. This funding includes $1.2 billion for 82 projects awarded by NTIA and more than $1 billion for 68 projects awarded by RUS. NTIA primarily awarded grants to public entities, such as states and municipalities, whereas RUS made grants, loans, and loan/grant combinations primarily to private-sector entities, such as for-profit companies and cooperatives. NTIA and RUS consistently substantiated information in first round award recipients' applications. The agencies and their contractors reviewed financial, technical, environmental, and other documents and determined the feasibility and reasonableness of each project. GAO's review of 32 award recipient applications found that the agencies consistently reviewed the applications and substantiated the information as specified in the first funding notice. In each of the files, GAO observed written documentation that the agencies and their contractors reviewed and verified pertinent application materials, and requested additional documentation where necessary. To meet the Recovery Act's September 30, 2010, deadline for obligating broadband funds, NTIA and RUS must award approximately $4.8 billion--or more than twice the amount they awarded during the first round--in less time than they had for the first round. As the end of the Recovery Act's obligation deadline draws near, the agencies may face increased pressure to approve awards. NTIA and RUS also lack detailed data on the availability of broadband service throughout the country, making it difficult to determine whether a proposed service area is unserved or underserved, as defined in the program funding notices. To address these challenges, NTIA and RUS have streamlined their application review processes by, for example, eliminating joint reviews and reducing the number of steps in the due-diligence review process, and NTIA began using Census tract data to verify the presence of service. NTIA and RUS are putting oversight plans in place to monitor compliance and progress for broadband stimulus funding recipients, but some risks remain. The agencies will need to oversee far more projects than in the past and these projects are likely to be much larger and more diverse than projects funded under the agencies' prior broadband-related programs. Additionally, NTIA and RUS must ensure that the recipients construct the infrastructure projects in the entire project area, not simply the area where it may be most profitable for the company to provide service. Both NTIA and RUS face the risk of having insufficient resources to actively monitor Recovery Act funded broadband projects. Because of this, planning for a possible lack of resources for program oversight after September 30, 2010, can help the agencies mitigate the effect of limited resources on postaward oversight. The Secretaries of Agriculture and Commerce should incorporate into their risk-based monitoring plans, steps to address variability in funding levels for postaward oversight beyond September 30, 2010. Both agencies took no position on GAO's recommendation and noted steps being taken to complete their respective programs.
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: Mark L. Goldstein Team: Government Accountability Office: Physical Infrastructure Phone: No phone on recordGAO-10-823, Recovery Act: Further Opportunities Exist to Strengthen Oversight of Broadband Stimulus Programs
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
August 2010:
Recovery Act:
Further Opportunities Exist to Strengthen Oversight of Broadband
Stimulus Programs:
GAO-10-823:
GAO Highlights:
Highlights of GAO-10-823, a report to congressional committees.
Why GAO Did This Study:
Access to affordable broadband service is seen as vital to economic
growth and improved quality of life. To extend broadband access 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 are awarding
funds in two rounds and must obligate all funds by September 30, 2010.
This report addresses the results of the first broadband stimulus
funding round, the extent to which NTIA‘s and RUS‘s application
reviews substantiated application information, the challenges facing
NTIA and RUS in awarding the remaining funds, and actions taken to
oversee grant and loan recipients. GAO analyzed program documentation,
reviewed a judgmentally-selected sample of applications from first
round award recipients, and interviewed agency officials and industry
stakeholders.
What GAO Found:
In the first round of broadband stimulus funding that began in July
2009 and ended in April 2010, NTIA and RUS received over 2,200
applications and awarded 150 grants, loans, and loan/grant
combinations totaling $2.2 billion to a variety of entities in nearly
every state and U.S. territory. This funding includes $1.2 billion for
82 projects awarded by NTIA and more than $1 billion for 68 projects
awarded by RUS. NTIA primarily awarded grants to public entities, such
as states and municipalities, whereas RUS made grants, loans, and
loan/grant combinations primarily to private-sector entities, such as
for-profit companies and cooperatives.
NTIA and RUS consistently substantiated information in first round
award recipients‘ applications. The agencies and their contractors
reviewed financial, technical, environmental, and other documents and
determined the feasibility and reasonableness of each project. GAO‘s
review of 32 award recipient applications found that the agencies
consistently reviewed the applications and substantiated the
information as specified in the first funding notice. In each of the
files, GAO observed written documentation that the agencies and their
contractors reviewed and verified pertinent application materials, and
requested additional documentation where necessary.
To meet the Recovery Act‘s September 30, 2010, deadline for obligating
broadband funds, NTIA and RUS must award approximately $4.8 billion”or
more than twice the amount they awarded during the first round”in less
time than they had for the first round. As the end of the Recovery Act‘
s obligation deadline draws near, the agencies may face increased
pressure to approve awards. NTIA and RUS also lack detailed data on
the availability of broadband service throughout the country, making
it difficult to determine whether a proposed service area is unserved
or underserved, as defined in the program funding notices. To address
these challenges, NTIA and RUS have streamlined their application
review processes by, for example, eliminating joint reviews and
reducing the number of steps in the due-diligence review process, and
NTIA began using Census tract data to verify the presence of service.
NTIA and RUS are putting oversight plans in place to monitor
compliance and progress for broadband stimulus funding recipients, but
some risks remain. The agencies will need to oversee far more projects
than in the past and these projects are likely to be much larger and
more diverse than projects funded under the agencies‘ prior broadband-
related programs. Additionally, NTIA and RUS must ensure that the
recipients construct the infrastructure projects in the entire project
area, not simply the area where it may be most profitable for the
company to provide service. Both NTIA and RUS face the risk of having
insufficient resources to actively monitor Recovery Act funded
broadband projects. Because of this, planning for a possible lack of
resources for program oversight after September 30, 2010, can help the
agencies mitigate the effect of limited resources on postaward
oversight.
What GAO Recommends:
The Secretaries of Agriculture and Commerce should incorporate into
their risk-based monitoring plans, steps to address variability in
funding levels for postaward oversight beyond September 30, 2010. Both
agencies took no position on GAO‘s recommendation and noted steps
being taken to complete their respective programs.
View [hyperlink, http://www.gao.gov/products/GAO-10-823] 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 Funded 150 Projects Totaling $2.2 Billion in the First
Funding Round:
NTIA's and RUS's Due-Diligence Reviews Consistently Substantiated
Information in the Awardees' Applications:
NTIA and RUS Face Challenges in Awarding Funds on Time and Have Taken
Actions to Streamline Application Reviews:
Agencies Are Developing Postaward Oversight Plans, but Some Risks to
the Success of the Broadband Stimulus Programs Remain:
Conclusion:
Recommendation for Executive Action:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Broadband Projects with Multistate Service Areas, First
Funding Round:
Appendix III: Comments from the Department of Agriculture:
Appendix IV: Comments from the Department of Commerce:
Appendix V: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Recovery Act Broadband Funding Timeline and Key Program
Milestones:
Table 2: Summary of Broadband Project Funding Categories, First
Funding Round:
Table 3: Summary of Broadband Project Funding Categories, Second
Funding Round:
Table 4: Comparison of NTIA's and RUS's Application Review Processes,
First Funding Round:
Table 5: BTOP Funding by Entity Type, First Funding Round (Dollars in
millions):
Table 6: Number of BTOP Projects Awarded to Entities, by Project
Category, First Funding Round:
Table 7: BIP Funding by Entity Type, First Funding Round (Dollars in
millions):
Table 8: Number of BIP Projects Awarded to Entities, by Project
Category, First Funding Round:
Table 9: BTOP and BIP Projects with Multistate Service Areas, First
Funding Round:
Figure:
Figure 1: Location and Types of Projects Awarded Broadband Stimulus
Funds, First Funding Round:
Abbreviations:
BIP: Broadband Initiatives Program:
BTOP: Broadband Technology Opportunities Program:
CRS: Congressional Research Service:
FCC: Federal Communications Commission:
IG: Inspector General:
kbps: kilobits per second:
mbps: megabits per second:
NEPA: National Environmental Policy Act:
NHPA: National Historic Preservation Act:
NTIA: National Telecommunications and Information Administration:
OMB: Office of Management and Budget:
RUS: Rural Utilities Service:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
August 4, 2010:
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:
Access to affordable broadband telecommunications[Footnote 1] is
increasingly viewed as vital to long-term economic growth and improved
quality of life, just as electricity, telephone, and the interstate
highway system filled similar roles in previous generations. 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. Furthermore, broadband
can improve citizens' quality of life. For example, broadband
technology makes it possible for a patient to visit a local clinic and
receive medical attention from specialists hundreds of miles away, for
a student to access information not available from the local library,
and for a firefighter to download blueprints of a burning building.
Broadband is particularly critical in rural areas, where advanced
communications can reduce the distances that isolate remote
communities and individuals. One of the goals of FCC's National
Broadband Plan is to provide all Americans with affordable access to
robust broadband service, and the means and skills to subscribe if
they choose.[Footnote 2] While the number of Americans who have
broadband at home has grown from 8 million in 2000 to nearly 200
million in 2009, millions of Americans do not yet have access to, or
do not use, broadband.
To extend access to broadband throughout the United States, as well as
to stimulate the economy and create jobs, Congress appropriated $7.2
billion for broadband programs under the American Recovery and
Reinvestment Act[Footnote 3] (Recovery Act), enacted on February 17,
2009. This $7.2 billion included $4.7 billion for the Department of
Commerce's National Telecommunications and Information Administration
(NTIA) and $2.5 billion for the Department of Agriculture's 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. Up to $350 million of the $4.7 billion was available
pursuant to the Broadband Data Improvement Act and for the purposes 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 the national broadband plan.[Footnote 4] The
Recovery Act also authorized RUS to establish the Broadband
Initiatives Program (BIP) to make loans and award grants and
loan/grant combinations for broadband infrastructure projects
primarily in rural areas. Both NTIA and RUS have established their
newly authorized broadband programs and put procedures in place for
implementing them. For example, the agencies instituted two rounds of
funding and each developed a multistep application review process that
includes due-diligence reviews[Footnote 5] to substantiate information
provided by applicants. The first funding round began in July 2009 and
ended in April 2010, and the second funding round began in January
2010 and will end September 30, 2010.
This report is part of GAO's ongoing efforts to monitor Recovery Act
programs and follows-up on our November 2009 report on NTIA's and
RUS's broadband stimulus programs.[Footnote 6] In that report, we
examined the challenges and risks facing NTIA and RUS in evaluating
applications and awarding funds, and the challenges and risks facing
the agencies in overseeing funded projects. We recommended that the
agencies take several actions, such as providing time to review
applications in the second funding round and establishing
quantifiable, outcome-based performance goals by which to measure
program effectiveness. NTIA and RUS agreed with our recommendations
and have taken some actions to address them. In this report, we
examine the first funding round and what remains to implement the
agencies' broadband programs. Specifically, this report addresses four
questions: (1) What are the results of the first broadband stimulus
funding round? (2) To what extent did NTIA's and RUS's due-diligence
reviews substantiate information in the awardees' applications? (3)
What challenges, if any, do NTIA and RUS face in awarding the
remaining broadband stimulus funds? (4) What actions, if any, are NTIA
and RUS taking to oversee grant and loan recipients?
To address these questions, we reviewed NTIA and RUS program
documentation and interviewed relevant officials about the agencies'
efforts to implement the broadband stimulus programs. To determine the
results of the first funding round, we obtained program and funding
data directly from the agencies, and from the agencies' Web sites and
press releases. We are reporting publicly available data that NTIA and
RUS provided on the first round broadband stimulus awards with the
intent to describe the number of awards, the entities receiving first
round funding, and the types of projects. This information is
presented for descriptive purposes. To determine the extent to which
NTIA's and RUS's due-diligence reviews substantiated information in
awardees' applications, we reviewed a judgmental sample of application
files for first-round grant and loan recipients. In choosing our
sample, we considered the award amount, type of applicant, geographic
location of the project, and type of project. We then reviewed the
selected application files electronically and compared the information
in those files to the requirements of the first-round funding notice.
[Footnote 7] We did not evaluate the agencies' decisions to award or
deny applications or the potential for success of any project. Rather,
we assessed the extent to which NTIA and RUS developed and implemented
a due-diligence review process. To determine the challenges, if any,
that NTIA and RUS face in awarding the remaining broadband stimulus
funds, we studied the requirements set forth in the Recovery Act,
evaluated changes between the first-and second-round funding notices,
and interviewed agency officials and representatives of five
telecommunications associations. Finally, to determine the actions
NTIA and RUS are taking to oversee grant and loan recipients, we
interviewed agency officials and reviewed agency plans and guidance,
and compared those plans to best practices identified by our prior
work and by the Office of Management and Budget (OMB).
