# DEPARTMENT OF AGRICULTURE

##### Rural Utilities Service

##### 7 CFR Part 1703

**Distance Learning and Telemedicine Loan and Grant Program**

**Subpart D\--Distance Learning and Telemedicine**

**Loan and Grant Program - General**

Sec.

1703.100 Purpose.

1703.101 Policy.

1703.102 Definitions.

103. Applicant eligibility and allocation

of funds.

1703.104 \[Reserved\]

1703.105 Processing of selected applications.

1703.106 Disbursement of loans and grants.

107. Reporting and oversight

> requirements.

1073.108 Audit requirements.

1703.109 Grant and loan administration.

110. Changes in project objectives or

> scope.

111. Grant and loan termination

> provisions.

112. Expedited telecommunications

> loans.

**Subpart E \-- Distance Learning and Telemedicine**

**Grant Program**

Sec.

1703.120 \[Reserved\]

1703.121 Approved purposes for grants.

1703.122 Matching contributions.

1703.123 Nonapproved purposes for grants.

1703.124 Maximum and minimum grant\
amounts.

1703.125 Completed application.

1703.126 Criteria for scoring applications.

1703.127 Application selection provisions.

1703.128 Submission of applications.

1703.129 Appeals.

**Subpart F \-- Distance Learning and Telemedicine**

**Combination Loan and Grant**

**Program**

Sec.

130. Use of combination loan and grant

> Funds.

1703.131 Approved purposes for a combination loan and grant.

1703.132 Nonapproved purposes for a combination loan and grant.

1703.133 Maximum and minimum amounts.

1703.134 Completed application.

1703.135 Application selection provisions.

1703.136 Submission of applications.

1703.137 Appeals.

**Subpart G \-- Distance Learning and Telemedicine**

**Loan Program**

Sec.

1703.140 Use of loan funds.

1703.141 Approved purposes for loans.

1703.142 Nonapproved purposes for loans.

1703.143 Maximum and minimum amounts.

1703.144 Completed application.

1703.145 Application selection provisions.

1703.146 Submission of applications.

1703.147 Appeals.

### **Subpart D\--Distance Learning and Telemedicine Loan and Grant Program - General**

**§ 1703.100 Purpose.**

The purpose of the Distance Learning and Telemedicine (DLT) Loan and
Grant Program is to encourage and improve telemedicine services and
distance learning services in rural areas through the use of
telecommunications, computer networks, and related advanced technologies
by students, teachers, medical professionals, and rural residents. This
subpart describes the general policies for administering the DLT
program. Subpart E contains the policies and procedures related to
grants; subpart F contains the policies and procedures related to a
combination loan and grant; and subpart G contains the policies and
procedures related to loans.

**§ 1703.101 Policy.**

\(a\) The transmission of information is vital to the economic
development, education, and health of rural Americans. To further this
objective, RUS will provide financial assistance to distance learning
and telemedicine projects that will improve the access of people
residing in rural areas to educational, learning, training, and health
care services.

\(b\) In providing financial assistance, RUS will give priority to rural
areas that it believes have the greatest need for distance learning and
telemedicine services. RUS believes that generally the need is greatest
in areas that are economically challenged,

costly to serve, and experiencing outward migration. This program is
consistent with the provisions of the Telecommunications Act of 1996
that designate telecommunications service discounts for schools,
libraries, and rural health care centers. RUS will take into
consideration the community's involvement in the proposed project and
the applicant's ability to leverage grant funds.

\(c\) In administering this subpart, RUS will not favor or mandate the
use of one particular technology over another.

\(d\) Rural institutions are encouraged to cooperate with each other,
with applicants, and with end-users to promote the program being
implemented under this subpart.

\(e\) RUS staff will make diligent efforts to inform potential
applicants in rural areas of the programs being implemented under this
subpart.

\(f\) The Administrator will provide only loans under this subpart to
any entity that has received a telecommunications or electric loan under
the Rural Electrification Act of 1936. Telecommunications and Electric
borrowers are encouraged to seek a loan under this subpart to bolster
educational and health care opportunities in the rural communities they
serve. A borrower receiving a loan shall:

\(1\) Make the loan available to entities that qualify as distance
learning or telemedicine projects satisfying the requirements of this
subpart, under any terms it so chooses as long as the terms are no more
stringent than the terms under which it received the financial
assistance.

\(2\) Use the loan to acquire, install, improve, or extend a distance
learning or telemedicine system referred to in this subpart.

\(g\) The Administrator will allocate funds that are appropriated each
fiscal year for the subparts E, F, and G, respectively. Not more than 30
days before the end of the fiscal year, the Administrator may transfer
any funds not committed to grants in the combination loan and grant
program to the grant program.

\(h\) Financial assistance may be provided for end user sites. Financial
assistance may also be provided for hubs located in rural or non-rural
areas if they are necessary to provide distance learning or telemedicine
services to rural residents at end user sites.

\(i\) The Administrator will publish, at the end of each fiscal year, a
notice in the [Federal Register]{.underline} of all applications
receiving financial assistance under this subpart. Subject to the
provisions of the Freedom of Information Act, (5 U.S.C. 552),
applications will be available for public inspection at the U.S.
Department of Agriculture, 1400 Independence Avenue, SW., Washington,
D.C., 20250.

**§ 1703.102 Definitions.**

[1996 Act]{.underline} means the Federal Agriculture Improvement Act of
1996.

[Act]{.underline} means the Rural Electrification Act of 1936 (7 U.S.C.
901 [et seq]{.underline}.).

[Administrator]{.underline} means the Administrator of the Rural
Utilities Service, or designee or successor.

[Applicant]{.underline} means an eligible organization that applies for
financial assistance under this subpart.

[Approved purposes]{.underline} means project purposes for which grant,
loan, or combination loan and grant financial assistance may be
expended.

[Champion community]{.underline} means any community that submitted a
valid application to become a USDA Empowerment Zone/Enterprise Community
(EZ/EC) area, that met the requirements to be designated an EZ/EC area,
but not chosen because their score was not high enough to be selected.

[Combination loan and grant]{.underline} means a grant in combination
with a loan made under the DLT program.

[Completed application]{.underline} means an application that includes
all those items specified in §§ 1703.125, 1703.134, and 1703.144 in form
and substance satisfactory to the Administrator.

[Computer networks]{.underline} mean computer hardware and software,
terminals, signal conversion equipment including both modulators and
demodulators, or related devices, used to communicate with other
computers to process and exchange data through a telecommunication
network in which signals are generated, modified, or prepared for
transmission, or received, via telecommunications terminal equipment and
telecommunications transmission facilities.

[Consortium]{.underline} means a combination or group of entities formed
to undertake the purposes for which the distance learning and
telemedicine financial assistance is provided. At least one of the
entities in a consortium must meet the requirements of

§ 1703.103.

[Construct]{.underline} means to acquire, construct, extend, improve, or
install a facility or system.

[Data terminal equipment]{.underline} means equipment that converts user
information into data signals for transmission, or reconverts the
received data signals into user information, and is normally found on
the terminal of a circuit and on the premises of the end user.

[Distance learning]{.underline} means a telecommunications link to an
end user through the use of eligible equipment to:

\(1\) Provide educational programs, instruction, or information
originating in one area, whether rural or not, to students and teachers
who are located in rural areas; or

\(2\) Connect teachers and students, located in one rural area with
teachers and students that are located in a different rural area.

[DLT borrower]{.underline} means an entity that has an outstanding loan
under the provisions of the DLT program.

[DLT program]{.underline} means the Distance Learning and Telemedicine
Loan and Grant Program administered by RUS.

[Economic useful life]{.underline} as applied to equipment and
facilities financed under the DLT program means the number of years
resulting from dividing 100 percent by the depreciation rate (expressed
as a percent) based on Internal Revenue Service depreciation rules or
recognized telecommunications industry guidelines.

[Eligible equipment]{.underline} means computer hardware and software,
audio or video equipment, computer network components,
telecommunications terminal equipment, data terminal equipment, inside
wiring, interactive video equipment, or other facilities that would
further telemedicine services or distance learning services.

[Eligible facilities]{.underline} means land, buildings, or building
construction needed to carry out an eligible distance learning or
telemedicine project for loan financial assistance only.

[Empowerment Zone and Enterprise Community (EZ/EC)]{.underline} means
any community whose designation as such by USDA pursuant to 26 U.S.C.
1391 [et seq]{.underline}., is in effect at the time RUS agrees to
provide financial assistance.

[End user]{.underline} is one or more of the following:

\(1\) Rural elementary, secondary schools, and other educational
institutions, such as institutions of higher education, vocational and
adult training and education centers, libraries, and teacher training
centers, and students, teachers and instructors using such rural
educational facilities, that participate in a rural distance learning
telecommunications program through a project funded under this subpart;

\(2\) Rural hospitals, primary care centers or facilities, such as
medical centers, nursing homes, and clinics, and physicians and staff
using such rural medical facilities, that participate in a rural
telemedicine program through a project funded under this subpart; and

\(3\) Other rural community facilities, institutions, or entities that
receive distance learning or telemedicine services.

[End user site]{.underline} means a facility that is part of a network
or telecommunications system that is utilized by end users.

[Financial assistance]{.underline} means a grant, combination loan and
grant, or loan.

[GFR]{.underline} means RUS telecommunications program General Field
Representative.

[Grant documents]{.underline} means the grant agreement, including any
amendments and supplements thereto, between RUS and the grantee.

[Grantee]{.underline} means a recipient of a grant from RUS to carry out
the purposes of the DLT program.

[Guarantee]{.underline} means a guarantee for a loan provided by a RUS
borrower or other qualified third party.

[Hub]{.underline} means a facility that is part of a network or
telecommunications system that provides educational or medical services
to end user sites.

[Instructional programming]{.underline} means educational material,
including computer software, which would be used for educational
purposes in connection with eligible equipment but does not include
salaries, benefits, and overhead of medical or educational personnel.

[Interactive equipment]{.underline} means equipment used to produce and
prepare for transmission audio and visual signals from at least two
distant locations so that individuals at such locations can orally and
visually communicate with each other. Such equipment includes monitors,
other display devices, cameras or other recording devices, audio pickup
devices, and other related equipment.

[Loan]{.underline} means a loan made under the DLT program bearing
interest at a rate equal to the then current cost-of-money to the
government.

[Loan documents]{.underline} mean the loan agreement, note, and security
instrument, including any amendments and supplements thereto, between
RUS and the DLT borrower.

[Local exchange carrier]{.underline} means a commercial, cooperative or
mutual-type association, or public body that is engaged in the provision
of telephone exchange service or exchange access.

[Matching contribution]{.underline} means the applicant's contribution
for approved purposes.

[National school lunch program (NSLP)]{.underline} means the federally
assisted meal program established under the National School Lunch Act of
1946 (42 U.S.C. 1751).

[Project]{.underline} means approved purposes for which financial
assistance has been provided.

[Project service area]{.underline} means the area in which at least 90
percent of the persons to be served by the project are likely to reside.

[Recipient]{.underline} means a grantee, borrower, or both of a DLT
program grant, loan or combination loan and grant.

[Rural community facility]{.underline} means a facility such as a
school, library, learning center, training facility, hospital, or
medical facility that provides educational or health care benefits
primarily to residents of rural areas.

[RUS]{.underline} means the Rural Utilities Service, an agency of the
United States Department of Agriculture, successor to the Rural
Electrification Administration.

[Secretary]{.underline} means the Secretary of Agriculture.

[Technical assistance]{.underline} means:

\(1\) Assistance in learning to manage, operate, or use equipment or
systems; and

\(2\) Studies, analyses, designs, reports, manuals, guides, literature,
or other forms of creating, acquiring, or disseminating information.

[Telecommunications carrier]{.underline} means any provider of
telecommunications services.

[Telecommunications or electric borrower]{.underline} means an entity
that has outstanding RUS or Rural Telephone Bank electric or
telecommunications loans or loan guarantees under the provisions of the
Act.

[Telecommunications systems plan]{.underline} means the plan submitted
by an applicant in accordance with § 1703.125 for grants, § 1703.134 for
a combination loan and grant, or § 1703.144 for loans.

[Telecommunications terminal equipment]{.underline} means the assembly
of telecommunications equipment at the end of a circuit or path of a
signal, including but not limited to facilities that receive or transmit
over the air broadcast, satellite, and microwave, normally located on
the premises of the end user, that interfaces with telecommunications
transmission facilities, and that is used to modify, convert, encode, or
otherwise prepare signals to be transmitted via such telecommunications
facilities, or that is used to modify, reconvert, or carry signals
received from such facilities, the purpose of which is to accomplish the
goal for which the circuit or signal was established.

[Telecommunications transmission facilities]{.underline} means
facilities that transmit, receive, or carry voice, video, or data
between the telecommunications terminal equipment at each end of the
telecommunications circuit or path. Such facilities include microwave
antennae, relay stations and towers, other telecommunications antennae,
fiber-optic cables and repeaters, coaxial cables, communication
satellite ground station complexes, copper cable electronic equipment
associated with telecommunications transmissions, and similar items.

[Telemedicine]{.underline} means a telecommunications link to an end
user through the use of eligible equipment which electronically links
medical professionals at separate sites in order to exchange health care
information in audio, video, graphic, or other format for the purpose of
providing improved health care services primarily to residents of rural
areas.

**§ 1703.103 Applicant eligibility and allocation of**

**funds.**

\(a\) To be eligible to receive a grant, loan and grant combination, or
loan under this subpart:

\(1\) The applicant must be legally organized as an incorporated
organization or partnership, an Indian tribe or tribal organization, as
defined in 25 U.S.C. 450b (b) and (c), a state or local unit of
government, a consortium, as defined in § 1703.102, or other legal
entity, including a private corporation organized on a for profit or
not-for profit basis. Each applicant must provide written evidence of
its legal capacity to contract with RUS to obtain the grant, loan and
grant combination, or the loan, and comply with all applicable
requirements. If a consortium lacks the legal capacity to contract, each
individual entity must contract with RUS in its own behalf.

\(2\) The applicant proposes to utilize the financing to:

\(i\) Operate a rural community facility; or

\(ii\) Deliver distance learning or telemedicine services to entities
that operate a rural community facility or to residents of rural areas
at rates calculated to ensure that the benefit of the financial
assistance is passed through to such entities or to residents of rural
areas.

\(b\) Electric or telecommunications borrowers are not eligible for
grants.

**§ 1703.104 \[Reserved\]**

**§ 1703.105 Processing of selected applications.**

\(a\) During the period between the submission of an application and the
execution of documents, the applicant must inform RUS if the project is
no longer viable or the applicant no longer is requesting financial
assistance for the project. When the applicant so informs RUS, the
selection will be rescinded or the application withdrawn and written
notice to that effect sent to the applicant.

\(b\) If an application has been selected and the scope of the project
changes substantially, the applicant may be required to submit a new
application to RUS for review and consideration depending on the degree
of change. A new application will be subject to review in accordance
with this subpart. The financial assistance may not be transferred by
the applicant for use for another project.

\(c\) If State or local governments raise objections to a proposed
project under the intergovernmental review process that are not resolved
within 90 days of the Administrator\'s selection of the application, the
Administrator will rescind the selection and written notice to that
effect will be sent to the applicant. The Administrator, in his sole
discretion may extend the 90 day period if it appears resolution is
imminent.

\(d\) RUS may request additional information to complete the appropriate
documents covering financial assistance.

\(e\) Financial Assistance Documents:

\(1\) The documents will include a grant agreement for grants; loan
documents, including third party guarantees, notes and security
instruments for loans; or any other legal documents the Administrator
deems appropriate, including suggested forms of certifications and legal
opinions.

\(2\) The grant agreement and the loan documents will include, among
other things, conditions on the release or advance of funds and include
at a minimum, a project description, approved purposes, the maximum
amount of the financial assistance, supplemental funds required for the
project, and certain agreements or commitments the applicant may have
proposed in its application. In addition, the loan documents may contain
covenants and conditions the Administrator deems necessary or desirable
to provide additional assurance that loans will be repaid and the
purposes of the loan will be accomplished.

\(3\) The recipient of a loan will be required to execute a security
instrument in form and substance satisfactory to RUS and must, before
receiving any advance of loan funds, provide security that is adequate,
in the opinion of RUS, to assure repayment, within the time agreed, of
all loans to the borrower under the DLT program. This assurance will
generally be provided by a first lien upon all facilities and equipment
financed by the loan. RUS may require additional security as it deems
necessary.

\(4\) Adequate security may also be provided by third-party guarantees,
letters of credit, pledges of revenue, or other forms of security
satisfactory to RUS.

\(5\) The security instrument and other loan documents required by RUS
in connection with a loan under the DLT program shall contain such
pledges, covenants, and other provisions as may, in the opinion of RUS,
be required to secure repayment of the loan.

\(6\) If the project does not constitute a complete operating system,
the DLT recipient shall provide evidence, in form and substance
satisfactory to RUS, demonstrating that the recipient has sufficient
contractual, financing, or other arrangements to assure that the project
will provide adequate and efficient service.

\(f\) Prior to the execution of a grant and loan document, RUS reserves
the right to require any changes in the project or legal documents
covering the project to protect the integrity of the DLT program and the
interests of the government.

\(g\) If the applicant fails to submit, within 120 calendar days from
the date of RUS' selection of an application, all of the information
that RUS determines to be necessary to prepare legal documents and
satisfy other requirements of this subpart, RUS may rescind the
selection of the application.

**§ 1703.106 Disbursement of loans and grants.**

\(a\) For financial assistance of \$100,000 or greater, prior to the
disbursement of a grant and a loan, the recipient, if it is not a unit
of government, will provide evidence of fidelity bond coverage as
required by 7 CFR part 3019.

\(b\) Grants and loans will be disbursed to recipients on a
reimbursement basis, or with unpaid invoices for the eligible purposes
contained in this rule, by the following process:

\(1\) An SF 270, \"Request for Advance or Reimbursement,\" will be
completed by the recipient and submitted to RUS not more frequently than
once a month;

\(2\) RUS will review the SF 270 for accuracy when received and will
schedule payment if the form is satisfactory. Payment will ordinarily be
made within 30 days; and

\(3\) For financial assistance approved during and subsequent to FY
1999, funds will be advanced in accordance with 7 CFR 1744.69.

\(c\) The recipient's share in the cost of the project must be disbursed
in advance of the loan and grant, or if the recipient agrees, on a pro
rata distribution basis with financial assistance during the
disbursement period. Recipients will not be permitted to provide their
contributions at the end of the project.

\(d\) A combination loan and grant will be disbursed on a pro rata basis
based on the respective amounts of financial assistance provided.

**§ 1703.107 Reporting and oversight requirements.**

\(a\) A project performance activity report will be required of all
recipients on an annual basis until the project is complete and the
funds are expended by the applicant.

\(b\) A final project performance report must be provided by the
recipient. It must provide an evaluation of the success of the project
in meeting the objectives of the program. The final report may serve as
the last annual report.

\(c\) RUS will monitor recipients, as it determines necessary, to assure
that projects are completed in accordance with the approved scope of
work and that the financial assistance is expended for approved
purposes.

\(d\) Recipients shall diligently monitor performance to ensure that
time schedules are being met, projected work by time periods is being
accomplished, and other performance objectives are being achieved.
Recipients are to submit an original and one copy of all project
performance reports, including, but not limited to, the following:

\(1\) A comparison of actual accomplishments to the objectives
established for that period;

\(2\) A description of any problems, delays, or adverse conditions which
have occurred, or are anticipated, and which may affect the attainment
of overall project objectives, prevent the meeting of time schedules or
objectives, or preclude the attainment of particular project work
elements during established time periods. This disclosure shall be
accompanied by a statement of the action taken or planned to resolve the
situation; and

\(3\) Objectives and timetable established for the next reporting
period.

**§ 1703.108 Audit requirements.**

A recipient of financial assistance shall provide RUS with an audit for
each year, beginning with the year in which a portion of the financial
assistance is expended, in accordance with the following:

\(a\) If the recipient is a for-profit entity, a Telecommunications or
Electric borrower, or any other entity not covered by the following
paragraph, the recipient shall provide an independent audit report in
accordance with 7 CFR part 1773, "Policy on Audits of RUS Borrowers."

\(b\) If the recipient is a State or local government, or non-profit
organization, the recipient shall provide an audit in accordance with 7
CFR part 3052, "Audits of States, Local Governments, and Non-Profit
Organizations."

**§ 1703.109 Grant and loan administration.**

RUS will conduct reviews as necessary to determine whether the financial
assistance was expended for approved purposes. The recipient is
responsible for ensuring that the project complies with all applicable
regulations, and that the grants and loans are expended only for
approved purposes. The recipient is responsible for ensuring that
disbursements and expenditures of funds are properly supported by
invoices, contracts, bills of sale, canceled checks, or other
appropriate forms of evidence, and that such supporting material is
provided to RUS, upon request, and is otherwise made available, at the
recipient's premises, for review by the RUS representatives, the
recipient's certified public accountant, the Office of Inspector
General, U.S. Department of Agriculture, the General Accounting Office,
and any other official conducting an audit of the recipient's financial
statements or records, and program performance for the grants and loans
made under this subpart. The recipient shall permit RUS to inspect and
copy any records and documents that pertain to the project.