We conducted our work from February through August 2010 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:
NTIA and RUS have until September 30, 2010, to obligate the Recovery
Act funding for broadband projects. While the completion time will
vary depending on the complexity of the project, recipients of BTOP
grants and BIP awards must substantially complete projects supported
by these programs no later than 2 years, and projects must be fully
completed no later than 3 years, following the date of issuance of the
award. As we reported in November 2009, NTIA and RUS faced a number of
challenges in evaluating applications and awarding broadband stimulus
funds during the first funding round.[Footnote 8] For example,
although both agencies had previously administered small
telecommunications grant or loan programs, they had to review more
applications and award far more funds with fewer staff to carry out
their Recovery Act programs. In addition, the agencies faced tight
time frames for awarding funds. To address these challenges, NTIA and
RUS awarded contracts to Booz Allen Hamilton and ICF International,
respectively, to help the agencies implement the programs within the
required time frames. The contractors have supported the development
and implementation of application review processes, helped with the
review of technical and financial materials, and assisted in the
development of postaward monitoring and reporting requirements.
To meet the September 30, 2010, deadline to award Recovery Act funds,
NTIA and RUS have established project categories for directing funds
to meet the act's requirements; released two funding notices;
conducted public outreach to increase participation among all eligible
entities; developed processes to accept, evaluate, advance, and award
applications; and advanced efforts to oversee recipients to ensure
proper use of Recovery Act funds. For the first funding round, NTIA
and RUS coordinated their efforts and issued one joint funding notice
detailing the requirements, rules, and procedures for applying for
funding. The first 18 broadband stimulus awards were announced on
December 17, 2009. NTIA and RUS completed the first round of awards on
April 26 and March 30, 2010, respectively. Table 1 shows the funding
timeline for NTIA's and RUS's broadband stimulus programs.
Table 1: Recovery Act Broadband Funding Timeline and Key Program
Milestones:
2009:
Date: February 17;
Schedule: Recovery Act signed.
Date: March 12;
Schedule: NTIA and RUS announced joint request for information seeking
public comment to inform the first funding round;
Round: 1.
Date: July 7-24;
Schedule: NTIA and RUS held free public workshops about the first
round application process;
Round: 1.
Date: July 9;
Schedule: First joint funding notice published in the Federal Register
by NTIA and RUS;
Round: 1.
Date: July 31;
Schedule: RUS awarded a contract to ICF International for program
development and administrative services;
Round: [Empty].
Date: August 3;
Schedule: NTIA awarded a contract to Booz Allen Hamilton for BTOP
program development and administrative services;
Round: [Empty].
Date: August 20;
Schedule: Deadline for applying for first round funding;
Round: 1.
Date: September - December;
Schedule: NTIA and RUS conducted eligibility and due-diligence reviews
and selected projects for awards;
Round: 1.
Date: November 16;
Schedule: NTIA and RUS announced joint request for information seeking
public comment to inform the second funding round;
Round: 2.
Date: December 17;
Schedule: NTIA announced first 10 BTOP awards;
RUS announced first 8 BIP awards;
Round: 1.
2010:
Date: January;
Schedule: NTIA announced 4 BTOP awards;
RUS announced 14 BIP awards;
Round: 1.
Date: January 22;
Schedule: Second separate funding notices published by NTIA and RUS;
Round: 2.
Date: January 26 - February 12;
Schedule: NTIA and RUS held free public workshops about the second
round application process;
Round: 2.
Date: February;
Schedule: NTIA announced 18 BTOP awards;
RUS announced 11 BIP awards;
Round: 1.
Date: February 16;
Schedule: Second round BIP/BTOP online application portal opens;
Round: 2.
Date: March;
Schedule: NTIA announced 38 BTOP awards;
RUS announced 31 BIP awards;
Round: 1.
Date: March 15;
Schedule: Second round Public Computer Center and Sustainable
Broadband Adoption project applications due (BTOP);
Round: 2.
Date: March 26;
Schedule: Second round Comprehensive Community Infrastructure project
applications due (BTOP);
Round: 2.
Date: March 29;
Schedule: Second round BIP project applications due;
Round: 2.
Date: March 30;
Schedule: RUS completed first round funding;
Round: 1.
Date: April;
Schedule: NTIA announced 12 BTOP awards;
Round: 1.
Date: April 26;
Schedule: NTIA completed first round funding;
Round: 1.
Date: May 19;
Schedule: NTIA announced a limited reopening of its Comprehensive
Community Infrastructure application window for entities authorized by
FCC to use the 700 MHz public safety spectrum;
Round: 2.
Date: June 1;
Schedule: 700 MHz public safety broadband applications accepted;
Round: 2.
Date: June 7;
Schedule: Applications for BIP Satellite, Rural Library Broadband, and
Technical Assistance projects due[A];
Round: 2.
Date: July 1;
Schedule: 700 MHz public safety broadband applications due;
Round: 2.
Date: September 30;
Schedule: Deadline for all BTOP/BIP funds to be obligated.
2011:
Date: January - December;
Schedule: Ongoing monitoring of project implementation to occur.
2012:
Date: September 30;
Schedule: BTOP/BIP projects to be "substantially complete"[B].
2013:
Date: September 30;
Schedule: Deadline for completing BTOP/BIP projects[C].
Source: GAO analysis of NTIA and RUS data.
[A] On May 7, 2010, RUS issued a notice of funding availability
outlining the specific requirements with respect to Satellite, Rural
Library Broadband, and Technical Assistance projects. Applications
were accepted for these projects from May 7, 2010, until June 7, 2010.
75 Fed. Reg. 25185 (2010).
[B] For RUS loans or loan/grant combinations, this date is based on
when the award closed. Therefore, some awards may be substantially
complete before or after September 30, 2012.
[C] For RUS loans or loan/grant combinations, this date is based on
when the award closed. Therefore, some BIP projects will be due for
completion before September 30, 2013, and some after that date.
[End of table]
Table 2 summarizes the categories of projects eligible for funding
during the first round for both BTOP and BIP.
Table 2: Summary of Broadband Project Funding Categories, First
Funding Round:
Agency/program: NTIA BTOP;
Project category: Broadband Infrastructure;
Description: Up to $1.2 billion was available for broadband
infrastructure projects. This category includes Last Mile and Middle
Mile projects (see below) designed to deliver access to "unserved" and
"underserved" areas. An "unserved" area is defined as one or more
contiguous census blocks, where at least 90 percent of households in
the proposed funded service area lack access to facilities-based,
terrestrial broadband service at the minimum broadband transmission
speed.[A] An "underserved" area is defined as one or more contiguous
census blocks where (1) no more than 50 percent of the households have
access to facilities-based, terrestrial broadband service; (2) no
service provider advertises broadband speeds of at least 3 megabits
per second (mbps); or (3) the rate of broadband adoption is 40 percent
of households or less. For Middle Mile projects, a proposed funded
service area may qualify as underserved if one interconnection point
terminates in a proposed funded service area that qualifies as
unserved or underserved.
Agency/program: NTIA BTOP;
Project category: Public Computer Centers;
Description: Up to $50 million was available for projects that would
expand public access to broadband service and enhance broadband
capacity at entities such as community colleges and public libraries
that permit the public to use these computer centers.
Agency/program: NTIA BTOP;
Project category: Sustainable Broadband Adoption;
Description: Up to $150 million was available for innovative projects
that would promote demand, including projects focused on providing
education, awareness, training, access, equipment, or support,
particularly among vulnerable groups that traditionally have underused
broadband technology.
Agency/program: RUS BIP;
Project category: Last Mile;
Description: Up to $1.2 billion was available for Last Mile
infrastructure projects in remote and nonremote areas.[B] A Last Mile
project is defined as any broadband infrastructure project that
provides service to end users or end-user devices. A remote area is an
unserved, rural area 50 miles from the limits of a nonrural area.
Agency/program: RUS BIP;
Project category: Middle Mile;
Description: Up to $800 million was available for Middle Mile
projects. A Middle Mile project is defined as a broadband
infrastructure project that does not predominantly provide broadband
service to end users or to end user devices, and may include
interoffice transport, backhaul,[C] Internet connectivity, or special
access[D].
Source: GAO analysis of NTIA and RUS data.
[A] The broadband service can be either fixed or mobile, but must
provide a minimum two-way data transmission speed of at least 768 kbps
downstream and at least 200 kbps upstream to end users.
[B] Because of provisions in the Federal Credit Reform Act of 1990,
RUS can award grants and loans that exceed its budgetary authority.
[C] In a telecommunications network, backhaul refers to the
transmission of information--or data--from any of the company's
aggregation points to an Internet backbone provider that will then
transmit the data to any point on the Internet.
[D] Special access is a generic term describing point-to-point
communications circuits that are carried over the public telephone
network. Special access circuits continuously connect two or more
points, and for that reason they are sometimes called dedicated
circuits.
[End of table]
Based on the agencies' experiences with the first round, and drawing
on public comments, both NTIA and RUS made changes to how the second-
round funding for BTOP and BIP will be structured and conducted.
Unlike the first round, NTIA and RUS issued separate funding notices
and applicants had the option of applying to either BTOP or BIP, but
not to both.[Footnote 9] In the second round, NTIA will again award
grants for three categories of eligible projects, however the
infrastructure program has been reoriented toward Comprehensive
Community Infrastructure grants, which will support Middle Mile
projects serving anchor institutions such as community colleges,
libraries, hospitals, universities, and public safety institutions.
RUS has prioritized Last Mile projects and added 3 new grant programs:
Satellite, Rural Library, and Technical Assistance projects. Table 3
provides information on the second-round project categories.
Table 3: Summary of Broadband Project Funding Categories, Second
Funding Round:
Agency/program: NTIA BTOP;
Project category: Comprehensive Community Infrastructure;
Description: Up to $2.35 billion is available for broadband
infrastructure projects that emphasize Middle Mile broadband
capabilities and new or substantially upgraded connections to
community anchor institutions, especially community colleges. Under
the second funding notice, a Middle Mile project is defined as any
component of a comprehensive community infrastructure project that
provides broadband service from one or more centralized facilities
(i.e., the central office, the cable headend,[A] the wireless
switching station, or other equivalent centralized facility) to an
Internet point of presence. NTIA eliminated the unserved and
underserved requirement.
Agency/program: NTIA BTOP;
Project category: Public Computer Centers;
Description: At least $150 million is available to provide broadband
access to the general public or a specific vulnerable population, and
the project must either create or expand a public computer center or
improve broadband service or connections at a public computer center,
including those at community colleges, that meets a specific public
need for broadband service.
Agency/program: NTIA BTOP;
Project category: Sustainable Broadband Adoption;
Description: At least $100 million is available to fund innovative
projects that promote broadband demand, including projects focused on
providing broadband education, awareness, training, access, equipment,
or support, particularly among vulnerable groups that traditionally
have underused broadband technology.
Agency/program: RUS BIP;
Project category: Last Mile;
Description: Up to $1.7 billion is available for loans or loan/grant
combinations.[B] RUS eliminated the remote and underserved requirement;
however, RUS still encourages projects in the most remote and rural
areas. Eligible areas are those in which at least 50 percent of the
premises in the area do not have access to broadband service at the
rate of 5 mbps (upstream and downstream combined). These projects must
cover an area that is at least 75 percent rural.
Agency/program: RUS BIP;
Project category: Middle Mile;
Description: Up to $300 million is available for loans or loan/grant
combinations.
Agency/program: RUS BIP;
Project category: Satellite, rural library broadband, and technical
assistance projects;
Description: Up to $100 million is available in grants for satellite
projects, as well as any and all funds not obligated for Last Mile and
Middle Mile projects, and up to $5 million is available in grants for
connecting rural libraries to the Internet and developing regional
broadband development strategies in rural areas.
Source: GAO analysis of NTIA and RUS data.
[A] In a cable system, video signals transmitted by satellites and
broadcast towers are received at a cable company facility known as a
headend. This facility originates and distributes cable service in a
geographic area. Depending on the size of the geographic area the
cable company serves, the company could have several headend
facilities within a cable system.
[B] Because of provisions in the Federal Credit Reform Act of 1990,
RUS can award grants and loans that exceed its budgetary authority.
[End of table]
The first funding notice, published July 9, 2009, set forth the
processes for reviewing applications that NTIA and RUS followed during
the first funding round. Both agencies developed a multistep
application review process designed to balance the applicants' need
for time to prepare their applications with the agencies' need for
time to review them, as well as to minimize the burden on the
applicants that did not ultimately qualify for program funding.
Generally, both agencies initially screened applications to determine
whether they were complete and eligible and then submitted the
qualifying applications to a due-diligence review. For this review,
the applicants were asked to submit additional documentation to
further substantiate their financial, technical, and other project
information. Table 4 compares the agencies' first-round application
review processes.