**§ 1703.110 Changes in project objectives or scope.**

The recipient shall obtain prior written approval by RUS for any
material change to the scope or objectives of the project, including any
changes to the scope of work or the budget submitted to RUS. Any
material change shall be contained in a revised scope of work plan to be
prepared by the recipient, submitted to, and approved by RUS in writing.

**§ 1703.111 Grant and loan termination.**

\(a\) The financial assistance may be terminated when RUS and the
recipient agree upon the conditions of the termination, the effective
date of the termination, and, in the case of a partial termination of
the financial assistance, any unadvanced portion of the financial
assistance to be terminated and any advanced portion of the financial
assistance to be returned.

\(b\) The recipient may terminate the financial assistance by written
notification to RUS, providing the reasons for such termination, the
effective date, and, in the case of a partial termination, the portion
of the financial assistance to be terminated. In the case of a partial
termination, if RUS believes that the remaining portion of the financial
assistance will not accomplish the approved purposes, then, RUS may
terminate the financial assistance in its entirety, pursuant to the
provisions of paragraph (a) of this section.

**§ 1703.112 Expedited telecommunications loans.**

RUS will expedite consideration and determination of an application
submitted by an RUS telecommunications borrower for a loan under the Act
or an advance of such loan funds to be used in conjunction with
financial assistance under subparts E, F, or G. See 7 CFR part 1737 for
loans and 7 CFR part 1744 for advances under this section.

**§§ 1703.113 - 1709.119 \[Reserved\]**

### **Subpart E -- Distance Learning and Telemedicine Grant Program**

**§ 1703.120 \[Reserved\]**

**§ 1703.121 Approved purposes for grants.**

For distance learning and telemedicine projects, grants shall finance
only the costs for approved purposes. Grants shall be expended only for
the costs associated with the initial capital assets associated with the
project. The following are approved grant purposes:

\(a\) Acquiring, by lease or purchase, eligible equipment as defined in
§ 1703.102;

\(b\) Acquiring instructional programming; and

\(c\) Providing technical assistance and instruction for using eligible
equipment, including any related software; developing instructional
programming; providing engineering or environmental studies relating to
the establishment or expansion of the phase of the project that is being
financed with the grant (this purpose shall not exceed 10 percent of the
grant).

**§ 1703.122 Matching contributions.**

\(a\) The grant applicant\'s minimum matching contribution must equal 15
percent of the grant amount requested and shall be used for approved
purposes for grants listed in § 1703.121. Matching contributions
generally must be in the form of cash. However, in-kind contributions
solely for the purposes listed in § 1703.121 may be substituted for
cash.

\(b\) In-kind items listed in § 1703.121 must be non-depreciated or new
assets with established monetary values. Manufacturers' or service
providers' discounts are not considered in-kind matching.

\(c\) Costs incurred by the applicant, or others on behalf of the
applicant, for facilities or equipment installed, or other services
rendered prior to submission of a completed application, shall not be
considered as an eligible in-kind matching contribution.

\(d\) Costs incurred for non-approved purposes for grant outlined in §
1703.123 shall not be used as an in-kind matching contribution.

\(e\) Any financial assistance from Federal sources will not be
considered as matching contributions under this subpart unless there is
a Federal statutory exception specifically authorizing the Federal
financial assistance to be considered as a matching contribution.

**§ 1703.123 Nonapproved purposes for grants.**

\(a\) A grant made under this subpart will not be provided or used:

\(1\) To cover the costs of acquiring, installing or constructing
telecommunications transmission facilities;

\(2\) To pay for medical equipment not having telemedicine as its
essential function;

\(3\) To pay salaries, wages, or employee benefits to medical or
educational personnel;

\(4\) To pay for the salaries or administrative expenses of the
applicant or the project;

\(5\) To purchase equipment that will be owned by the local exchange
carrier or another telecommunications service provider unless that
service provider is the applicant;

\(6\) To duplicate facilities providing distance learning or
telemedicine services in place or to reimburse the applicant or others
for costs incurred prior to RUS' receipt of the completed application;

\(7\) To pay costs of preparing the application package for financial
assistance under this program;

\(8\) For projects whose sole objective is to provide links between
teachers and students or between medical professionals who are located
at the same facility;

\(9\) For site development and the destruction or alteration of
buildings;

\(10\) For the purchase of land, buildings, or building construction;

\(11\) For projects located in areas covered by the Coastal Barrier
Resources Act (16 U.S.C. 3501 [et seq]{.underline}.);

\(12\) For any purpose that the Administrator has not specifically
approved;

\(13\) Except for leases provided for in § 1703.121, to pay the cost of
recurring or operating expenses for the project; or

\(14\) For any other purposes not specifically contained in § 1703.121.

\(b\) Except as otherwise provided in § 1703.112, grants shall not be
used to finance a project, in part, when the success of the project is
dependent upon the receipt of additional financial assistance under this
subpart or is dependent upon the receipt of other financial assistance
that is not assured.

**§ 1703.124 Maximum and minimum grant\
amounts.**

Applications for grants under this subpart will be subject to
limitations on the proposed amount of grant funds. The Administrator
will establish the maximum amount of a grant to be made available to an
individual recipient for each fiscal year under this subpart by
publishing notice of the maximum amount in the Federal Register not
sooner than 45 days before the period for accepting applications begins.
The minimum amount of a grant is \$50,000.

**§ 1703.125 Completed application.**

The following items are required to be submitted to RUS in support of an
application for grant funds:

\(a\) [An application for Federal Assistance.]{.underline} A completed
Standard Form 424

\(b\) [An executive summary of the project.]{.underline} The applicant
must provide RUS with a general project overview that addresses the
following 9 categories:

\(1\) A description of why the project is needed;

\(2\) An explanation of how the applicant will address the need cited in
paragraph (b)(1) of this section, why the applicant requires financial
assistance, the types of educational or medical services to be offered
by the project, and the benefits to rural residents;

\(3\) A description of the applicant, documenting eligibility in
accordance with § 1703.103;

\(4\) An explanation of the total project cost including a breakdown of
the grant required and the source of matching contribution and other
financial assistance for the remainder of the project;

\(5\) A statement specifying whether the project is either a distance
learning or telemedicine facility as defined in § 1703.102. If the
project provides both distance learning and telemedicine services, the
applicant must identify the predominant use of the system;

\(6\) A general overview of the telecommunications system to be
developed, including the types of equipment, technologies, and
facilities used;

\(7\) A description of the participating hubs and end user sites and the
number of rural residents that will be served by the project at each end
user site; and

\(8\) A certification by the applicant that facilities constructed with
grants do not duplicate adequate established telemedicine or distance
learning services.

\(9\) A listing of the location of each end user site (city, town,
village, borough, or rural areas) plus the State.

\(c\) [Scoring criteria documentation.]{.underline} Each grant applicant
must address and provide documentation on how it meets each of the
scoring criteria contained in § 1703.126.

\(d\) [A scope of work.]{.underline} The scope of work must include, at
a minimum:

\(1\) The specific activities to be performed under the project;

\(2\) Who will carry out the activities;

\(3\) The time-frames for accomplishing the project objectives and
activities; and

\(4\) A budget for all capital expenditures reflecting the line item
costs for approved purposes for both the grant funds and other sources
of funds for the project. Separately, the budget must specify any line
item costs that are nonapproved purposes for grants as contained in §
1703.123.

\(e\) [Financial information and sustainability.]{.underline} The
applicant must provide a narrative description demonstrating:
feasibility of the project, including having sufficient resources and
expertise necessary to undertake and complete the project; and, how the
project will be sustained following completion of the project.

> \(f\) [A statement of experience.]{.underline} The applicant must
> provide a written narrative (not exceeding three single spaced pages)
> describing its demonstrated capability and experience, if any, in
> operating an educational or health care endeavor and any project
> similar to the project. Experience in a similar project is desirable
> but not required.

\(g\) [Funding commitment from other sources]{.underline}. The applicant
must provide evidence, in form and substance satisfactory to RUS, that
funding agreements have been obtained to ensure completion of the
project. These agreements shall be sufficient to ensure (1) payment of
all proposed expenditures for the project; (2) all required matching
contribution in § 1703.120; (3) any additional matching funding provided
in accordance with § 1703.126(b)(4); and (4) any other funds necessary
to complete the project.

\(h\) [A telecommunications system plan]{.underline}. A
telecommunications system plan consisting of the following:

\(1\) The capabilities of the telecommunications terminal equipment,
including a description of the specific equipment which will be used to
deliver the proposed service. The applicant must document discussions
with various technical sources which could include consultants,
engineers, product vendors, or internal technical experts, provide
detailed cost estimates for operating and maintaining the end user
equipment and provide evidence that alternative equipment and
technologies were evaluated.

\(2\) A listing of the proposed telecommunications terminal equipment,
telecommunications transmission facilities, data terminal equipment,
interactive video equipment, computer hardware and software systems, and
components that process data for transmission via telecommunications,
computer network components, communication satellite ground station
equipment, or any other elements of the telecommunications system
designed to further the purposes of this subpart, that the applicant
intends to build or fund using RUS financial assistance.

\(3\) A description of the consultations with the appropriate
telecommunications carriers (including other interexchange carriers,
cable television operators, enhanced service providers, providers of
satellite services and telecommunications equipment manufacturers and
distributors) and the anticipated role of such providers in the proposed
telecommunications system.

\(i\) [Compliance with other Federal statutes]{.underline}. The
applicant must provide evidence of compliance with other Federal
statutes and regulations including, but not limited to the following:

\(1\) E.O. 11246, Equal Employment Opportunity, as amended by E.O. 11375
and as supplemented by regulations contained in 41 CFR part 60;

\(2\) Architectural barriers;

\(3\) Flood hazard area precautions;

\(4\) Assistance and Real Property Acquisition Policies Act of 1970;

\(5\) Drug-Free Workplace Act of 1998 (41 U.S.C. 701);

\(6\) E.O.s 12549 and 12689, Debarment and Suspension;

\(7\) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352).

\(j\) [Environmental impact and historic preservation.]{.underline}

\(1\) The applicant must provide details of the project's impact on the
environment and historic preservation. Grants made under this part are
subject to part 1794 of this chapter which contains RUS' policies and
procedures for implementing a variety of Federal statutes, regulations,
and executive orders generally pertaining to the protection of the
quality of the human environment that are listed in 7 CFR 1794.1. The
application shall contain a separate section entitled "Environmental
Impact of the Project."

\(2\) The applicant may use the "Environmental Questionnaire," available
from RUS, to assist in complying with the requirements of this section.

\(k\) [Evidence of legal authority and existence.]{.underline} The
applicant must provide evidence of its legal existence and authority to
enter into a grant agreement with RUS and perform the activities
proposed under the grant application.

\(l\) [Federal debt certification]{.underline}. The applicant must
provide a certification that it is not delinquent on any obligation owed
to the government (7 CFR parts 3016 and 3019).

\(m\) [Consultation with USDA State Director, Rural
Development]{.underline}. The applicant must provide evidence that it
has consulted with the USDA State Director, Rural Development,
concerning the availability of other sources of funding available at the
State or local level.

\(n\) [State Strategic Plan Conformity.]{.underline} The applicant must
provide evidence from the USDA State Director, Rural Development, that
the application conforms with the State strategic plan as prepared under
section 381D of the Consolidated Farm and Rural Development Act (7
U.S.C. 1921 [et seq]{.underline}.). The applicant should indicate if
such a plan does not exist.

\(o\) [Supplemental information.]{.underline} The applicant should
provide any additional information it considers relevant to the project
and likely to be helpful in determining the extent to which the project
would further the purposes of the 1996 Act.

\(p\) [Additional information required by RUS.]{.underline} The
applicant must provide any additional information RUS may consider
relevant to the application and necessary to adequately evaluate the
application. RUS may request modifications or changes, including changes
in the amount of financial assistance requested, in any proposal
described in an application submitted under this subpart.

**§ 1703.126 Criteria for scoring grant\
applications.**

\(a\) [Criteria]{.underline}. The criteria in this section will be used
by RUS to score applications that have been determined to be in
compliance with the requirements of this subpart. Applications for
grants must meet the rurality requirements in paragraph (b)(2)(iv) of
this section and address each of the following scoring criteria:

\(1\) The need for services and benefits derived from services (up to 55
points);

\(2\) The comparative rurality of the project service area (up to 45
points);

\(3\) The economic need of the applicant's service area as estimated by
the NSLP or other supplemental objective criteria (up to 35 points);

\(4\) The ability of the applicant to leverage resources (up to 35
points);

\(5\) Innovativeness of the project (up to 15 points);

\(6\) The cost effectiveness of the system (up to 35 points);

\(7\) Project participation in EZ/ECs (Empowerment Zone and Enterprise
Communities) and Champion Communities (up to 15 points).

\(b\) Scoring criteria:

\(1\) [The need for services and benefits derived from
services]{.underline} - up to 55 Points.

\(i\) This criterion will be used by RUS to score applications based on
the documentation in support of the need for services, benefits derived
from the services proposed by the project, and local community
involvement in planning, implementing, and financial assistance of the
project. Applicants may receive up to 45 points for documenting the need
for services and benefits derived from service as explained in this
section. Applicants with an average NSLP percentage less than 50 percent
as determined in paragraph (b)(3) of this section may receive up to an
additional 10 points based on information submitted that evidences the
economic need of the project's service area. This determination will be
made by RUS based on information submitted by the applicant under
paragraph (b)(1) of this section.

\(ii\) RUS will consider the extent of the applicant's documentation
explaining the economic, education, or health care challenges facing the
community; the applicant's proposed plan to address these challenges;
how the grant can help; and why the applicant cannot complete the
project without a grant. RUS will also consider the extent to which the
applicant provides evidence that economic, education, or health care
challenges could not be addressed without employing advanced technology.
The Administrator will also consider any support by recognized experts
in the related educational or health care field, any documentation
substantiating the educational or health care underserved nature of the
applicant's proposed service area, and any justification for specific
educational or medical services which are needed and will provide direct
benefits to rural residents.

\(A\) Some examples of benefits to be provided by the project include,
but are not limited to:

*(1)* Improved educational opportunities for a specified number of
students;

*(2)* Travel time and money saved by telemedicine diagnoses;

*(3)* Number of doctors retained in rural areas;

*(4)* Number of additional students electing to attend higher education
institutions;

*(5)* Lives saved due to prompt medical diagnoses and treatment;

*(6)* New education courses offered, including college level courses;

\(7\) Expanded use of educational facilities such as night training;

\(8\) Number of patients receiving telemedicine diagnoses;

\(9\) Provision of training, information resources, library assets,
adult education, lifetime learning, community use of technology, jobs,
connection to region, nation, and world.

\(B\) Other matters that will be considered by RUS under this criterion
include:

\(1\) That rural residents, and other beneficiaries, desire the
educational or medical services to be provided by the project. A strong
indication of need is the willingness of local end users or
institutions, to the extent possible, to contribute to the capital costs
of establishing the project. This could include letters of financial
commitment toward the project from local institutions.

\(2\) The extent of the project's planning, development, and support by
local residents and institutions. This may include evidence of community
involvement, as exemplified in community meetings, public forums, and
surveys. In addition, applicants should provide evidence of local
residents' participation in the project planning and development.

\(3\) The extent to which the application addresses the problems of
population out-migration and how the project seeks to slow, halt, or
prevent population loss.

\(4\) The extent to which the application is consistent with the State
strategic plan prepared by the Rural Development State Director of the
United States Department of Agriculture.

\(2\) [The comparative rurality of the project service
area]{.underline} - up to 45 Points.

This criterion will be used to evaluate the relative rurality of service
areas for various projects. Under this system, the end user sites and
hubs (as defined in § 1703.102) contained within the project service
area are identified and given a score according to the population of the
area where the end user sites are located.

\(i\) The following definitions are used in the evaluation of rurality:

\(A\) Exceptionally Rural Area means any area of the United States not
included within the boundaries of any incorporated or unincorporated
city, village, or borough having a population in excess of 5,000
inhabitants.

\(B\) Rural Area means any area of the United States included within the
boundaries of any incorporated or unincorporated city, village, or
borough having a population over 5,000 and not in excess of 10,000
inhabitants.

\(C\) Mid-Rural Area means any area of the United States included within
the boundaries of any incorporated or unincorporated city, village, or
borough having a population over 10,000 and not in excess of 20,000
inhabitants.

\(D\) Urban Area means any area of the United States included within the
boundaries of any incorporated or unincorporated city, village, or
borough having a population in excess of 20,000 inhabitants.

\(ii\) There are a total of 45 possible points for this criterion. Each
end user site will receive points based on its location in accordance
with paragraph (b)(2)(i) of this section. If a hub is utilized as an end
user site, the hub will be considered as an end user site. The applicant
will receive points as follows:

\(A\) If the end user site is located in an Exceptionally Rural Area, it
will receive 45 points.

\(B\) If the end user site is located in a Rural Area, it will receive
30 points.

\(C\) If the end user site is located in a Mid-Rural Area, it will
receive 15 points.

\(D\) If the end user site is located in an Urban Area, it will receive
0 points.

\(iii\) The total score for this criterion will be based on the average
score for all the end user sites included in the project.

\(iv\) An application must receive a minimum of 20 points as an average
score for all the end user sites under this criterion to be eligible for
a grant.

\(3\) [The economic need of the applicant's service area as estimated by
NSLP]{.underline} - up to 35 points.

This criterion will be used to evaluate the relative financial need of
the applicant, community, and project. All applicants are required to
provide the applicable percentage of students eligible to participate in
the NSLP for each area to be served by the end user site. The
appropriate State or local organization administering the program must
certify the percentages as being correct. The applicant must provide RUS
with a listing of the location of each end user site (city, town,
village, borough or rural area plus the State) discussing how the
appropriate NSLP percentage was determined in accordance with this
section. These percentages may be obtained from the State or local
organization that administers the program and must be certified by that
organization as being correct. For purposes of this subpart, the NSLP
percentage will reflect the percentage of eligibility rather than the
percentage of actual participation.

\(i\) The following guidelines will be used to determine the applicable
NSLP percent for a particular application:

\(A\) Public schools or non-profit private schools of high school grade
or under will use the actual eligibility percentage for that particular
school.

\(B\) Schools and institutions of higher learning ineligible to
participate in the NSLP and non-school end user sites (medical
facilities, libraries, etc.) will use the eligibility percentage of all
students in the school district where the end user will be located.

\(C\) Percentage ratios will be rounded up to the next highest or
rounded down to the next lowest whole number for fraction of percentages
at or greater than .5 or less than .5, respectively.

\(D\) The project NSLP percentage will be determined by the average of
the NSLP percentages of the end user sites. If end user sites fall
within different percentile categories, the eligibility percentages
associated with each end user site will be averaged to determine the
percentile category. For purposes of averaging, if a hub is also
utilized as an end user site, the hub will be considered as an end user
site.

\(ii\) The applicant will receive points as follows:

\(A\) NSLP percentage greater than or equal to 75 percent -- 35 points

\(B\) NSLP percentage greater than or equal to 50 percent but less than
75 percent -- 20 points

\(C\) NSLP percentage greater than or equal to 25 percent but less than
50 percent -- 15 points

\(D\) NSLP percentage less than 25 percent -- 0 points.

\(4\) [The ability of the applicant to leverage financial
resources]{.underline} - Up to 35 points.

This criterion will be used to evaluate the ability of the applicant to
provide a matching contribution for the project using other non-Federal
financial assistance. Documentation submitted in support of the
application should reflect any additional financial support for the
project from non-Federal sources above the applicant\'s minimum matching
contribution of 15 percent as required by § 1703.122. The applicant must
include evidence, from authorized representatives of the sources, of a
commitment that the funds are available and will be used for the
project. The applicant will receive points as follows:

\(i\) Matching contribution for approved purposes greater than 15
percent, but less than or equal to 30 percent of the grant requested ---
0 points.

\(ii\) Matching contribution for approved purposes greater than 30
percent, but less than or equal to 50 percent of the grant requested ---
15 points.

\(iii\) Matching contribution for approved purposes greater than 50
percent, but less than or equal to 75 percent of the grant requested ---
25 points.

\(iv\) Matching contribution for approved purposes greater than 75
percent, but less than or equal to 100 percent of the grant requested
--- 30 points. (v) Matching contribution for a grant for approved
purposes greater than 100 percent of the grant requested --- 35 points.

\(5\) [Innovativeness of the project]{.underline} - up to 15 points.

This criterion will be used to evaluate the innovativeness of
application based on documentation that shows how the project utilizes
advanced telecommunications in a unique way to address the needs of the
community. Innovativeness should be addressed in the context of how the
project will deliver distance learning or telemedicine services more
effectively or at a lower cost. The following issues may be addressed to
show how the project differs from a typical distance learning and
telemedicine network as follows:

\(i\) The extent to which the project differs from a technical
standpoint;

\(ii\) The extent to which the project differs from an educational or
medical programmatic standpoint;

\(iii\) The extent to which the project reflects a unique adaptation of
technology based on the special needs or circumstances of the proposed
area to be served by the project; and

\(iv\) The potential of the project to influence or lead changes in how
telecommunications services can be delivered in other areas.