Table 4: Comparison of NTIA's and RUS's Application Review Processes,
First Funding Round:
Step in process: Initial screening;
NTIA/BTOP: NTIA staff and the contractor screen applications for
eligibility and completeness;
RUS/BIP: RUS staff and the contractor screen applications for
eligibility and completeness.
Step in process: First step;
NTIA/BTOP: Three independent reviewers with demonstrated subject-
matter expertise review and score applications. Scores are averaged
and ranked, and all applications above a designated threshold advance
to step two;
RUS/BIP: Contractor performs due-diligence review covering financial
and technological feasibility; Contractor recommends applications to
RUS staff for further consideration for BIP awards.
Step in process: Second step;
NTIA/BTOP: NTIA staff and contractor perform due-diligence review;
NTIA staff and contractor summarize findings of due-diligence review
and make recommendations for further consideration for BTOP awards;
State governors' offices have an opportunity to make recommendations
for qualifying projects in or affecting their states; 565 Federally
recognized tribal entities and 12 Alaska Regional Tribal Corporations
also have an opportunity to comment upon applications that propose to
serve tribal communities;
RUS/BIP: Contractor reviews additional documentation to substantiate
application information and the required environmental review;
Contractor recommends applications to RUS staff for consideration for
BIP awards.
Source: GAO analysis of NTIA and RUS documents.
[End of table]
In addition to implementing the BTOP program, NTIA is implementing the
broadband mapping provisions referenced in the Recovery Act. Up to
$350 million of the $4.7 billion was available to NTIA pursuant to the
Broadband Data Improvement Act and for the purpose of developing and
maintaining a nationwide map of broadband service availability. NTIA
explained that this program would fund projects that collect
comprehensive and accurate state-level broadband mapping data, develop
state-level broadband maps, aid in the development and maintenance of
a national broadband map, and fund statewide initiatives directed at
broadband planning. NTIA accepted applications for the State Broadband
Data and Development Grant program until August 14, 2009. NTIA
originally funded state data collection efforts for a 2-year period,
allowing the agency to assess initial state activities before awarding
funding for the remainder of this 5-year initiative. On May 28, 2010,
NTIA announced that state governments and other existing awardees had
until July 1, 2010, to submit amended and supplemental applications
for 3 additional years of mapping and data collection activities and
to support all other eligible purposes under the Broadband Data
Improvement Act.
NTIA and RUS Funded 150 Projects Totaling $2.2 Billion in the First
Funding Round:
In the first round of broadband stimulus funding, NTIA and RUS
received almost 2,200 applications and awarded 150 grants, loans, and
loan/grant combinations totaling over $2.2 billion in federal funds to
a variety of entities for projects in nearly every state and U.S.
territory.[Footnote 10] This funding includes over $1.2 billion for 82
BTOP projects and more than $1 billion for 68 BIP projects. More than
70 percent of these projects were awarded to non-governmental
entities, such as for-profit corporations, nonprofit organizations,
and cooperative associations. Ten BTOP and 3 BIP grants were awarded
to applicants with multistate projects. For example, RUS awarded a
grant to Peetz Cooperative Telephone Company for a Last Mile Remote
project covering parts of Colorado and Nebraska and NTIA awarded a
grant to One Economy Corporation for a Sustainable Broadband Adoption
project covering parts of 32 states. Figure 1 illustrates the
locations of the broadband stimulus projects and the total project
funding per state awarded in the first round.
Figure 1: Location and Types of Projects Awarded Broadband Stimulus
Funds, First Funding Round:
[Refer to PDF for image: illustrated table]
State/territory: Alabama;
Middle Mile: 0;
Last Mile: 1;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $3,892,920.
State/territory: Alaska;
Middle Mile: 2;
Last Mile: 2;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 4;
Total funding: $117,144,273.
State/territory: American Samoa;
Middle Mile: 0;
Last Mile: 1;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $91,034,763.
State/territory: Arizona;
Middle Mile: 2;
Last Mile: 0;
Public computer center: 1;
Sustainable broadband adoption: 0;
Total projects: 3;
Total funding: $40,600,395.
State/territory: Arkansas[A];
Middle Mile: 0;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 0;
Total funding: 0.
State/territory: California;
Middle Mile: 1;
Last Mile: 2;
Public computer center: 3;
Sustainable broadband adoption: 2;
Total projects: 8;
Total funding: $39,954,655.
State/territory: Colorado;
Middle Mile: 0;
Last Mile: 2;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 2; $5,842,281.
Total funding:
State/territory: Connecticut[A];
Middle Mile: 0;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 0;
Total funding: 0.
State/territory: Delaware;
Middle Mile: 0;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 0;
Total funding: 0.
State/territory: District of Columbia;
Middle Mile: 0;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 1;
Total projects: 1;
Total funding: $28,519,482.
State/territory: Florida;
Middle Mile: 2;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 1;
Total projects: 3;
Total funding: $35,682,424.
State/territory: Georgia;
Middle Mile: 3;
Last Mile: 1;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 4;
Total funding: $56,592,677.
State/territory: Guam;
Middle Mile: 1;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $8,039,792.
State/territory: Hawaii;
Middle Mile: 0;
Last Mile: 1;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $106,503.
State/territory: Idaho;
Middle Mile: 1;
Last Mile: 4;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 5;
Total funding: $18,886,365.
State/territory: Illinois;
Middle Mile: 3;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 1;
Total projects: 4;
Total funding: $64,241,908.
State/territory: Indiana;
Middle Mile: 2;
Last Mile: 2;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 4;
Total funding: $88,515,852.
State/territory: Iowa;
Middle Mile: 0;
Last Mile: 4;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 4;
Total funding: $8,969,531.
State/territory: Kansas;
Middle Mile: 1;
Last Mile: 4;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 5;
Total funding: $121,089268.
State/territory: Kentucky;
Middle Mile: 0;
Last Mile: 2;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 2;
Total funding: $78,659,887.
State/territory: Louisiana;
Middle Mile: 1;
Last Mile: 3;
Public computer center: 2;
Sustainable broadband adoption: 0;
Total projects: 6;
Total funding: $143,741,951.
State/territory: Maine;
Middle Mile: 1;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $25,402,904.
State/territory: Maryland;
Middle Mile: 0;
Last Mile: 0;
Public computer center: 1;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $932,116.
State/territory: Massachusetts;
Middle Mile: 1;
Last Mile: 0;
Public computer center: 2;
Sustainable broadband adoption: 1;
Total projects: 4;
Total funding: $35,460,550.
State/territory: Michigan;
Middle Mile: 1;
Last Mile: 2;
Public computer center: 1;
Sustainable broadband adoption: 0;
Total projects: 4;
Total funding: $51,121,663.
State/territory: Minnesota;
Middle Mile: 1;
Last Mile: 3;
Public computer center: 1;
Sustainable broadband adoption: 1;
Total projects: 6;
Total funding: $71,599,574.
State/territory: Mississippi;
Middle Mile: 0;
Last Mile: 1;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $8,440,189.
State/territory: Missouri;
Middle Mile: 0;
Last Mile: 2;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 2;
Total funding: $29,378,733.
State/territory: Montana[A];
Middle Mile: 0;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 0;
Total funding: 0.
State/territory: Nebraska[A];
Middle Mile: 0;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 0;
Total funding: 0.
State/territory: Nevada;
Middle Mile: 0;
Last Mile: 0;
Public computer center: 1;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $4,680,0963.
State/territory: New Hampshire;
Middle Mile: 0;
Last Mile: 1;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $985,000.
State/territory: New Jersey[A]
Middle Mile: 0;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 0;
Total funding: 0.
State/territory: New Mexico;
Middle Mile: 1;
Last Mile: 4;
Public computer center: 1;
Sustainable broadband adoption: 1;
Total projects: 7;
Total funding: $38,493,350.
State/territory: New York;
Middle Mile: 1;
Last Mile: 1;
Public computer center: 1;
Sustainable broadband adoption: 1;
Total projects: 4;
Total funding: $76,737,231.
State/territory: North Carolina;
Middle Mile: 1;
Last Mile: 0;
Public computer center: 2;
Sustainable broadband adoption: 0;
Total projects: 3;
Total funding: $29,477,115.
State/territory: North Dakota;
Middle Mile: 0;
Last Mile: 5;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 5;
Total funding: $32,703,494.
State/territory: Ohio;
Middle Mile: 1;
Last Mile: 3;
Public computer center: 0;
Sustainable broadband adoption: 1;
Total projects: 5;
Total funding: $30,950,174.
State/territory: Oklahoma;
Middle Mile: 0;
Last Mile: 6;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 6;
Total funding: $73,153,765.
State/territory: Oregon;
Middle Mile: 1;
Last Mile: 3;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 4;
Total funding: $10,447,611.
State/territory: Pennsylvania;
Middle Mile: 3;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 3;
Total funding: $134,581,596.
State/territory: Puerto Rico;
Middle Mile: 2;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 2;
Total funding: $38,760,352,
State/territory: Rhode Island;
Middle Mile: 0;
Last Mile: 0;
Public computer center: 1;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $1,245,500.
State/territory: South Carolina;
Middle Mile: 0;
Last Mile: 0;
Public computer center: 1;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $5,903,040.
State/territory: South Dakota;
Middle Mile: 1;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $30,572,242.
State/territory: Tennessee;
Middle Mile: 2;
Last Mile: 1;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 3;
Total funding: $60,360,899.
State/territory: Texas;
Middle Mile: 1;
Last Mile: 5;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 6;
Total funding: $183,812,101.
State/territory: Utah;
Middle Mile: 1;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 1;
Total funding: $13,401,096.
State/territory: Vermont;
Middle Mile: 0;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 1;
Total projects: 1;
Total funding: $2,525,675.
State/territory: Virginia;
Middle Mile: 4;
Last Mile: 2;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 6;
Total funding: $60,167,701.
State/territory: Washington;
Middle Mile: 1;
Last Mile: 1;
Public computer center: 1;
Sustainable broadband adoption: 1;
Total projects: 4;
Total funding: $113,870,067.
State/territory: West Virginia;
Middle Mile: 2;
Last Mile: 1;
Public computer center: 1;
Sustainable broadband adoption: 1;
Total projects: 5;
Total funding: $138,781,586.
State/territory: Wisconsin;
Middle Mile: 2;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 2;
Total funding: $28,084,740.
State/territory: Wyoming;
Middle Mile: 0;
Last Mile: 0;
Public computer center: 0;
Sustainable broadband adoption: 0;
Total projects: 0;
Total funding: 0.
State/territory: Total;
Middle Mile: 47;
Last Mile: 70;
Public computer center: 20;
Sustainable broadband adoption: 13;
Total projects: 150;
Total funding: $2,273,545,954.
Source: GAO presentation of NTIA and RUS data.
[A] Broadband stimulus funding projects are occurring in these states.
In the first round, 13 of the 150 projects involve a service area
covering more than one state. For this table, we have categorized the
project in the state where the organization receiving funding is
headquartered. See appendix II for a list of projects with service
areas covering multiple states.
[End of figure]
BTOP. During the first funding round, NTIA awarded more than $1
billion in BTOP funds for 49 broadband infrastructure projects to
deploy Middle Mile and Last Mile broadband technology to unserved and
underserved areas of the United States; $57 million for 20 Public
Computer Center projects to provide access to broadband, computer
equipment, computer training, job training, and educational resources
to the general public and specific vulnerable populations; and $110
million for 13 Sustainable Broadband Adoption projects to promote
broadband demand through innovation, especially among vulnerable
population groups that have traditionally underused broadband
technology.
NTIA awarded grants to a variety of entities in the first funding
round, including public entities, for-profits, nonprofits, cooperative
associations, and tribal entities. Our analysis of NTIA's data shows
that public entities, such as states, municipalities, or other local
governments, received the largest number of BTOP grants and largest
percentage of the funding. This funding supports BTOP projects in 45
states and territories. Table 5 shows the entity types and the amounts
of funding per entity type during the first round.
Table 5: BTOP Funding by Entity Type, First Funding Round:
Entity type: Public[A];
Number of grants: 34;
Funding amount: $474 million;
Percentage of total first round funding: 39.3%.
Entity type: Nonprofit;
Number of grants: 21;
Funding amount: $384 million;
Percentage of total first round funding: 31.8%.
Entity type: For-profit;
Number of grants: 21;
Funding amount: $233 million;
Percentage of total first round funding: 19.3%.
Entity type: Cooperative[B];
Number of grants: 5;
Funding amount: $83 million;
Percentage of total first round funding: 6.9%.
Entity type: Tribal entity;
Number of grants: 1;
Funding amount: $32 million;
Percentage of total first round funding: 2.7%.