\(6\) [The cost-effectiveness of the project]{.underline} - Up to 35
points

This criterion will be used to evaluate the cost effectiveness of the
application based on the extent that cost-efficiency is considered in
delivering the services in the project. The following issues should be
addressed under this criterion:

\(i\) The extent to which the applicant has considered various
technological options for delivering the services. The applicant must
provide sufficient documentation reflecting accepted analytical and
financial methodologies to substantiate its choice of technology as the
most cost-effective option. RUS will consider the applicant's
documentation and analysis comparing various systems and technologies.

\(ii\) Whether buying or leasing specific equipment is more cost
effective.

\(iii\) The extent to which the project will utilize other existing
networks at the regional, statewide, national or international levels.
To the extent possible, educational and health care networks should be
designed to utilize the widest practicable number of other networks that
expand the capabilities of the project, thereby affording rural
residents opportunities that may not be available at the local level.
The ability to connect to the Internet alone can not be used as the sole
basis to fulfill this criteria.

\(iv\) The extent to which the facilities being constructed with
financial assistance, particularly financial assistance under this
chapter provided to entities other than the applicant, will be utilized
to extend or enhance the benefits of the project.

\(v\) The extent to which the project utilizes existing
telecommunications transmission facilities that could provide the
transmission path for the needed services. For projects that do not
utilize existing transmission facilities, RUS will consider
documentation explaining the necessity of this option. RUS will also
consider any agreements between the applicant and other entities for
sharing transmission facilities to lower the fixed costs of such
facilities.

\(7\) [Project participation in EZ/ECs and champion
communities]{.underline} - (up to 15 Points).

This criterion will be used by RUS to score applications based on the
number of end user sites within an EZ/EC and Champion Community. Ten
(10) points will be assigned if at least one end user site is located in
an EZ/EC. Five (5) points will be assigned if at least one end user site
is located in a Champion Community.

**§ 1703.127 Application selection provisions.**

\(a\) Applications will be selected for approval based on scores
assigned, availability of funds, and the provisions of this section. RUS
will make determinations regarding the reasonableness of all numbers;
dollar levels; rates; the nature and design of the project; costs;
location; and other characteristics of the application and the project
to determine the number of points assigned to a grant application for
all selection criteria.

\(b\) Regardless of the number of points an application receives in
accordance with § 1703.126, the Administrator may, based on a review of
the applications in accordance with the requirements of this subpart:

\(1\) Limit the number of applications selected for projects located in
any one State during a fiscal year;

\(2\) Limit the number of selected applications for a particular
project;

\(3\) Select an application receiving fewer points than another higher
scoring application if there are insufficient funds during a particular
funding period to select the higher scoring application. In this case,
however, the Administrator will provide the applicant of the higher
scoring application the opportunity to reduce the amount of its grant
request to the amount of funds available. If the applicant agrees to
lower its grant request, it must certify that the purposes of the
project can be met, and the Administrator must determine the project is
financially feasible at the lower amount in accordance with §
1703.125(e)(1). An applicant or multiple applicants affected under this
paragraph will have the opportunity to be considered for loan financing
in accordance with subparts F and G of this part.

\(c\) RUS will not approve a grant if RUS determines that:

\(1\) The applicant's proposal does not indicate financial feasibility
or is not sustainable in accordance with the requirements of §
1703.125(e)(1);

\(2\) The applicant's proposal indicates technical flaws, which, in the
opinion of RUS, would prevent successful implementation, operation, or
sustainability of the project;

\(3\) Other applications would provide more benefit to rural America
based on a review of the financial and technical information submitted
in accordance with § 1703.125(e).

\(4\) Any other aspect of the applicant's proposal fails to adequately
address any requirement of this subpart or contains inadequacies which
would, in the opinion of RUS, undermine the ability of the project to
meet the general purpose of this subpart or comply with policies of the
DLT Program contained in § 1703.101.

\(d\) Grant applications will be ranked by the type of application
(health care or educational) and total points scored. Grants available
for medical and educational applicants may be allocated based on the
total number of medical and educational applications scoring in the top
50 percent of all applications received for that fiscal year. Based on
the number and type of applications received, applications may be ranked
only in one category based on the predominant use of the project.

\(e\) RUS may reduce the amount of the applicant's grant based on
insufficient program funding for the fiscal year in which the project is
reviewed. RUS will discuss its findings informally with the applicant
and make every effort to reach a mutually acceptable agreement with the
applicant. Any discussions with the applicant and agreements made with
regard to a reduced grant amount will be confirmed in writing, and these
actions shall be deemed to have met the notification requirements set
forth in paragraph (f) of this section.

\(f\) RUS will provide the applicant with an explanation of any
determinations made with regard to paragraphs (c)(1) through (c)(4) of
this section prior to making final project selections for the year. The
applicant will be provided 15 days from the date of RUS' letter to
respond, provide clarification, or make any adjustments or corrections
to the project. If, in the opinion of the Administrator, the applicant
fails to adequately respond to any determinations or other findings made
by the Administrator, the project will not be funded, and the applicant
will be notified of this determination. If the applicant does not agree
with this finding an appeal may be filed in accordance with § 1703.129.

\(g\) Grantees shall comply with all applicable provisions of 7 CFR
parts 3015, 3016, and 3019.

**§ 1703.128 Submission of applications.**

\(a\) Applications for grants shall be submitted to the RUS, U.S.
Department of Agriculture, 1400 Independence Avenue, SW., STOP 1590,
Washington, DC 20250-1590. Applications should be marked \"Attention:
Assistant Administrator, Telecommunications Program\".

\(b\) Applications must be submitted to RUS postmarked not later than
the application filing deadline established by the Administrator if the
applications are to be considered during the period for which the
application was submitted. The deadline for submission of applications
each fiscal year will be published, and provided through other notices,
by RUS in the [Federal Register]{.underline}, at least 30 days before
the deadline occurs. It is suggested that applications be submitted
prior to the respective deadline to ensure they can be reviewed and
considered complete by the deadline. RUS will review each application
for completeness in accordance with § 1703.125, and notify the
applicant, within 15 working days of the receipt of the application, of
the results of this review, citing any information that is incomplete.
To be considered for a grant, the applicant must submit the information
to complete the application within 15 working days of the date of RUS'
written response. If the applicant has submitted an application prior to
the application filing deadline, the applicant will have 15 working days
from RUS' response or until the application filing deadline to submit
information, whichever provides the applicant more time. If the
applicant fails to submit such information by the appropriate deadline,
the application will be considered during the next established
application period.

\(c\) All applicants must submit an original and two copies of a
completed application. Applicants must also submit a copy of the
application to the State government point of contact, if one has been
designated for the State, at the same time it submits an application to
RUS. All applications must include the information required by §
1703.125.

**§ 1703.129 Appeals.**

All qualifying applications under this subpart will be scored based on
the criteria contained in § 1703.126. Awards will be made by RUS based
on the highest ranking applications and the amount of financial
assistance available for grants. All applicants will be notified in
writing of the score each application receives, and included in this
notification will be a tentative minimum required score to receive
financial assistance. If the score received by the applicant could
result in the denial of its application, or if its score, while
apparently sufficient to qualify for financial assistance, may be
surpassed by the score awarded to a competing application after appeal,
that applicant may appeal its numerical scoring. Any appeal must be
based on inaccurate scoring of the application by RUS and no new
information or data that was not included in the original application
will be considered. The appeal must be made, in writing, within 10 days
after the applicant is notified of the scoring results. Appeals shall be
submitted to the Administrator, RUS, U.S. Department of Agriculture,
1400 Independence Ave., SW., STOP 1590, Washington, DC 20250-1590.
Thereafter, the Administrator will review the original scoring to
determine whether to sustain, reverse, or modify the original scoring
determination. Final determinations will be made after consideration of
all appeals. The Administrator's determination will be final. A copy of
the Administrator's decision will be furnished promptly to the
applicant.

***Subpart F -- Distance Learning and Telemedicine Combination Loan and
Grant Program***

**§ 1703.130 Use of combination loan and grant.**

\(a\) A combination loan and grant may be used by eligible organizations
as defined in\
§ 1703.103 for distance learning and telemedicine projects to finance
100 percent of the cost of approved purposes contained in § 1703.131
provided that no financial assistance may exceed the maximum amount for
the year in which the combination loan and grant is made.

\(b\) Applicants must meet the minimum eligibility requirement for
determining the extent to which the project serves rural areas as
determined in § 1703.126(b)(2) (the applicant must receive at least 20
points to be eligible to receive financial assistance under this
subpart).

**§ 1703.131 Approved purposes for a combination**

**loan and grant.**

The approved purposes for a combination loan and grant are:

\(a\) Acquiring, by lease or purchase, eligible equipment or facilities
as defined in § 1703.102;

\(b\) Acquiring instructional programming;

\(c\) Providing technical assistance and instruction for using eligible
equipment, including any related software; developing instructional
programming; providing engineering or environmental studies relating to
the establishment or expansion of the phase of the project that is being
financed with the a combination loan and grant (this purpose shall not
exceed 10 percent of the total requested financial assistance);

\(d\) Paying for medical or educational equipment and facilities that
are shown to be necessary to implement the project, including vehicles
utilizing distance learning and telemedicine technology to deliver
educational and health care services. The applicant must demonstrate
that such items are necessary to meet the purposes under this subpart
and financial assistance for such equipment and facilities is not
available from other sources at a cost which would not adversely affect
the economic viability of the project;

\(e\) Providing links between teachers and students or medical
professionals who are located at the same facility, provided that such
facility receives or provides distance learning or telemedicine services
as part of a distance learning or telemedicine network which meets the
purposes of this subpart;

\(f\) Providing for site development and alteration of buildings in
order to meet the purposes of this subpart. Financial assistance for
this purpose must be necessary and incidental to the total amount of
financial assistance requested;

\(g\) Purchasing of land, buildings, or building construction determined
by RUS to be necessary and incidental to the project. The applicant must
demonstrate that funding from other sources is not available at a cost
that does not adversely impact the economic viability of the project as
determined by the Administrator. Financial assistance for this purpose
must be necessary and incidental to the total amount of financial
assistance requested; and,

\(h\) Acquiring telecommunications transmission facilities provided that
no telecommunications carrier will install such facilities under the Act
or through other financial procedures within a reasonable time period
and at a cost to the applicant that does not impact the economic
viability of the project, as determined by the Administrator.

**§ 1703.132 Nonapproved purposes for a**

**combination loan and grant.**

\(a\) Without limitation, a combination loan and grant made under this
subpart shall not be expended:

\(1\) To pay salaries, wages, or employee benefits to medical or
educational personnel;

\(2\) To pay for the salaries or administrative expenses of the
applicant or the project;

\(3\) To purchase equipment that will be owned by the local exchange
carrier or another telecommunications service provider, unless the
applicant is the local exchange carrier or other telecommunications
service provider;

\(4\) To duplicate facilities providing distance learning or
telemedicine services in place or to reimburse the applicant or others
for costs incurred prior to RUS' receipt of the completed application;

\(5\) For projects located in areas covered by the Coastal Barrier
Resources Act (16 U.S.C. 3501 [et seq]{.underline}.);

\(6\) For any purpose that the Administrator has not specifically
approved;

\(7\) Except for leases (see § 1703.131), to pay the cost of recurring
or operating expenses for the project; or,

\(8\) For any other purposes not specifically outlined in § 1703.131.

\(b\) Except as otherwise provided in\
§ 1703.112, funds shall not be used to finance a project, in part, when
the success of the project is dependent upon the receipt of additional
financial assistance under this subpart or is dependent upon the receipt
of other funding that is not assured.

**§ 1703.133 Maximum and minimum amounts.**

Applications for a combination loan and grant under this subpart will be
subject to limitations on the proposed amount of loans and grants. The
Administrator will establish the maximum amount of loans and grants and
the portion of grant funds as a percentage of total assistance for each
project to be made available to an individual recipient for each fiscal
year under this subpart, by publishing notice of the maximum amount in
the [Federal Register]{.underline} before the beginning the fiscal year
to carry out this subpart. The minimum amount of a combination loan and
grant is \$50,000.

**§ 1703.134 Completed application.**

The following items are required to be submitted to RUS in support of an
application for a combination loan and grant:

\(a\) [An application for federal assistance:]{.underline} A completed
Standard Form 424.

\(b\) [An executive summary of the project.]{.underline} The applicant
must provide RUS with a general project overview that addresses each of
the following 9 categories:

\(1\) A description of why the project is needed;

\(2\) An explanation of how the applicant will address the need cited in
paragraph (b)(1) of this section, why the applicant requires financial
assistance, the types of educational or medical services to be offered
by the project, and the benefits to the rural residents;

\(3\) A description of the applicant, documenting eligibility in
accordance with § 1703.103;

\(4\) An explanation of the total project cost including a breakdown of
the combination loan and grant required and the source of funding, if
applicable, for the remainder of the project;

\(5\) A statement specifying whether the project provides predominantly
distance learning or telemedicine services as defined in § 1703.102. If
the project provides both distance learning and telemedicine services,
the applicant must identify the predominant use of the system;

\(6\) A general overview of the telecommunications system to be
developed, including the types of equipment, technologies, and
facilities used;

\(7\) A description of the participating hubs and end user sites and the
number of rural residents that will be served by the project at each end
user site;

\(8\) A certification by the applicant that facilities constructed with
a combination loan and grant do not duplicate adequately established
telemedicine or distance learning services.

\(9\) A listing of the location of each end user site (city, town,
village, borough, or rural area plus the State).

\(c\) [A scope of work.]{.underline} The scope of work must include, at
a minimum:

\(1\) The specific activities to be performed under the project;

\(2\) Who will carry out the activities;

\(3\) The time-frames for accomplishing the project objectives and
activities; and

\(4\) A budget for capital expenditures reflecting the line item costs
for both the combination loan and grant and any other sources of funds
for the project.

\(d\) [Financial information]{.underline}. The applicant must show its
financial ability to complete the project; show project feasibility; and
provide evidence that it can execute a note for a loan with a maturity
period greater than one year. For educational institutions participating
in a project application (including all members of a consortium), the
financial data must reflect revenue and expense reports and balance
sheet reports, reflecting net worth, for the most recent annual
reporting period preceding the date of the application. For medical
institutions participating in a project application (including all
members of a consortium), the financial data must include income
statement and balance sheet reports, reflecting net worth, for the most
recent completed fiscal year preceding the date of the application. When
the applicant is a partnership, company, corporation, or other entity,
current balance sheets, reflecting net worth, are needed from each of
the entities that has at least a 20 percent interest in such
partnership, company, corporation or other entity. When the applicant is
a consortium, a current balance sheet, reflecting net worth, is needed
from each member of the consortium and from each of the entities that
has at least a 20 percent interest in such member of the consortium.

\(1\) Applicants must include sufficient pro-forma financial data that
adequately reflects the financial capability of project participants and
the project as a whole to continue a sustainable project for a minimum
of 10 years and repay the loan portion of the combination loan and
grant. This documentation should include sources of sufficient income or
revenues to pay operating expenses including telecommunications access
and toll charges, system maintenance, salaries, training, and any other
general operating expenses, provide for replacement of depreciable
items, and show repayment of interest and principal for the loan portion
of the combination loan and grant.

\(2\) A list of property which will be used as collateral to secure
repayment of the loan. The applicant shall purchase and own collateral
that secures the loan free from liens or security interests and take all
actions necessary to perfect a security interest in the collateral that
secures the loan. RUS considers as adequate security for a loan, a
guarantee by a RUS telecommunications or electric borrower or by another
qualified party. Additional forms of security, including letters of
credit, real estate, or any other items will be considered. RUS will
determine the adequacy of the security offered.

\(3\) As applicable, a depreciation schedule covering all assets of the
project. Those assets for which a combination loan and grant are being
requested should be clearly indicated.

\(4\) For each hub and end user site, the applicant must identify and
provide reasonable evidence of each source of revenue. If the projection
relies on cost sharing arrangements among hub and end user sites, the
applicant must provide evidence of agreements made among project
participants.

\(5\) For applicants eligible under\
§ 1703.103(a)(3), an explanation of the economic analysis justifying the
rate structure to ensure that the benefit, including cost saving, of the
financial assistance is passed through to the other persons receiving
telemedicine or distance learning services.

> \(e\) [A statement of experience]{.underline}. The applicant must
> provide a written narrative (not exceeding three single spaced pages)
> describing its demonstrated capability and experience, if any, in
> operating an educational or health care endeavor similar to the
> project. Experience in a similar project is desirable but not
> required.

\(f\) [A telecommunications system plan.]{.underline} A
telecommunications system plan, consisting of the following (the items
in paragraphs (g)(4) and (g)(5) of this section are required only when
the applicant is requesting a combination loan and grant for
telecommunications transmission facilities):

\(1\) The capabilities of the telecommunications terminal equipment,
including a description of the specific equipment which will be used to
deliver the proposed service. The applicant must document discussions
with various technical sources which could include consultants,
engineers, product vendors, or internal technical experts, provide
detailed cost estimates for operating and maintaining the end user
equipment and provide evidence that alternative equipment and
technologies were evaluated.

\(2\) A listing of the proposed purchases or leases of
telecommunications terminal equipment, telecommunications transmission
facilities, data terminal equipment, interactive video equipment,
computer hardware and software systems, and components that process data
for transmission via telecommunications, computer network components,
communication satellite ground station equipment, or any other elements
of the telecommunications system designed to further the purposes of
this subpart, that the applicant intends to build or fund using a
combination loan and grant.

\(3\) A description of the consultations with the appropriate
telecommunications carriers (including other interexchange carriers,
cable television operators, enhanced service providers, providers of
satellite services, and telecommunications equipment manufacturers and
distributors) and the anticipated role of such providers in the proposed
telecommunications system.

\(4\) Results of discussions with local exchange carriers serving the
project area addressing the concerns Contained in § 1703.131(h).

\(5\) The capabilities of the telecommunications transmission
facilities, including bandwidth, networking topology, switching,
multiplexing, standards, and protocols for intra-networking and open
systems architecture (the ability to effectively communicate with other
networks). In addition, the applicant must explain the manner in which
the transmission facilities will deliver the proposed services. For
example, for medical diagnostics, the applicant might indicate whether
or not a guest or other diagnosticians can join the network from
locations off the network. For educational services, indicate whether or
not all hub and end-user sites are able to simultaneously hear in
real-time and see each other or the instructional material in real-time.
The applicant must include detailed cost estimates for operating and
maintaining the network, and include evidence that alternative delivery
methods and systems were evaluated.

\(g\) [Compliance with other Federal statutes.]{.underline} The
applicant must provide evidence of compliance with other federal
statutes and regulations including, but not limited to the following:

\(1\) E.O. 11246, Equal Employment Opportunity, as amended by E.O. 11375
and as supplemented by regulations contained in 41 CFR part 60;

\(2\) Architectural barriers;

\(3\) Flood hazard area precautions;

\(4\) Assistance and Real Property Acquisition Policies Act of 1970;

\(5\) Drug-Free Workplace Act of 1998 (41 U.S.C. 701);

\(6\) E.O.s 12549 and 12689, Debarment and Suspension;

\(7\) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352).

\(h\) [Environmental impact and historic preservation]{.underline}.

\(1\) The applicant must provide details of the project's impact on the
environment and historic preservation. Loans and grants made under this
part are subject to 7 CFR part 1794 which contains RUS' policies and
procedures for implementing a variety of Federal statutes, regulations,
and executive orders generally pertaining to the protection of the
quality of the human environment that are listed in 7 CFR 1794.1. The
application shall contain a separate section entitled "Environmental
Impact of the Project."

\(2\) The applicant may use the "Environmental Questionnaire," available
from RUS, to assist in complying with the requirements of this section.

\(i\) [Evidence of legal authority and existence]{.underline}. The
applicant must provide evidence of its legal existence and authority to
enter into a grant and incur debt with RUS.

\(j\) [Federal debt certification.]{.underline} The applicant must
provide evidence that it is not delinquent on any obligation owed to the
government.

\(k\) [Supplemental information.]{.underline} The applicant should
provide any additional information it considers relevant to the project
and likely to be helpful in determining the extent to which the project
would further the purposes of this subpart.

\(l\) [Additional information required by RUS.]{.underline} The
applicant must provide any additional information RUS may consider
relevant to the application and necessary to adequately evaluate the
application. RUS may also request modifications or changes, including
changes in the amount of funds requested, in any proposal described in
an application submitted under this subpart.

**§ 1703.135 Application selection provisions.**

\(a\) A combination loan and grant will be approved based on
availability of funds, the financial feasibility of the project in
accordance with § 1703.134(d), the services to be provided which
demonstrate that the project meets the general requirements of this
subpart, the design of the project; costs; location; and other
characteristics of the application.