Entity type: Total;
Number of grants: 82;
Funding amount: $1.206 billion;
Percentage of total first round funding: 100%.
Source: GAO presentation of NTIA data.
[A] "Public" refers to states, local governments, or any government
agency, including a territory or possession of the United States.
[B] "Cooperative" refers to any independent, member-owned
telecommunications business.
[End of table]
Of the 82 grants awarded, over half were for infrastructure projects,
and NTIA awarded over 40 percent of these grants to for-profit
entities in the first round. NTIA awarded Public Computer Center and
Sustainable Broadband Adoption projects to public entities and
nonprofit organizations. Table 6 shows the types of entities awarded
funds for each BTOP funding category.
Table 6: Number of BTOP Projects Awarded to Entities, by Project
Category, First Funding Round:
Entity type: Public[A];
Project category: Broadband infrastructure: 15;
Project category: Public computer center: 14;
Project category: Sustainable broadband adoption: 5;
Project category: Total: 34.
Entity type: Nonprofit;
Project category: Broadband infrastructure: 7;
Project category: Public computer center: 6;
Project category: Sustainable broadband adoption: 8;
Project category: Total: 21.
Entity type: For-profit;
Project category: Broadband infrastructure: 21;
Project category: Public computer center: 0;
Project category: Sustainable broadband adoption: 0;
Project category: Total: 21.
Entity type: Cooperative[B];
Project category: Broadband infrastructure: 5;
Project category: Public computer center: 0;
Project category: Sustainable broadband adoption: 0;
Project category: Total: 5.
Entity type: Tribal entity;
Project category: Broadband infrastructure: 1;
Project category: Public computer center: 0;
Project category: Sustainable broadband adoption: 0;
Project category: Total: 1.
Entity type: Total;
Project category: Broadband infrastructure: 49;
Project category: Public computer center: 20;
Project category: Sustainable broadband adoption: 13;
Project category: Total: 82.
Source: GAO presentation of NTIA data.
[A] "Public" refers to states, local governments, or any government
agency, including a territory or possession of the United States.
[B] "Cooperative" refers to any independent, member-owned
telecommunications business.
[End of table]
BIP. During the first funding round, RUS announced 49 broadband
infrastructure awards totaling nearly $740 million in program funding
for Last-Mile nonremote projects,[Footnote 11] 13 awards totaling $161
million for Last Mile remote projects,[Footnote 12] and 6 awards
totaling $167 million for Middle Mile broadband infrastructure
projects. The majority of funding was awarded in the form of
loan/grant combinations. Of the nearly $1.1 billion in first round
funding, RUS awarded 53 loan/grant combinations totaling over $957
million in program funds, 12 grants totaling about $69 million, and 3
loans totaling over $41 million.
RUS awarded grants, loans, and loan/grant combinations to a variety of
entities. Eighty-five percent of BIP recipients are for-profit
companies or cooperative associations. Four tribal entities also
received BIP funding. In addition, 43 of the 68 BIP recipients are
Title II borrowers and have previously received rural electrification
and telephone loans from RUS.[Footnote 13] These represent the
incumbent local telecommunications providers in the funding area.
Table 7 shows the entity types and amount of funding received during
the first round.
Table 7: BIP Funding by Entity Type, First Funding Round:
Entity type: Public[A];
Number of awards (loans, grants, and loan/grant combinations): 3;
Funding amount: $105 million;
Percentage of total first round funding: 9.8%.
Entity type: Nonprofit;
Number of awards (loans, grants, and loan/grant combinations): 2;
Funding amount: $11 million;
Percentage of total first round funding: 1.1%.
Entity type: For-profit;
Number of awards (loans, grants, and loan/grant combinations): 34;
Funding amount: $416 million;
Percentage of total first round funding: 39.0%.
Entity type: Cooperative[B];
Number of awards (loans, grants, and loan/grant combinations): 25;
Funding amount: $489 million;
Percentage of total first round funding: 45.8%.
Entity type: Tribal entity;
Number of awards (loans, grants, and loan/grant combinations): 4;
Funding amount: $46 million;
Percentage of total first round funding: 4.3%.
Entity type: Total;
Number of awards (loans, grants, and loan/grant combinations): 68;
Funding amount: $1.067 billion;
Percentage of total first round funding: 100%.
Source: GAO presentation of RUS data.
[A] "Public" refers to states, local governments, or any government
agency, including a territory or possession of the United States.
[B] "Cooperative" refers to any independent, member-owned
telecommunications business.
[End of table]
RUS made nearly three-quarters of its awards for Last Mile non-remote
projects and the majority of these awards went to for-profit and
cooperative associations. Table 8 shows the types of entities that
received awards and the number of projects awarded in each BIP funding
category.
Table 8: Number of BIP Projects Awarded to Entities, by Project
Category, First Funding Round:
Entity type: Public[A];
Project category: Last Mile nonremote: 2;
Project category: Last Mile remote: 1;
Project category: Middle Mile: 0;
Project category: Total: 3.
Entity type: Nonprofit;
Project category: Last Mile nonremote: 2;
Project category: Last Mile remote: 0;
Project category: Middle Mile: 0;
Project category: Total: 2.
Entity type: For-profit;
Project category: Last Mile nonremote: 24;
Project category: Last Mile remote: 8;
Project category: Middle Mile: 2;
Project category: Total: 34.
Entity type: Cooperative[B];
Project category: Last Mile nonremote: 19;
Project category: Last Mile remote: 3;
Project category: Middle Mile: 3;
Project category: Total: 25.
Entity type: Tribal entity;
Project category: Last Mile nonremote: 2;
Project category: Last Mile remote: 1;
Project category: Middle Mile: 1;
Project category: Total: 4.
Entity type: Total;
Project category: Last Mile nonremote: 49;
Project category: Last Mile remote: 13;
Project category: Middle Mile: 6;
Project category: Total: 68.
Source: GAO presentation of RUS data.
[A] "Public" refers to states, local governments, or any government
agency, including a territory or possession of the United States.
[B] "Cooperative" refers to any independent, member-owned
telecommunications business.
[End of table]
As of June 29, 2010, RUS had provided $899.6 million in program funds
for 61 of these 68 projects, representing approximately 85 percent of
the awards announced in the first round. This amount represents about
$485 million charged against RUS's Recovery Act budget authority.
[Footnote 14] Of the remaining projects, 4 are still in the contract
award process and 3 awards were declined by the recipients.[Footnote
15]
NTIA's and RUS's Due-Diligence Reviews Consistently Substantiated
Information in the Awardees' Applications:
To substantiate information in the applications, NTIA, RUS, and their
contractors reviewed financial, technical, environmental, and other
documents and determined the feasibility and reasonableness of each
project. The agencies reviewed application materials for evidence that
the applicants satisfied the criteria established in the first funding
notice. The first funding notice identified several types of
information that would be subject to due-diligence review, including
details related to the following items:
* Proposed budget, capital requirements and the source of these funds,
and operational sustainability.
* Technology strategy and construction schedule, including a map of
the proposed service area and a diagram showing how technology will be
deployed throughout the project area (for infrastructure projects) and
a timeline demonstrating project completion.
* Completed environmental questionnaire and historic preservation
documentation.
* Evidence of current subscriber and service levels in the project
area to support an "unserved" or "underserved" designation.[Footnote
16]
* Recipient's eligibility to receive a federal award.[Footnote 17]
* Any other underlying documentation referenced in the application,
including outstanding and contingent obligations (debt), working
capital requirements and sources of these funds, the proposed
technology, and the construction build-out schedule.
To implement the due-diligence review, the agencies with their
contractors reviewed the application materials for adherence to the
first-round funding notice's guidelines. The contractors formed teams
with specific financial or technical expertise[Footnote 18] to perform
the due-diligence evaluation of applications. Generally, the agencies
followed similar due-diligence review processes, but there were some
differences. For example, NTIA teams analyzed and discussed the
application materials and assigned scores to applications based on the
criteria established in the first-round funding notice: (1) project
purpose, (2) project benefits, (3) project viability, and (4) project
budget and sustainability. Also, NTIA teams contacted applicants when
necessary to obtain additional materials or clarify information in the
application. Both NTIA and RUS officials reviewed environmental
questionnaires addressing National Environmental Policy Act (NEPA)
concerns and other documents addressing National Historic Preservation
Act (NHPA) concerns.[Footnote 19] Agency officials requested that
applicants provide full environmental and historical impact reports
for their projects unless the projects received an exclusion. At the
time we reviewed our sample of application files, these reports were
pending for NTIA applications; all RUS applications we reviewed
received categorical exclusions.[Footnote 20] During the due-diligence
review, agency officials said that the contractor teams had frequent
contact with NTIA and RUS to discuss issues that arose during the
review.
The review teams produced detailed briefing reports describing the
information contained in each file and used professional judgment to
make recommendations as to each project's viability and
sustainability, and the applicant's apparent capacity to implement and
maintain the project. Agency officials used these reports and other
information in making award decisions. The review teams also
recommended follow-up actions the agencies might consider to gather
more information on unresolved issues. Both agencies' officials
reported that they were satisfied with the quality of their
contractors' work.
Based on our analysis of the files of 32 awarded applications, we
found that the agencies consistently reviewed the applications and
substantiated the information as specified in the first-round funding
notice, a finding consistent with the Department of Commerce Inspector
General's April 2010 report.[Footnote 21] In each of the files we
reviewed, we observed written documentation that the agencies and
their contractors had reviewed and verified pertinent application
materials, or made notes to request additional documentation where
necessary. In general, we saw evidence that the agencies and the
contractors verified the following information:
* basic fit with the programs (project descriptions);
* financial reasonableness (capital and operating budgets, financial
statements);
* technological viability (maps of the proposed coverage area, a
description of the technology to be used and how it would be employed);
* environmental and historic preservation/remediation;
* project planning (construction schedules, project milestones);
* organizational capacity (resumes or biographies of the principals
involved in the project, matching funds, support from both the
affected communities and other governmental entities); and:
* congressional districts affected.
The two agencies developed different processes to investigate the
merits of public comments on whether proposed projects met the
definition of "unserved" or "underserved" published in the first
funding notice. This investigation is known as an "overbuild analysis"
and is needed because of the continued lack of national broadband
data.[Footnote 22] In general, the public comments were submitted by
companies that claimed they were already providing service in the
proposed service areas and that the applicant's project would thus
lead to overbuilding. NTIA's contractor researched the commenting
companies' claims of provided service via industry databases, the
companies' Web sites and advertisements, and then produced an
overbuild analysis for review by agency officials that described the
research results and the contractor's level of confidence in the
accuracy of the analysis. For RUS, field staff personally contacted
the entities that submitted the comments to verify their claims that
they provided service in the affected areas. According to RUS, field
staff reconciled any difference between the application and commenter,
and where necessary, conducted an actual field visit to the proposed
service territory. In all cases in our sample, we observed that
agencies and their contractors found that the projects met the
definitions of "unserved" and "underserved" set forth in the first
funding notice.[Footnote 23] In at least one case, public comments
were retracted following a request for additional information; in
other cases, the additional information provided did not support
claims of overbuilding.
Finally, we interviewed representatives of five industry associations
and two companies that received funding during the first round to
learn their perspectives on the thoroughness of the due-diligence
reviews. Generally, the industry association representatives confirmed
that their constituents who had applied for and received broadband
funding had undergone due-diligence reviews, but they were not
familiar with the extent to which NTIA and RUS had verified applicant
information. According to representatives of two companies that
received funding during the first round, the agencies' due-diligence
process was thorough and rigorous.
NTIA and RUS Face Challenges in Awarding Funds on Time and Have Taken
Actions to Streamline Application Reviews:
NTIA and RUS Must Award a Significant Amount of Funds in a Short Time:
During the second funding round, NTIA and RUS have more funds to award
and less time to award these funds than they had for the first round,
and although the agencies received fewer applications for the second
round, they are conducting more due-diligence reviews than they did
for the first round. NTIA and RUS have until September 30, 2010, to
obligate approximately $4.8 billion in remaining broadband stimulus
funds, or more than twice the $2.2 billion they awarded during the
first funding round. More specifically, in the second funding round,
NTIA must award $2.6 billion in BTOP grants and RUS must award $2.1
billion in BIP loans and loan/grant combinations.[Footnote 24]
Moreover, NTIA has 2 fewer months in the second funding round to
perform due-diligence reviews and obligate funds for selected BTOP
projects than in the first funding round, and RUS has 3 months less
for BIP.[Footnote 25] Whereas NTIA took 8 months for these tasks
during the first funding round from the August 20, 2009, application
deadline through April 26, 2010, it has 6 months for the second round,
from the March 26, 2010, application deadline to the program's
September 30, 2010, obligation deadline. Similarly, RUS took at least
9 months for the first funding round and has 6 months for the second
round. (As of July 1, 2010, RUS had not obligated funds for four first-
round awards.)