\(b\) RUS will determine, from the information submitted with each
application for a combination loan and grant, whether the application
achieves sufficient priority, based on the criteria set forth in the
1996 Act, to receive a combination loan and grant from funds available
for the fiscal year. If such priority is achieved, RUS will process the
combination loan and grant application on a first-in, first-out basis,
provided that the total amount of applications on-hand for combination
loans and grants does not exceed 90 percent of the total loan and grant
funding available for the fiscal year. At such time as the total amount
of applications eligible for combination loans and grants, if such
applications were approved, exceeds 90 percent of amount of combination
loan and grant funding available, RUS will process the remaining
applications using the evaluation criteria set forth in § 1703.126.

\(c\) RUS will not approve a combination loan and grant if RUS
determines that:

\(1\) The applicant's proposal does not indicate financial feasibility,
or will not be adequately secured in accordance with the requirements
contained in § 1703.134(d);

\(2\) The applicant's proposal indicates technical flaws, which, in the
opinion of RUS, would prevent successful implementation, or operation of
the project; or

\(3\) Any other aspect of the applicant's proposal fails to adequately
address any requirements of this subpart or contains inadequacies which
would, in the opinion of RUS, undermine the ability of the project to
meet the general purpose of this subpart or comply with policies of the
DLT program contained in § 1703.101.

\(d\) RUS will provide the applicant with a statement of any
determinations made with regard to paragraphs (c)(1) through (c)(3) of
this section. The applicant will be provided 15 days from the date of
RUS' letter to respond, provide clarification, or make any adjustments
or corrections to the project. If, in the opinion of the Administrator,
the applicant fails to adequately respond to any determinations or other
findings made by the Administrator, the project will not be funded, and
the applicant will be notified of this determination. If the applicant
does not agree with this finding, an appeal may be filed in accordance
with § 1703.137.

**§ 1703.136 Submission of applications.**

\(a\) RUS will accept applications for a combination loan and grant
submitted by RUS telecommunications General Field representatives
(GFRs), by Rural Development State Directors, or by applicants
themselves. Applications for a combination loan and grant under this
subpart may be filed at any time and will be evaluated as received.

\(b\) Applications submitted to the State Director, Rural Development,
in the State serving the headquarters of the project will be evaluated
as they are submitted. All applicants must submit an original and two
copies of a completed application. The applicant must also submit a copy
of the application to the State government point of contact, if one has
been designated for the State, at the same time it submits an
application to the State Director. The State Director will:

\(1\) Review each application for completeness in accordance with §
1703.134, and notify the applicant, within 15 working days of receiving
the application, of the results of this review, acknowledging a complete
application, or citing any information that is incomplete. To be
considered for a combination loan and grant, the applicant must submit
any additional information requested to complete the application within
15 working days of the date of the State Director's written response. If
the applicant fails to submit such information, the application will be
returned to the applicant.

\(2\) Within 30 days of the determination of a completed application in
accordance with paragraph (b)(1) of this section, review the application
to determine suitability for financial assistance in accordance with §
1703.135, and other requirements of this subpart. Based on its review,
the State Director will work with the applicant to resolve any questions
or obtain any additional information. The applicant will be notified, in
writing, of any additional information required to allow a financial
assistance recommendation and will be provided a reasonable period of
time to furnish the additional information.

\(3\) Based on the review in accordance with\
§ 1703.135 and other requirements of this subpart, make a preliminary
determination of suitability for financial assistance. A combination
loan and grant recommendation will be prepared by the State Director
with concurrence of the RUS telecommunications GFR that addresses the
provisions of sections § 1703.134 and § 1703.135 and other applicable
requirements of this subpart.

\(4\) If the application is determined suitable for further
consideration by RUS, forward an original and one copy of the
application with a financial assistance recommendation, signed jointly,
to the Assistant Administrator, Telecommunications Program, Rural
Utilities Service, Washington, DC. The applicant will be notified by
letter of this action. Upon receipt of the application from the State
Director, RUS will conduct a review of the application and the financial
assistance recommendation. A final determination will be made within 15
days. If the Administrator determines that a combination loan and grant
can be approved, the State Director will be notified and the State
Director will notify the applicant. A combination loan and grant will be
processed, approved, and serviced in accordance with §§ 1703.105 through
1703.112 of subpart D.

\(5\) If the State Director determines that the application is not
suitable for further consideration by RUS, notify the applicant with the
reasons for this determination. The applicant may appeal this
determination pursuant to section § 1703.137 of this subpart.

\(c\) Applications submitted by RUS telecommunications GFRs or directly
by applicants will be evaluated as they are submitted. All applicants
must submit an original and two copies of a completed application. The
applicant must also submit a copy of the application to the State
government point of contact, if one has been designated for the State,
at the same time it submits an application to RUS. RUS will:

\(1\) Review each application for completeness in accordance with §
1703.134, and notify the applicant, within 15 working days of receiving
the application, of the results of this review, acknowledging a complete
application, or citing any information that is incomplete. To be
considered for a combination loan and grant assistance, the applicant
must submit any additional information requested to complete the
application within 15 working days of the date of the RUS written
response. If the applicant fails to submit such information, the
application will be returned to the applicant.

\(2\) Within 30 days of the determination of a completed application in
accordance with paragraph (c)(1) of this section, review the application
to determine suitability for financial assistance in accordance with §
1703.135, and other requirements of this subpart. Based on its review,
RUS will work with the applicant to resolve any questions or obtain any
additional information. The applicant will be notified, in writing, of
any additional information required to allow a financial assistance
recommendation and will be provided a reasonable period of time to
furnish the additional information.

\(3\) If the application is determined suitable for further
consideration by RUS, conduct a review of the application and financial
assistance recommendation. A final determination will be made within 15
days. If the Administrator determines that a combination loan and grant
can be approved, the applicant will be notified. A combination loan and
grant will be processed, approved, and serviced in accordance with §§
1703.105 through 1703.112 of subpart D.

\(4\) If RUS determines that the application is not suitable for further
consideration, notify the applicant with the reasons for this
determination. The applicant will be able to appeal in accordance with §
1703.137 of this subpart.

**§ 1703.137 Appeals.**

Any appeal must be made, in writing, within 10 days after the applicant
is notified of the determination to deny the application. Appeals shall
be submitted to the Administrator, RUS, U.S. Department of Agriculture,
1400 Independence Ave., SW., STOP 1590, Washington, DC 20250-1590.
Thereafter, the Administrator will review the appeal to determine
whether to sustain, reverse, or modify the original determination. Final
determinations will be made after consideration of all appeals. The
Administrator's determination will be final. A copy of the
Administrator's decision will be furnished promptly to the applicant.

**§§ 1703.138 \-- 1703.139 \[Reserved\]**

***Subpart G -- Distance Learning and Telemedicine Loan Program***

**§ 1703.140 Use of loan funds.**

A loan may be used by eligible organizations as defined in §1703.103 for
distance learning and telemedicine projects to finance 100 percent of
the cost of approved purposes contained in §1703.141 provided that no
financial assistance may exceed the maximum amount for the year in which
the loan is made. Entities seeking a loan must be able to provide
security and execute a note with a maturity period greater than one
year. The following entities are eligible for loans under this subpart:

\(a\) Organizations as defined in § 1703.103. If a RUS
telecommunications borrower is seeking a loan, the borrower does not
need to submit all of the financial security information required by §
1703.144(d). The borrower's latest financial report (Form 479) filed
with RUS and any additional information relevant to the project, as
determined by RUS, will suffice;

\(b\) Any non-profit or for-profit entity, public or private entity,
urban or rural institution, or rural educational broadcaster, which
proposes to provide and receive distance learning and telemedicine
services to carry out the purposes of this subpart; or

\(c\) Any entity that contracts with an eligible organization in
paragraphs (a) or (b) of this section for constructing distance learning
or telemedicine facilities for the purposes contained in § 1703.141,
except for those purposes in § 1703.141(h).

\(d\) Applicants must meet the minimum eligibility requirement for
determining the extent to which the project serves rural areas as
contained in § 1703.126(b)(2) (the applicant must receive at least 20
points to be eligible to receive financial assistance under this
subpart).

**§ 1703.141 Approved purposes for loans.**

The following are approved purposes for loans:

\(a\) Acquiring, by lease or purchase, eligible equipment or facilities
as defined in § 1703.102;

\(b\) Acquiring instructional programming;

\(c\) Providing technical assistance and instruction for using eligible
equipment, including any related software; developing instructional
programming; providing engineering or environmental studies relating to
the establishment or expansion of the phase of the project that is being
financed with the loan (financial assistance for this purpose shall not
exceed 10 percent of the requested financial assistance);

\(d\) Paying for medical or educational equipment and facilities which
are shown to be necessary to implement the project, including vehicles
utilizing distance learning and telemedicine technology to deliver
educational and health care services. The applicant must demonstrate
that such items are necessary to meet the purposes under this subpart
and financial assistance for such equipment and facilities is not
available from other sources at a cost which would not adversely affect
the economic viability of the project;

\(e\) Providing links between teachers and students or medical
professionals who are located at the same facility, provided that such
facility receives or provides distance learning or telemedicine services
as part of a distance learning or telemedicine network which meets the
purposes of this subpart;

\(f\) Providing for site development and alteration of buildings in
order to meet the purposes of this subpart. Loans for this purpose must
be necessary and incidental to the total amount of financial assistance
requested;

\(g\) Purchasing of land, buildings, or building construction, where
such costs are demonstrated necessary to construct distance learning and
telemedicine facilities. The applicant must demonstrate that funding
from other sources is not available at a cost which does not adversely
impact the economic viability of the project as determined by the
Administrator. Financial assistance for this purpose must be necessary
and incidental to the total amount of financial assistance requested;
and,

\(h\) Acquiring of telecommunications transmission facilities provided
that no telecommunications carrier will install such facilities under
the Act or through other financial procedures within a reasonable time
period and at a cost to the applicant that does not impact the economic
viability of the project, as determined by the Administrator.

\(i\) Any project costs, except for salaries and administrative
expenses, not included in paragraphs (a) through (h) of this section,
incurred during the first two years of operation after the financial
assistance has been approved. The applicant must show that financing
such costs are necessary for the establishment or continued operation of
the project and that financing is not available for such costs
elsewhere, including from the applicant's financial resources. The
Administrator will determine whether such costs will be financed based
on information submitted by the applicant. Loans shall not be made
exclusively to finance such costs, and financing for such costs will not
exceed 20 percent of the loan provided to a project under this section.