For the second funding round, NTIA and RUS received 1,662
applications, compared with 2,174 for the first round. For the first
round, NTIA reviewed 940 applications for BTOP, RUS reviewed 401
applications for BIP, and the agencies concurrently reviewed 833 joint
applications for both programs.[Footnote 26] For the second funding
round, NTIA received 886 applications for BTOP and RUS received 776
for BIP. No joint applications were solicited for the second round as
the agencies published separate funding notices. As of July 2, 2010,
NTIA and RUS have awarded a total of 66 second round broadband
stimulus projects totaling $795 million.
While NTIA and RUS have fewer applications to review for the second
round, they expect their due-diligence workload to increase. According
to agency officials, the quality of the second-round applications is
substantially better and more applications will be eligible for due-
diligence reviews.[Footnote 27] Agency officials believe that their
staffs' increased experience, together with some process changes
implemented in response to lessons learned during the first funding
round (discussed later in this report) will enable their staffs to
manage the increased workload and maintain the same high standards in
the time allotted. However, as the Recovery Act's obligation deadline
draws near, the agencies may face increased pressure to approve
awards. Agency officials state that their programs' goals remain to
fund as many projects as possible that meet the requirements of the
act and to select the projects that will have the most economic
impact; simply awarding funds is not the goal.
Agencies Must Award Remaining Funds with Still-Incomplete Broadband
Mapping Data, Slowing the Review Process:
The continued lack of national broadband data complicates NTIA and RUS
efforts to award broadband stimulus funding in remote, rural areas
where it may be needed the most. Although NTIA recently issued grants
to states and territories to map broadband services, the National
Broadband Map showing the availability of broadband service will not
be completed until 2011. The most recent FCC report on currently
available Internet access nationwide relies on December 2008 data.
[Footnote 28] Because of the lack of current data, NTIA and RUS are
using a cumbersome process to verify the status of broadband services
in particular geographic locations. The agencies must collect and
assess statements by applicants as well as the aforementioned public
comments submitted by existing broadband providers delineating their
service areas and speeds available. NTIA and RUS are investing time
and resources to review these filings, and in some cases due-diligence
reviews have found information in the filings to be inaccurate. During
our review of 32 judgmentally selected applications, we found several
instances noted by RUS in which companies provided inaccurate
information when claiming they were already providing service in a
proposed service area. For example, when an RUS field representative
asked one company to provide supporting information to verify its
number of subscribers in its service area during the due-diligence
review process, the company admitted the information in its filing was
incorrect and withdrew the comment. In addition, for a number of
applications we reviewed, NTIA's contractor had a low or medium level
of confidence in the accuracy of the overbuild analysis because data
were inconclusive. Because the National Broadband Map will not be
completed until 2011, NTIA and RUS will have to complete awards for
round two based on existing data.[Footnote 29]
Agencies Have Taken Actions to Streamline Their Application Review
Process, but It Is Not Clear If They Can Obligate All Remaining Funds
by September 30, 2010:
Both agencies have taken steps to streamline their application review
processes in an effort to obligate the remaining funds by September
30, 2010. First, the agencies agreed to generally target different
types of infrastructure projects and issued separate funding notices
for the second round to save time during the eligibility screening
phase.[Footnote 30] Second, the agencies reduced the number of steps
in the application review process from two to one, adding some time to
the application window and agency review process. NTIA also reduced
the basic eligibility factors for BTOP from five to three, moved from
a largely unpaid to a paid reviewer model to ensure that reviews were
conducted in a timely fashion, and decreased the number of reviewers
per application from three to two. These steps allowed the agency to
complete the initial portion of its review ahead of schedule,
according to BTOP officials. NTIA also split the second round
applications into four groups for due-diligence reviews, allowing
staff to concentrate on one group at a time. Due-diligence reviews for
the first group were completed in June; awards for this group will be
announced in July. Reviews for the second group will be completed in
July, with awards to be announced in August; reviews for the third and
fourth group will be complete in August, with final awards to be
announced in September. Third, NTIA began to use Census tract data,
which companies already compile and report to FCC, to verify
applicants' claims and simplified the process to allow existing
broadband providers to supply information about their services. RUS is
relying on its mapping tool, which does show Census block data, but
not Census track data, to determine whether the service area is
eligible. According to RUS officials, the tool has been upgraded
several times to make it easier for applicants to submit information
about existing service providers to the agency. Finally, RUS
eliminated funding for the Last-Mile Remote project designation,
reducing the number of project types to screen for award, and also
stopped accepting paper applications.
Notwithstanding these efficiencies, a few second round changes may
lengthen the time required to complete due-diligence reviews and
obligate funds. For example, on May 28, 2010, after the application
deadline was closed for round two, NTIA notified State Broadband Data
and Development Grant program recipients that they were able to submit
amended and supplemental applications for eligible mapping activities
in those states. With regards to BTOP, NTIA also solicited
applications for public safety broadband infrastructure projects
nationwide through July 1, 2010, which adds additional burden on the
agency.[Footnote 31] The time remaining for due diligence to be
performed on these applications is a month shorter than for the first
group of round two applications. RUS increased the opportunity for
more applications to obtain funding by instituting a "second-chance
review" process to allow an applicant to adjust an application that
may not have contained sufficient documentation to fully support an
award. During the second-chance review, BIP application reviewers will
work with applicants to assist them in providing the documentation
needed to complete their applications.[Footnote 32] Adding these
activities to the BIP application reviewers' duties may lengthen the
time required to complete due-diligence reviews and obligate funds by
September 30, 2010.
Both agencies have renegotiated with their contractors for greater
staffing flexibility. RUS has extended its contract with ICF
International to provide BIP program support through 2012. In
addition, RUS also indicated that its previously established broadband
support program[Footnote 33] made no awards in 2010, freeing staff
time for BIP activities. Despite this, NTIA and RUS officials told us
that existing staff are overworked and there has been some turnover
with contractor support. With the completion of second round funding
and the beginning of the postaward phase, it will be critical for NTIA
and RUS to ensure that they have enough staff dedicated to project
oversight.
Agencies Are Developing Postaward Oversight Plans, but Some Risks to
the Success of the Broadband Stimulus Programs Remain:
The Recovery Act, Specific Program Requirements, and Leading Practices
Identify Components of Effective Oversight:
Under Section 1512 of the Recovery Act and related OMB guidance, all
nonfederal recipients of Recovery Act funds must submit quarterly
reports that are to include a list of each project or activity for
which Recovery Act funds were expended or obligated and information
concerning the amount and use of funds and jobs created or retained by
these projects and activities.[Footnote 34] Under OMB guidance,
awarding agencies are responsible for ensuring that funding recipients
report to a central, online portal no later than 10 calendar days
after each calendar quarter in which the recipient received
assistance. [Footnote 35] 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
be made available to the public on the Recovery.gov Web site.
In addition to governmentwide reporting, BTOP and BIP funding
recipients must also submit program-level reports.
* 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 36] Specifically, NTIA
requires that funding recipients submit quarterly reports with respect
to Recovery Act reporting, as well as BTOP quarterly and annual
financial and performance progress reports. BTOP financial reports
include budget and cost information on each quarter's expenses and are
used to assess the overall financial management and health of each
award and ensure that BTOP expenditures are consistent with the
recipient's anticipated progress. BTOP performance reporting includes
project data, key milestones, and project indicator information, such
as the number of new network miles deployed, the number of new public
computer centers, or the number of broadband awareness campaigns
conducted.
* BIP-specific reports. RUS requires BIP funding recipients to submit
quarterly balance sheets, income and cash-flow statements, and data on
how many households are subscribing to broadband service in each
community, 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 education,
library, health care, and public safety providers subscribing to new
or more accessible broadband services.
A final source of guidance is the Domestic Working Group, which has
highlighted leading practices in grants management.[Footnote 37]
Effective grants management calls for establishing adequate internal
control systems, including efficient and effective information
systems, training, policies, and oversight procedures, to ensure grant
funds are properly used and achieve intended results. Some agencies
have developed risk-based monitoring criteria to assess where there is
a need for heightened monitoring or technical assistance. These
criteria can include total funding, prior experience with government
grants or loans, independent audit findings, budget, and expenditures.
Given the large number of BTOP and BIP grant and loan recipients,
including many first-time recipients of federal funding, it is
important that NTIA and RUS identify, prioritize, and manage potential
at-risk recipients.
NTIA Is Finalizing a New Postaward Framework; RUS Plans to Rely on
Existing Oversight Mechanisms:
NTIA. NTIA has developed and is beginning to implement a postaward
framework to ensure the successful execution of BTOP. This framework
includes three main elements: (1) monitoring and reporting, (2)
compliance, and (3) technical assistance. NTIA will use desk reviews
and on-site visits to monitor the implementation of BTOP awards and
ensure compliance with award conditions by recipients. NTIA plans to
provide technical assistance in the form of training, webinars,
conference calls, workshops, and outreach for all recipients of BTOP
funding to address any problems or issues recipients may have
implementing the projects, as well as to assist in adhering to award
guidelines and regulatory requirements. NTIA has provided training to
recipients in grant compliance and reporting, and has also developed a
recipient handbook with a number of checklists to assist recipients
with performance and compliance under their federal awards. In
addition, NTIA has developed training, handbooks, and other guidance
for program staff and grant recipients throughout the entire postaward
process and through the completion of BTOP projects in 2013. According
to NTIA officials, the agency is preparing a risk-based model for
postaward project monitoring and designating three levels of
monitoring for grant recipients: routine, intermediate, and advanced.
Under this model, program staff will reassess the risk level of each
recipient on an annual basis and conduct site visits accordingly.
NTIA has recently reorganized several senior positions to distribute
grants management and grants administration responsibilities more
evenly among a larger group of personnel, and to more effectively
balance workloads. As a result, more NTIA employees will share
postaward responsibilities up to September 30, 2010. For fiscal year
2011, the President's budget request includes nearly $24 million to
continue oversight activities, yet even if this amount is
appropriated, agency officials said that there is some risk that NTIA
will have insufficient resources to implement this comprehensive
postaward framework.
RUS. RUS is also putting into place a multifaceted oversight framework
to monitor compliance and progress for recipients of BIP funding.
Unlike NTIA, which is developing a new oversight framework, RUS plans
to replicate the oversight framework it uses for its existing
Community Connect, Broadband Access and Loan, Distance Learning and
Telemedicine, and Rural Electrification Infrastructure Loan programs.
However, RUS still has several open recommendations from a Department
of Agriculture Inspector General's report pertaining to oversight of
its grant and loan programs.[Footnote 38] The main components of RUS's
oversight framework are (1) financial and program reporting and (2)
desk and field monitoring. According to RUS officials, no later than
30 days after the end of each calendar-year quarter, BIP recipients
will be required to submit several types of information to RUS through
its Broadband Collection and Analysis System, including balance
sheets, income statements, statements of cash flow, summaries of rate
packages, the number of broadband subscribers in each community, and
each project's completion status. BIP funding recipients will also be
required to submit detailed data on the numbers of households and
businesses subscribing to or receiving improved broadband service and
the numbers of schools, libraries, health care facilities, and public
safety organizations obtaining either new or improved access to
broadband service. In addition, RUS will conduct desk and site reviews
using 52 permanent general field representatives and field
accountants. RUS also has access to 15 additional temporary field
staff who can assist with BIP oversight. Moreover, RUS extended its
contract with ICF International through 2012, giving the agency
additional resources in conducting program oversight. The President's
budget request does not include additional resources to continue BIP
oversight activities in fiscal year 2011, but RUS officials believe
they have sufficient resources to oversee BIP-funded recipients.
Despite Steps Taken, Some Risks to Projects' Success Remain:
Overall, both NTIA and RUS have taken steps to address the concerns we
noted in our November 2009 report. For example, the agencies are
developing plans to monitor BTOP-and BIP-funded recipients and are
working to develop objective, quantifiable, and measurable goals to
assess the effectiveness of the broadband stimulus programs. Finally,
NTIA now has audit requirements in place for annual audits of
commercial entities receiving BTOP grants. Despite this progress, some
risks to projects' success remain.
Scale and Number of Projects. NTIA and RUS will need to oversee a far
greater number of projects than in the past. As we reported in 2009,
the agencies face the challenge of monitoring these projects with
fewer staff than were available for their legacy grant and loan
programs. Although the exact number of funded projects is still
unknown, based on the first funding round's results and the amount of
funding remaining to be awarded, the agencies could fund several
hundred projects each before September 30, 2010. In addition, BTOP-and
BIP-funded projects are likely to be much larger and more diverse than
projects funded under the agencies' prior broadband-related programs.
For example, NTIA and RUS expect to fund several types of broadband
projects, and these projects will be dispersed nationwide, with at
least one project in every state. NTIA is funding several different
types of broadband projects, including Last Mile and Middle Mile
broadband infrastructure projects for unserved and underserved areas,
public computer centers, and sustainable broadband adoption projects.
RUS can fund Last Mile and Middle Mile infrastructure projects in
rural areas across the country.
Adding to these challenges, NTIA and RUS must ensure that the
recipient constructs the infrastructure project in the entire project
area, not just the area where it may be most profitable for the
company to provide service. For example, the Recovery Act mandates
that RUS fund projects where at least 75 percent of the funded area is
in a rural area that lacks sufficient access to high-speed broadband
service to facilitate rural economic development; these are often
rural areas with limited demand, and the high cost of providing
service to these areas make them less profitable for broadband
providers. The rest of the project can be located in an area that may
already have service from an existing provider. Companies may have an
incentive to build first where they have the most opportunity for
profit and leave the unserved parts of their projects for last in
order to achieve the highest number of subscribers as possible. In
addition, funding projects in low-density areas where there may
already be existing providers could potentially discourage further
private investment in the area and undermine the viability of both the
incumbents' investment and the broadband stimulus project. During our
review of BIP applications, we found several instances in which RUS
awarded projects that would simultaneously cover unserved areas and
areas with service from an existing provider.[Footnote 39] To ensure
that Recovery Act funds reach hard-to-serve areas, recipients must
deploy their infrastructure projects throughout the proposed area on
which their award was based. NTIA and RUS oversight and monitoring
procedures will help ensure that the unserved areas are in fact built
out.
Lack of Sufficient Resources. Both NTIA and RUS face the risk of
having insufficient staff and resources to actively monitor BTOP-and
BIP-funded projects after September 30, 2010. BTOP and BIP projects
must be substantially complete within 2 years of the award date and
fully complete within 3 years of the award date. As a result, some
projects are not expected to be complete until 2013. However, the
Recovery Act does not provide budget authority or funding for the
administration and oversight of BTOP-and BIP-funded projects beyond
September 30, 2010. Effective monitoring and oversight of over $7
billion in Recovery Act broadband stimulus funding will require
significant resources, including staffing, to ensure that recipients
fulfill their obligations. NTIA and RUS officials believe that site
visits, in particular, are essential to monitoring progress and
ensuring compliance; yet, it is not clear if they will have the
resources to implement their oversight plans. As discussed earlier,
NTIA requested fiscal year 2011 funding for oversight, but the agency
does not know whether it will receive the requested funding and
whether the amount would be sufficient. RUS intends to rely on
existing staff and believes it has sufficient resources; however, RUS
field staff members have other duties in addition to oversight of BIP
projects. Because of this, it is critical that the oversight plans the
agencies are developing recognize the challenges that could arise from
a possible lack of resources for program oversight after September 30,
2010. For example, the agencies' staff will need to conduct site
visits in remote locations to monitor project development, but a lack
of resources will pose challenges to this type of oversight. Planning
for these various contingencies can help the agencies mitigate the
effect that limited resource levels may have on postaward oversight.
Conclusion:
The Recovery Act broadband stimulus programs are intended to promote
the availability and use of broadband throughout the country, as well
as create jobs and stimulate economic development. In the first round,
NTIA and RUS funded a wide variety of projects in most states and
territories to meet these goals. In doing so, the agencies developed
and implemented an extensive and consistent process for evaluating
project applications. In addition, the agencies made efforts to gather
and apply lessons learned from the first funding round to the second
round in order to streamline the application review process, making it
easier for applicants to submit and officials to review applications.
However, the agencies must also oversee funded projects to ensure that
they meet the objectives of the Recovery Act. To date, NTIA and RUS
have begun to develop and implement oversight plans to support such
efforts and have developed preliminary risk-based frameworks to
monitor the progress and results of broadband stimulus projects.
However, the Recovery Act does not provide funding beyond September
30, 2010. As the agencies continue to develop their oversight plans,
it is critical that they anticipate possible contingencies that may
arise because of the limited funding and target their oversight
resources to ensure that recipients of Recovery Act broadband funding
complete their projects in a manner consistent with their applications
and awards.
Recommendation for Executive Action:
To ensure effective monitoring and oversight of the BTOP and BIP
programs, we recommend that the Secretaries of Agriculture and
Commerce incorporate into their risk-based monitoring plans, steps to
address the variability in funding levels for postaward oversight
beyond September 30, 2010.
Agency Comments:
We provided a draft of this report to the Departments of Agriculture
and Commerce for review and comment. In its written comments, RUS
agreed that awarding and obligating the remaining funds under the BIP
program will be challenging and noted that the loan obligation process
for the second funding round will be expedited because financial
documents have been crafted and are now in place. In addition, RUS
agreed that there is a lack of data on broadband availability
throughout the country and stated that the agency is using field
representatives and other Rural Development field staff to support the
BIP program as needed. RUS also noted that it is developing
contingency plans to retain the majority of its temporary Recovery Act
staff beyond September 30, 2010. RUS took no position on our
recommendation. In its comments, NTIA stated that it is on schedule to
award all of its Recovery Act funds by September 30, 2010. In
addition, NTIA noted that the President's fiscal year 2011 budget
request, which includes authority and funding for NTIA to administer
and monitor project implementation, is vital to ensuring that BTOP
projects are successful and that recipients fulfill their obligations.
NTIA took no position on our recommendation. Finally, the agencies
provided technical comments that we incorporated, as appropriate.
RUS's and NTIA's full comments appear in appendixes III and IV,
respectively.
We are sending copies of this report to the Secretary of Agriculture
and the Secretary of Commerce, and interested congressional
committees. This report is available at no charge on the GAO Web site
at [hyperlink, http://www.gao.gov].
If you have any further 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. Key contributors to this report are
listed in appendix V.
Signed by:
Mark L. Goldstein:
Director, Physical Infrastructure:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
The objectives of this report were to examine (1) the results of the
first broadband stimulus funding round; (2) the extent to which the
National Telecommunications and Information Administration's (NTIA)
and the Rural Utilities Service's (RUS) due-diligence review
substantiated information in the awardees' applications; (3) the
challenges, if any, facing NTIA and RUS in awarding the remaining
broadband stimulus funds; and (4) the actions, if any, NTIA and RUS
are taking to oversee grant and loan recipients.
To describe the results of the first funding round, we obtained and
analyzed data from NTIA and RUS and the agencies' Web sites and press
releases, interviewed agency officials, and reviewed agency program
documentation. We are reporting publicly available data that NTIA and
RUS provided on the first round broadband stimulus awards with the
intent to describe the number of awards, the entities receiving first
round funding, and the types of projects. This information is
presented for descriptive purposes. The data are available online at
BroadbandUSA.gov, the Web site through which NTIA and RUS publicly
report Broadband Technology Opportunities Program (BTOP) and Broadband
Initiatives Program (BIP) application and award data. In addition, we
obtained and reviewed internal application information and award
documentation from both agencies. We also interviewed NTIA and RUS
officials who were involved in reviewing applications and awarding the
broadband stimulus funds. During these interviews, we reviewed the
progress NTIA and RUS were making to complete the first funding round
and discussed the status of the awards, including the number of awards
that had been obligated, and progress made during the second funding
round. To familiarize ourselves with the programs and track their
ongoing status, we reviewed NTIA and RUS program documentation, both
publicly available online and internal documents provided by the
agencies; reviewed a November 2009 GAO report on NTIA's and RUS's
broadband stimulus programs; and reviewed April 2010 reports by the
Congressional Research Service (CRS) and the Department of Commerce
Inspector General (Commerce IG) covering first funding round
applications, awards, and program management.
To determine the extent to which NTIA's and RUS's due-diligence
reviews substantiated information in awardees' applications, we
reviewed a judgmental sample of 32 awarded application files,
including 15 from BTOP and 17 from BIP. In choosing our sample, we
considered individual award amounts, aggregate amounts of awards per
state or territory (state), type of project, type of applicant, and
geographic location of the state. To determine our sample criteria, we
analyzed descriptive statistics for all awards and grouped states into
three categories: "below $50 million" (low); "between $50 million and
$100 million" (middle); and "above $100 million" (high). Because BIP's
aggregate award amounts to the states to which it awarded funds were
slightly higher than those for BTOP overall, we chose to review a
slightly larger number of BIP application files than BTOP files. We
chose states from among the three award categories so that the
representation of low-, middle-, and high-award states approximated
that in the overall population. After choosing our sample, we met with
agency officials to discuss the contents of the application files and
clarify the requirements of the due-diligence review process. Then, we
arranged to inspect the agency files: RUS provided electronic access
to its due-diligence materials for each application via an online Web
site and we performed our file review remotely; NTIA provided us with
a CD-ROM containing the relevant project files and we reviewed these
at the Department of Commerce. We reviewed the decision memos
summarizing the total output of the due-diligence review,
documentation of environmental reviews, project budgets, construction
schedules, and assessment of public notice filings. We recorded our
findings on a data collection instrument and verified the results by
using two separate reviewers. We did not evaluate the agencies'
decisions to award or deny applications or the potential for success
of any project. Rather, we assessed the extent to which NTIA and RUS
developed and implemented a due-diligence review process. In addition
to reviewing the sample, we interviewed agency officials and two award
recipients.
To determine the challenges, if any, that NTIA and RUS face in
awarding the remaining broadband stimulus funds, we studied the
requirements set forth in the Recovery Act; evaluated changes between
the first-and second-round funding notices; and interviewed agency
officials, representatives of five telecommunications associations,
and two award recipients. We also reviewed prior GAO, CRS, and
Commerce IG reports to learn about issues affecting the broadband
stimulus programs. We also monitored agency press releases and tracked
notices published on the Broadbandusa.gov Web site.
Finally, to determine the actions NTIA and RUS are taking to oversee
grant and loan recipients, we interviewed agency officials about plans
to monitor and oversee awardees. During these meetings, we discussed
Recovery Act reporting requirements, as well as specific BTOP and BIP
requirements. We also reviewed agency plans and guidance provided to
recipients. We compared those plans to requirements established in the
Recovery Act and guidance from the Office of Management and Budget,
the Domestic Working Group, and GAO.
We conducted this performance audit from February through August 2010
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.
[End of section]
Appendix II: Broadband Projects with Multistate Service Areas, First
Funding Round:
Table 9 provides information on the 10 BTOP and 3 BIP projects
covering areas in multiple states.
Table 9: BTOP and BIP Projects with Multistate Service Areas, First
Funding Round:
Recipient: Allegiance Communications;
Program: BTOP;
Project type: Infrastructure;
Award: $28.6 million;
States/territory: Arkansas, Kansas, Oklahoma, Texas.
Recipient: Deaf Action Center of Louisiana;
Program: BTOP;
Project type: Public Computer Center;
Award: $1.4 million;
States/territory: Alabama, California, Louisiana, Texas.
Recipient: ENMR Telephone Cooperative;
Program: BTOP;
Project type: Infrastructure;
Award: $11.3 million;
States/territory: New Mexico, Texas.
Recipient: ION HoldCo, LLC;
Program: BTOP;
Project type: Infrastructure;
Award: $39.7 million;
States/territory: New York, Pennsylvania, Vermont.
Recipient: Island Telephone and Engineering;
Program: BTOP;
Project type: Infrastructure;
Award: $8.0 million;
States/territory: Territory of Guam, Commonwealth of the Northern
Mariana Islands.
Recipient: Mission Economic Development Agency;
Program: BTOP;
Project type: Public Computer Center;
Award: $3.7 million;
States/territory: Arizona, California, Colorado, Idaho, Kansas,
Maryland, Minnesota, Missouri, New Mexico, Pennsylvania, Texas.
Recipient: Navajo Tribal Utility Authority;
Program: BTOP;
Project type: Infrastructure;
Award: $32.2 million;
States/territory: Arizona, New Mexico, Utah.
Recipient: OneCommunity;
Program: BTOP;
Project type: Sustainable Broadband Adoption;
Award: $18.7 million;
States/territory: Florida, Kentucky, Michigan, Minnesota, Mississippi,
Ohio, South Dakota.
Recipient: One Economy Corporation;
Program: BTOP;
Project type: Sustainable Broadband Adoption;
Award: $28.5 million;
States/territory: Alabama, Arizona, California, Connecticut, District
of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky,
Massachusetts, Maryland, Michigan, Minnesota, Mississippi, Nevada, New
Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,
Texas, Virginia, Washington, Wisconsin.
Recipient: Peetz Cooperative Telephone Co.;
Program: BIP;
Project type: Last Mile Remote;
Award: $1.5 million;
States/territory: Colorado, Nebraska.
Recipient: Reservation Telephone Cooperative;
Program: BIP;
Project type: Last Mile Nonremote;
Award: $21.9 million;
States/territory: North Dakota, Montana.
Recipient: Totah Communications, Inc.;
Program: BIP;
Project type: Last Mile Nonremote;
Award: $8.5 million;
States/territory: Kansas, Oklahoma.
Recipient: Zito Media Communications;
Program: BTOP;
Project type: Infrastructure;
Award: $6.1 million;
States/territory: Ohio, Pennsylvania.
Source: NTIA and RUS data.
[End of table]
[End of section]
Appendix III: Comments from the Department of Agriculture:
USDA:
United States Department of Agriculture:
Rural Development:
Office of the Under Secretary:
1400 Independence Ave., S.W.
Washington, DC 20250-0700:
[hyperlink, http://www.rurdev.usda.gov]
July 26, 2010:
Mr. Mark L. Goldstein:
Director, Physical Infrastructure Issues:
United States Government Accountability Office:
441 G Street, NW:
Washington, D.C. 20548:
Dear Mr. Goldstein:
Thank you for providing the Department of Agriculture (USDA) Rural
Development and the Rural Utilities Service (RUS) your Government
Accountability Office (GAO) Draft Report entitled, "Recovery Act:
Further Opportunities Exist to Strengthen Oversight of Broadband
Stimulus Programs" Report Number GAO-10-823 (Report). Rural
Development offers the following comments to the 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 receiving state-of the-art health
care, educational opportunities and access to timely financial and
commodity market data. If we are going to effectively compete in the
global economy, our rural economies must be sustainable and attractive
for new businesses and ongoing investment. USDA's objective is to turn
rural areas into employment zones and centers for innovation.
Universal access to broadband is needed to get the economy up and
running. Broadband is necessary for rural businesses to survive and
remain competitive. USDA intends to use budget authority to deliver up
to $3.5 billion in loans, grants and loan grant combinations to
enhance rural broadband access.
Since 1935, beginning with the Rural Electrification Administration,
we have been a premier lender for rural infrastructure investment. Our
current infrastructure loan portfolio is nearly $57 billion and
includes financing for water and wastewater, telecommunications,
broadband, electric, and renewable energy infrastructure projects.
We are now applying the technical skills and historical knowledge we
have gained over the past 75 years to construct "next generation"
broadband facilities in rural areas to serve as many customers as
possible. Our goal is to recreate the successes we achieved in
financing the rural electric grid in the task of building new
broadband networks in the most rural and remote regions of the country.
In assessing our readiness to this task, it is important also to note
that RUS is part of the Rural Development mission area which delivers
over 40 major loan, loan guarantee, grant, technical assistance and
payment programs providing financial resources for rural economic
development. Programs are administered by over 6,100 Rural Development
staff (which includes RUS) through 500 field offices. Our field staff
works across program lines. The Secretary has placed a high priority
on all of Recovery Act programs with particular emphasis on BIP.
Recently, Rural Development staff held a national training and policy
conference to brief field personnel about BIP. Also, Rural Development
staff from across the country attended the 19 joint BIP and Broadband
Technology Opportunities Program (BTOP) training and workshops. Our 47
State Directors attended many of these events.
Your recent report highlights several challenges to delivering the
Recovery Act broadband programs. Broadly, 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 awarding and
obligating the remaining funds under the BIP program will be
challenging. Rural Development received Recovery Act funding for seven
major programs, including BIP. Many of the programs are or are almost
completely obligated. For example, our Single Family Housing
Guaranteed program is fully obligated, the Business and Industry loan
program is over 90 percent obligated, the Rural Business Enterprise
Grant program is 98 percent obligated and Water and Environmental
programs are over 80 percent obligated. Because BIP required the
establishment of a new program, its initial obligations did not occur
until December 2009. To ensure that we would still meet our targets,
Rural Development has taken several steps to streamline the BIP
process. We are ahead of schedule on awarding funds under Notice of
Funding Availability (NOFA) 2, thanks in part to previous GAO
recommendations.
Here are some notable accomplishments under BIP NOFA 2:
1. RUS has completed the due-diligence review of all 776 applications
received under the BIP program.
2. RUS and its field staff have completed the Public Notice Response
process for all applications that met NOFA requirements in the first
review. This included site visits to proposed service territories
where necessary. In addition, RUS has completed the environmental
process for all first review applications.
3. RUS has nearly completed the second review process outlined in the
NOFA. Detailed letters were sent to all applicants in second review
along with an opportunity for a one-hour teleconference with RUS
representatives. Those calls are now complete. The final deadline for
submission of materials was July 23rd, 2010. RUS has already received
and processed updated information from almost 75 percent of these
applicants.
4. The President announced over $390 million of NOFA 2 BIP projects on
July 2nd, 2010. As of the date of this response, RUS has an additional
$1.4 billion in awards in the final stages of clearance. This will
bring our total awards to over $2.4 billion.
5. RUS appreciates GAO's concern over the delay in making loan
obligations. As noted by GAO, BIP is a new program for RUS. As such,
new loan, grant and security documents needed to be crafted before
awards could be obligated, and such documents had to be developed for
entities including tribes, municipalities, and cooperatives. In
addition, some awardees were existing organizations with other
financing arrangements in place, which required development of
acceptable inter-creditor agreements. These documents have now been
crafted and are in place for all NOFA 2 awardees. This will
significantly expedite the obligation process; in fact, several awards
announced on July 2nd have already been obligated.
6. RUS has detailed timelines for the award and obligation of projects
in three major categories -first review applications, second review
applications, and Requests for Proposals for (RFP) satellite, rural
library connectivity, and technical assistance. Our timelines are as
follows:
A. First review applications: Award and obligate by August 19;
B. Second review applications: Award and obligate by September 7;
C. RFP Applications: Award and obligate by September 15.
USDA's experiences during NOFA 1 have been invaluable in expediting
the award and obligation process under NOFA 2. RUS is ahead of
schedule on these timelines.
Staffing Challenges: Rural Development agrees that staffing is
critical to the success of this program. RUS has 114 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;
* Rural Electrification Infrastructure Loan Program;
* Distance Learning and Telemedicine Loan and Grant Program;
* Community Connect Grant Program.
As noted in your report, RUS' contract with ICF International includes
option years extending to 2012, which include oversight and monitoring
of BIP customers, RUS has also developed contingency plans to retain
the majority of our Recovery Act temporary staff beyond September 30,
2010. The challenging economic times have afforded RUS an opportunity
to hire extremely well qualified applicants for these positions.
To further ensure the success of awardees, RUS conducted two workshops
for awardees under NOFA 1. These workshops reiterated the importance
of the success of these projects to rural America and the economy as a
whole. Detailed sessions on accounting, oversight and compliance with
RUS security agreements were conducted. Also included was training on
Recovery Act reporting, construction and monitoring oversight. BIP
awardees were able to meet RUS General Field Representatives (GFRs)
and Field Accountants that will be responsible for oversight of the
projects. Finally, the workshops included panels with guest speakers
from broadband companies and the economic development community on how
to make broadband deployments not only successful, but an integral
part of the economic future of the rural communities they serve.
Data Challenges: Rural Development agrees that there is a lack of data
on broadband availability throughout the country. Congress recognized
this shortfall and fully funded a State Broadband Mapping program in
the Recovery Act, which will be of assistance in the future. Many of
the state maps have been developed and are being used by RUS staff.
Despite the lack of a complete data set, RUS has extensive experience
in analyzing broadband availability to ensure that our existing non-
Recovery Act broadband loans and grants were fully supported.
As in our existing broadband programs, RUS is using State maps,
Federal Communications Commission data and other information to
determine the current availability of broadband service. Rural
Development also developed the internet mapping tool used by
applicants to draw their proposed service territories. This same
mapping tool was used by the public and incumbent service providers to
provide comments on whether proposed service territories may already
have broadband service. In addition, RUS will use GFRs, Field
Accountants and Rural Development field staff as needed to ensure that
proposed service territories meet the requirements of the statute and
NOFA. These resources have been successfully used to support our
existing broadband loan and grant programs and have not imposed a
hardship to Rural Development in implementing BIP.
Rural Development also submits the following technical comments to
your draft report:
1. At the bottom of page 4 and top of page 5, the report states that
"In addition, the agencies face tight time frames for awarding funds,
which we noted could limit their opportunities for applying lessons
learned to the application review process during the second funding
round. To address these challenges, National Telecommunications and
Information Administration (NTIA) and RUS awarded contracts.... to
implement the programs within the required time frames." We would like
to point out that both NTIA and RUS recognized these tight time frames
and began contracting process well before GAO began its review of our
programs.
2. In the section entitled "RUS BIP Last Mile" the chart on page 10,
states that "RUS eliminated the remote, unserved, and underserved
requirement." We believe this statement should be amended. RUS
eliminated a separate funding category for "remote" rural projects;
however, we still incent projects in the most remote and rural areas
through the point scoring process. The term "unserved" is still used
in the program. And rather than a multi-faceted definition of
"underserved," RUS defined these areas as those lacking 5 megabits of
service in at least 50 percent of the proposed service territory.
3. Page 17, footnote 15 states that 3 BIP awardees declined their
awards because the award was "... incompatible with other agreements
the companies want to make." This should state that the award was "...
incompatible with other agreements the companies already made with
existing lenders or were in the process of making."
4. At the top of page 19, GAO describes the due diligence process. The
process described by GAO is apparently the BTOP process. This was not
the process followed by BIP. For example, BIP projects were not
awarded points in four categories under NOFA 1. Also, RUS staff did
not contact applicants to clarify information in their application.
Please refer to NOFA 1 for the RUS BIP process.
5. At the top of page 21, the report states, "For RUS, field staff
personally contacted the entities that submitted the comments to
verify their claims that they provided service in the affected areas."
While this statement is accurate, it does not fully reflect the RUS
field validation process. We would recommend the following statement
be added: "RUS field staff reconciled any difference between the
applicant and commenter, and where necessary, conducted an actual
field visit to the proposed service territory."
6. Page 23 of the report, states that "... NTIA and RUS are investing
time and resources to review these filings, but in some cases due-
diligence reviews have found information in the filings to be
inaccurate." The report should state that "... NTIA and RUS are
investing time and resources to review these filings, and in some
cases due-diligence reviews have found information in the filings to
be inaccurate."
7. Page 23 of the report states " ... During our review of 32
judgmentally selected applications, we found several instances in
which companies provided inaccurate information when claiming they
were already providing service in a proposed service area." The report
should state, " ... During our review of 32 judgmentally selected
applications, we found several instances noted by RUS in which
companies provided inaccurate information when claiming they were
already providing service in a proposed service area."
8. Page 24 of the report states that NTIA and RUS "... will have to
complete awards for round two based on existing data." RUS does not
solely rely upon existing data to verify service territory
eligibility. RUS also employs the use of Rural Development field staff
to actually verify information, and often visits the proposed service
areas, to ensure compliance with the NOFA. RUS has successfully used
this process throughout its 60 years of history of making
telecommunications loans and grants.
9. Page 25 of the report, states that "RUS increased the opportunity
for more applications to obtain funding by instituting a "second-
chance review" of incomplete applications for what appeared to be
promising projects." This statement is inaccurate. Similar to the
process used in NOFA 1, incomplete applications were not considered
for the program. The "second review" process allows an applicant "to
adjust" an application which may not contain sufficient documentation
to fully support an award. For example, a financial projection may
include an invalid interest rate or loan term for RUS financing, or a
build-out plan may not fully correlate to revenue projections. In all
cases, the application was complete; however, the submission on its
face did not fully document making of an award.
10. Footnote 29 on page 25 states, and "... a waiver filled by a
number. ..." We believe this should state "... a waiver filed by a
number..."
11. The first paragraph on Page 29 lists two RUS broadband programs.
Please add our Distance Learning and Telemedicine loan and grant
program, and our Rural Electrification Infrastructure loan program.
The latter has successfully provided telecommunication and broadband
loans in rural areas for over 60 years.
12. Page 31 of the report states that "During our review of BIP
applications, we found several instances in which RUS awarded projects
that would simultaneously cover unserved areas and areas with service
from an existing provider." We believe this statement does not take
into account that such consideration was incorporated into the
eligibility requirements. Under both BIP and BTOP, applicants could
elect to provide service in areas that were both "unserved" and
"underserved." In many cases, it is impractical or unfeasible for an
applicant to serve a totally unserved area. We appreciate GAO's
concern that we ensure that applicants actually build out to both
unserved and underserved areas within their awarded service areas.
Through our construction and monitoring processes, both agencies
intend to do so.
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 IV: Comments from the Department of Commerce:
United States Department Of Commerce:
The Secretary of Commerce:
Washington, D.C. 20230:
July 21, 2010:
Mr. Mark L. Goldstein:
Director, Physical Infrastructure Issues:
Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Goldstein:
Thank you for the opportunity to comment on the Government
Accountability Office's (GAO) draft report, "Recovery Act: Further
Opportunities Exist to Strengthen Oversight of Broadband Stimulus
Programs" (GA0-10-823), which includes your evaluation of the
Broadband Technology Opportunities Program (Program) first-round
funding review, as well as challenges the agency faces both in
awarding the remaining funds before the statutory deadline and in
ongoing grant monitoring. The Department of Commerce (Department) and
the National Telecommunications and Information Administration (NTIA)
are committed to ensuring that funds from the American Recovery and
Reinvestment Act of 2009 (Recovery Act) are made available and spent
as efficiently, effectively, and responsibly as possible.
The Department appreciates GAO's thorough review of the Program to
date. As your report confirms, NTIA has worked hard to consistently
document its review of applications and to substantiate information
provided by applicants to ensure the Program is fair and transparent.
I also understand GAO's observations that NTIA faces several
challenges in awarding the remaining Program funds in the time
required by the Recovery Act. I am pleased to note that NTIA completed
the first round of funding and subsequently streamlined its processes
and improved its systems to prepare for the second funding round. NTIA
has now awarded a significant number of second-round grants and is on
schedule to award all of its Recovery Act funds by September 30, 2010.
As GAO's report highlights, NTIA faces the risk of having insufficient
resources to actively monitor the Program awards. Specifically, the
Recovery Act does not provide authority or funding for administration
and oversight of Program-funded projects or maintenance of the
national broadband map beyond September 30, 2010. For this reason, the
President's fiscal year 2011 budget includes authority and funding for
NTIA to administer and monitor the execution of grant projects and to
protect taxpayer investment. These funds are vital to ensuring that
Program projects are successful and that recipients fulfill their
obligations. NTIA is committed to preventing waste, fraud, and abuse
of Federal funds and ensuring the ability of Program projects to
achieve the economic stimulus benefits intended by the Recovery Act.
The Department is determined to obtain and provide the funding
necessary to successfully monitor and oversee these grants.
Please be assured that NTIA will continue to administer and monitor
the Program grants commensurate with available budget and staffing
resources. Since the inception of the Program, NTIA has sought input
from the Department's Office of Inspector General and relied on
guidance from the Office of Management and Budget to design the
Program in a manner that minimizes the risk of waste, fraud, and
abuse. The Department and NTIA are committed to ensuring that
taxpayers' money is well spent and have worked to develop
comprehensive monitoring, reporting, and oversight systems to ensure
that Program funds fulfill the purposes of the Recovery Act. NTIA will
use all resources at its disposal to assist grant recipients in the
successful completion of their projects, mitigate risks, and ensure
accountability and transparency in the use of Program funds.
Thank you again for providing the Department an opportunity to comment
on this draft report. I look forward to continuing to work with GAO to
ensure that Program funding enhances broadband capabilities in the
United States, creates jobs, and helps lay the groundwork for
longterm, sustainable economic growth across America.
Sincerely,
Signed by:
Gary Locke:
[End of section]
Appendix V: 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; Jonathan Carver; Elizabeth Eisenstadt; Brandon Haller; Tom
James; Elke Kolodinski; Kim McGatlin; Josh Ormond; and Mindi
Weisenbloom made key contributions to this report.
[End of section]
Footnotes:
[1] According to the Federal Communications Commission, "broadband"
refers to advanced communications systems capable of transmitting
data, voice, and video services at high speeds over the Internet and
other networks. However, the Departments of Agriculture and Commerce
originally defined broadband as two-way data transmission with an
advertised speed of at least 768 kilobits per second (kbps) downstream
and at least 200 kbps upstream from end users. Notice of Funds
Availability and Solicitation of Applications, 74 Fed. Reg. 33104
(July 9, 2009).
[2] FCC, Connecting America: The National Broadband Plan (Washington,
D.C.: Mar. 16, 2010).
[3] American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5,
123 Stat. 115 (2009).
[4] On July 8, 2009, NTIA published a notice of funds availability and
solicited applications for the State Broadband Data and Development
Grant Program pursuant to authority provided in the American Recovery
and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat 115 (2009),
and the Broadband Data Improvement Act, Title I, Pub. L. No. 110-385,
122 Stat. 4096 (2008). 74 Fed. Reg. 32545 (2009). Section 6001 (1) of
the Recovery Act requires NTIA to develop and maintain a
comprehensive, interactive, and searchable nationwide inventory map of
existing broadband service availability in the United States. The
statute further requires that the National Broadband Map be accessible
to the public on an NTIA Web site no later than February 17, 2011.
[5] These due-diligence reviews include the verification of additional
financial and technical information to further substantiate the
representations made by applicants in their applications.
[6] GAO, Recovery Act: Agencies Are Addressing Broadband Program
Challenges, but Actions Are Needed to Improve Implementation,
[hyperlink, http://www.gao.gov/products/GAO-10-80] (Washington, D.C.:
Nov. 16, 2009).
[7] 74 Fed. Reg. 33104 (July 9, 2009).
[8] [hyperlink, http://www.gao.gov/products/GAO-10-80].
[9] For applications that NTIA determines it will not fund, but that
may be consistent with RUS's BIP requirements and priorities, NTIA
will transfer the application to BIP for consideration of funding. RUS
will handle such applications, if timely received from NTIA, under its
Second Review process.
[10] These totals do not include an additional 54 grants totaling
approximately $102 million that NTIA awarded as of March 5, 2010,
under the State Broadband Data and Development Grant program.
[11] Last Mile nonremote projects are defined as any broadband
infrastructure project that is not exclusively a Last Mile remote area
project and that provides broadband service to the end user or end-
user devices in a service area eligible for BIP funding.
[12] Last Mile remote projects are defined as any project that
provides broadband service to the end user or to end-user devices only
in a remote area(s) eligible for broadband funding.
[13] Title II of the Rural Electrification Act of 1936 authorized the
Secretary of Agriculture to make loans for furnishing and improving
rural telephone service and specifies eligible borrowers, terms, and
conditions. 7 U.S.C. §§ 921-928.
[14] RUS received $2.5 billion for both grants and loan underwriting.
RUS stated that it would allocate $2 billion for grants and $500
million for supporting loans. Because loans, unlike grants, must be
repaid to the government with interest, RUS uses a complex formula to
calculate charges against its budget authority. For grants, the face
amount of each grant is charged against RUS budget authority. However,
the Federal Credit Reform Act of 1990 requires RUS to account for the
budgetary impact of loans by estimating the expected net loss (or
gain) of loans. This net amount, which is estimated by calculating the
net present value of all cash flows to and from RUS over the lifetime
of the loans, is referred to as the subsidy cost of the loans. RUS
must charge the subsidy cost of loans to its budget authority. RUS
initially expected that the $500 million in budget authority allocated
to support loans would support a principal amount of approximately $7
billion.
[15] According to RUS, the three awards were made for projects in
Illinois, Kansas, and New Mexico. The entities responsible for
submitting those applications found that the loans and grants from
Department of Agriculture were incompatible with other agreements the
companies already made with existing lenders or were in the process of
making.
[16] Projects had to adhere to either the definition of "unserved" or
one of the three definitions of "underserved" established in the first
funding notice to qualify for funding.
[17] Information establishing the recipient's eligibility to receive a
federal award includes Dun & Bradstreet reports, Central Contractor
Registration database, the General Service Administration's Excluded
Party List System, FCC's debarment list, Federal Audit Clearing House
for prior A-133 audit findings, and credit scores.
[18] At both agencies, officials said that they had access to
information about the expertise of the reviewers employed by the
contractors and were satisfied with the reviewers' qualifications.
[19] The National Environmental Policy Act of 1969, as amended (42
U.S.C. § 4321 et seq.) and the National Historic Preservation Act of
1966, as amended (16 U.S.C. § 470 et seq.).
[20] In accordance with NEPA, federal agencies must consider and
evaluate the potential environmental impacts or effects of their
actions before those actions are taken. In the case of NTIA and RUS,
the approval of loans and grants are actions that require the
consideration of environmental factors in their decision making
process. NTIA and RUS have established categorically excluded projects
that do not require an environmental review. These are projects that
do not have a significant effect on the human environment and
therefore neither an environmental assessment nor an environmental
impact statement is required.
[21] The Inspector General found that NTIA had established a rigorous
due-diligence review process that met the requirements of the first
funding notice. Department of Commerce, Office of the Inspector
General, NTIA Must Continue to Improve Its Program Management and Pre-
Award Process for Its Broadband Grants Program, Final Report No. ARR-
19842-1 (Washington, D.C.: Apr. 8, 2010).
[22] 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. February 2011 is the deadline for NTIA to post on its Web
site "a comprehensive nationwide inventory map of existing broadband
service capability and availability." Pub. L. No. 111-5, div. A, tit.
II, 123 Stat. at 516 (2009).
[23] This does not imply that NTIA or RUS did not fund a project in an
area where another company already provides some level of broadband
service. Rather, NTIA and RUS funded projects consistent with the
definitions of "unserved" and "underserved."
[24] RUS can award loans and grants in the second round of funding
that, in the aggregate, substantially exceed $2.1 billion because the
current loan subsidy rate is 7.24 percent.
[25] The first round application period ended in August 2009. NTIA
completed due diligence, award, and obligation tasks for BTOP by April
2010; as of July 1, 2010, four RUS awards had not yet been obligated
for BIP.
[26] During the first round, NTIA and RUS reviewed joint applications
concurrently due to tight deadlines and NTIA did not fund a joint
project until after RUS had decided not to fund it.
[27] Both NTIA and RUS officials expected applicants to be better
prepared for the process during the second round and to submit a
cohort of higher-quality applications.
[28] Inquiry Concerning the Deployment of Advanced Telecommunications
Capability to All Americans in a Reasonable and Timely Fashion, and
Possible Steps to Accelerate Such Deployment Pursuant to Section 706
of the Telecommunications Act of 1996, as Amended by the Broadband
Data Improvement Act; A National Broadband Plan for Our Future, Sixth
Broadband Deployment Report, FCC 10-129, 2010 FCC LEXIS 4356 (rel.
July 20, 2010).
[29] RUS does not solely rely upon existing data to verify service
territory eligibility. For example, RUS uses field staff to verify
information and visit the proposed service areas.
[30] Unlike in the first round, NTIA and RUS published separate
funding notices on January 22, 2010. See 75 Fed. Reg. 3792 (Jan. 22,
2010) for the BTOP program funding notice and 75 Fed. Reg. 3820 (Jan.
22, 2010) for the BIP funding notice.
[31] On May 11, 2010, FCC adopted an Order granting, with conditions,
a waiver filed by a number of public safety entities seeking early
deployment of statewide or local public safety broadband networks in
the 700 MHz public safety broadband spectrum (763-768 MHz and 793-798
MHz). Request for Waivers of Various Petitioners to Allow the
Establishment of 700 MHz Interoperable Public Safety Wireless
Broadband Networks, Order, 25 FCC Rcd 5145 (2010). These governments
may have previously been discouraged from filing BTOP applications
because they did not have the legal authority to use the spectrum. As
a result of this significant development, and given the national
priority of improving public safety communications, NTIA accepted
applications for infrastructure projects from the affected parties
from June 1, 2010, to July 1, 2010. (NTIA press release, May 13, 2010).
[32] NTIA will transfer to BIP for consideration of funding
applications that NTIA determines it will not fund, but that may be
consistent with RUS's BIP requirements and priorities. RUS will handle
such applications, if timely received from NTIA, under its Second
Review process.
[33] The Department of Agriculture's Rural Broadband Access Loan and
Loan Guarantee program, officiated by Rural Development.
[34] Pub. L. No. 111-5, div. A. tit. XV, § 1512(c),(d), 123 Stat. 287-
288 (2009).
[35] 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).
[36] Pub. L. No. 111-5, div. B, tit. VI, § 6001(i)(1) (2009).
[37] Chaired by the Comptroller General and initiated by the Domestic
Working Group, the Grant Accountability Project brought together 19
federal, state, and local audit organizations for the purpose of
identifying current and emerging challenges of mutual interest within
the intergovernmental audit community. Domestic Working Group, Grant
Accountability Project, Guide to Opportunities for Improving Grant
Accountability (October 2005).
[38] Department of Agriculture, Office of Inspector General, "Existing
Risk to Rural Development's Economic Recovery Program" (Apr. 3, 2009).
[39] According to RUS, under both BTOP and BIP, applicants could elect
to provide service in areas that were both unserved and underserved.
Further, RUS noted that in many cases, it is impractical or unfeasible
for an applicant to serve a totally unserved area.
[End of section]
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