\(j\) For all of the costs needed to provide distance learning
broadcasting to rural areas. Loans may be used to cover the costs of
facilities and end-user equipment dedicated to providing educational
broadcasting to rural areas for distance learning purposes. If the
facilities are not 100 percent dedicated to broadcasting, a portion of
the financing may be used to fund such facilities based on a percentage
of use factor that approximates the distance learning broadcasting
portion of use.

**§ 1703.142 Nonapproved purposes for loans.**

\(a\) Loans made under this subpart will not be provided to pay the
costs of recurring or operating expenses incurred after two years from
approval of the project except for leases (see § 1703.141).

\(b\) Loans made under this subpart will not be provided for any of the
following costs:

\(1\) To purchase equipment that will be owned by the local exchange
carrier or another telecommunications service provider, unless the
applicant is the local exchange carrier or other telecommunications
service provider;

\(2\) To duplicate facilities providing distance learning or
telemedicine services in place or to reimburse the applicant or others
for costs incurred prior to RUS' receipt of the completed application;

\(3\) For projects located in areas covered by the Coastal Barrier
Resources Act (16 U.S.C. 3501 [et seq]{.underline}.);

\(4\) To pay for salaries, wages, or administrative expenses; or

\(5\) For any purpose that the Administrator has not specifically
approved.

\(c\) Except as otherwise provided in § 1703.112, funds shall not be
used to finance a project, in part, when the success of the project is
dependent upon the receipt of additional financial assistance under this
subpart D or is dependent upon the receipt of other funding that is not
assured.

**§ 1703.143 Maximum and minimum amounts.**

Applications for loans under this subpart will be subject to limitations
on the proposed amount of loans. The Administrator will establish the
maximum amount of a loan available to an applicant under this subpart,
by publishing notice of the maximum amount in the [Federal
Register]{.underline} before the opening of the application window. The
minimum amount of a loan is \$50,000.

**§ 1703.144 Completed application.**

The following items are required to be submitted in support of an
application for a loan:

\(a\) [An application for federal assistance]{.underline}: A completed
standard form 424

\(b\) [An executive summary of the project]{.underline}. The applicant
must provide RUS with a general project overview that addresses each of
the following 9 categories:

\(1\) A description of why the project is needed;

\(2\) An explanation of how the applicant will address the need (see
paragraph (b)(1) of this section), why the applicant requires financial
assistance, the types of educational or medical services to be offered
by the project, and the benefits to the rural residents;

\(3\) A description of the applicant, documenting eligibility in
accordance with § 1703.103;

\(4\) An explanation of the total project cost including a breakdown of
the loan required and the source of funding, if applicable, for the
remainder of the project;

\(5\) A statement specifying whether the project provides predominantly
distance learning or telemedicine services as defined in § 1703.102. If
the project provides both distance learning and telemedicine services,
the applicant must identify the predominant use of the system;

\(6\) A general overview of the telecommunications system to be
developed, including the types of equipment, technologies, and
facilities used;

\(7\) A description of the participating hubs and end user sites and the
number of rural residents which will be served by the project at each
end user site;

\(8\) A certification by the applicant that facilities funded by a loan
do not duplicate adequate established telemedicine or distance learning
services.

\(9\) A listing of the location of each end user site (city, town,
village, borough, or rural area plus the State).

\(c\) [A scope of work.]{.underline} The scope of work must include, at
a minimum:

\(1\) The specific activities to be performed under the project;

\(2\) Who will carry out the activities;

\(3\) The time-frames for accomplishing the project objectives and
activities; and

\(4\) A budget for capital expenditures reflecting the line item costs
for the loan and any other sources of funds for the project.

\(d\) [Financial information.]{.underline} The applicant must show its
financial ability to complete the project; show project feasibility; and
provide evidence that it can execute a note for a loan for a maturity
period greater than one year. For educational institutions participating
in a project application (including all members of a consortium), the
financial data must reflect revenue and expense reports and balance
sheet reports, reflecting net worth, for the most recent annual
reporting period preceding the date of the application. For medical
institutions participating in a project application (including all
members of a consortium), the financial data must include income
statement and balance sheet reports, reflecting net worth, for the most
recent completed fiscal year preceding the date of the application. When
the applicant is a partnership, company, corporation, or other entity,
current balance sheets, reflecting net worth, are needed from each of
the entities that has at least a 20 percent interest in such
partnership, company, corporation or other entity. When the applicant is
a consortium, a current balance sheet, reflecting net worth, is needed
from each member of the consortium and from each of the entities that
has at least a 20 percent interest in such member of the consortium.

\(1\) Applicants must include sufficient pro-forma financial data which
adequately reflects the financial capability of project participants and
the project as a whole to continue a sustainable project for a minimum
of 10 years and repay the requested loan. This documentation should
include sources of sufficient income or revenues to pay operating
expenses including telecommunications access and toll charges, system
maintenance, salaries, training, and any other general operating
expenses, provide for replacement of depreciable items, and show
repayment of interest and principal for the loan.

\(2\) A list of property which will be used as collateral to secure
repayment of the proposed loan. The applicant shall purchase and own
collateral that secures the loan free from liens or security interests
and take all actions necessary to perfect a first lien in the collateral
that secures the loan. RUS will consider as adequate security a loan
guarantee by a telecommunications or electric borrower or by another
qualified party. Additional forms of security, including letters of
credit, real estate, or any other items will be considered. RUS will
determine the adequacy of the security offered.

\(3\) As applicable, a depreciation schedule covering all assets of the
project. Those assets for which a loan is being requested should be
clearly indicated.

\(4\) For each hub and end user site, the applicant must identify and
provide reasonable evidence of each source of revenue. If the projection
relies on cost sharing arrangements among hub and end user sites, the
applicant must provide evidence of agreements made among project
participants.

\(5\) For applicants eligible under § 1703.103(a)(3), an explanation of
the economic analysis justifying the rate structure to ensure that the
benefit, including cost saving, of the financial assistance is passed
through to the other persons receiving telemedicine or distance learning
services.

> \(e\) [A statement of experience]{.underline}. The applicant must
> provide a written narrative (not exceeding three single spaced pages)
> describing its demonstrated capability and experience, if any, in
> operating an educational or health care endeavor and any project
> similar to the project. Experience in a similar project is desirable
> but not required.

\(f\) [A telecommunications system plan.]{.underline} A
telecommunications system plan, consisting of the following (the items
in paragraphs (g)(4) and (g)(5) of this section are required only when
the applicant is requesting a loan for telecommunications transmission
facilities):

\(1\) The capabilities of the telecommunications terminal equipment,
including a description of the specific equipment which will be used to
deliver the proposed service. The applicant must document discussions
with various technical sources which could include consultants,
engineers, product vendors, or internal technical experts, provide
detailed cost estimates for operating and maintaining the end user
equipment and provide evidence that alternative equipment and
technologies were evaluated.

\(2\) A listing of the proposed purchases or leases of
telecommunications terminal equipment, telecommunications transmission
facilities, data terminal equipment, interactive video equipment,
computer hardware and software systems, and components that process data
for transmission via telecommunications, computer network components,
communication satellite ground station equipment, or any other elements
of the telecommunications system designed to further the purposes of
this subpart, that the applicant intends to build or fund using a loan.

\(3\) A description of the consultations with the appropriate
telecommunications carriers (including other interexchange carriers,
cable television operators, enhanced service providers, providers of
satellite services, and telecommunications equipment manufacturers and
distributors) and the anticipated role of such providers in the proposed
telecommunications system.

\(4\) Results of discussions with local exchange carriers serving the
project area addressing the concerns contained in § 1703.141(h).

\(5\) The capabilities of the telecommunications transmission
facilities, including bandwidth, networking topology, switching,
multiplexing, standards, and protocols for intra-networking and open
systems architecture (the ability to effectively communicate with other
networks). In addition, the applicant must explain the manner in which
the transmission facilities will deliver the proposed services. For
example, for medical diagnostics, the applicant might indicate whether
or not a guest or other diagnosticians can join the network from
locations off the network. For educational services, indicate whether or
not all hub and end-user sites are able to simultaneously hear in
real-time and see each other or the instructional material in real-time.
The applicant must include detailed cost estimates for operating and
maintaining the network, and include evidence that alternative delivery
methods and systems were evaluated.

\(g\) [Compliance with other federal statutes.]{.underline} The
applicant must provide evidence of compliance with other Federal
statutes and regulations including, but not limited to the following:

\(1\) E.O. 11246, Equal Employment Opportunity, as amended by E.O. 11375
and as supplemented by regulations contained in 41 CFR part 60;

\(2\) Architectural barriers;

\(3\) Flood hazard area precautions;

\(4\) Assistance and Real Property Acquisition Policies Act of 1970;

\(5\) Drug-Free Workplace Act of 1998 (41 U.S.C. 701);

\(6\) c.o.\'s 12549 and 12689, Debarment and Suspension;

\(7\) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352).

\(h\) [Environmental impact and historic preservation]{.underline}.

\(1\) The applicant must provide details of the project's impact on the
environment and historic preservation. Loans made under this part are
subject to 7 CFR part 1794 which contains RUS' policies and procedures
for implementing a variety of Federal statutes, regulations, and
executive orders generally pertaining to the protection of the quality
of the human environment that are listed in 7 CFR 1794.1. The
application shall contain a separate section entitled "Environmental
Impact of the Project."

\(2\) The applicant may use the "Environmental Questionnaire," available
from RUS, to assist in complying with the requirements of this section.

\(i\) [Evidence of legal authority and existence]{.underline}. The
applicant must provide evidence of the its legal existence and authority
to enter into debt with RUS and perform the activities proposed under
the loan application.

\(j\) [Federal debt certification.]{.underline} The applicants must
provide a certification that it is not delinquent on any obligation owed
to the government (7 CFR parts 3016 and 3019).

\(k\) [Supplemental information]{.underline}. The applicant should
provide any additional information it considers relevant to the project
and likely to be helpful in determining the extent to which the project
would further the purposes of this subpart.

\(l\) [Additional information required by RUS.]{.underline} The
applicant must provide any additional information RUS determines is
necessary to adequately evaluate the application. Modifications or
changes, including changes in the loan amount requested, may be
requested in any project described in an application submitted under
this subpart.

**§ 1703.145 Application selection provisions.**

\(a\) Loans will be approved based on availability of funds, the
financial feasibility of the project in accordance with § 1703.144(d),
the services to be provided which demonstrate that the project meets the
general requirements of this subpart, the design of the project; costs;
location; and other characteristics of the application.

\(b\) RUS will determine, from the information submitted with each
application for a loan, whether the application achieves sufficient
priority, based on the criteria set forth in the 1996 Act, to receive a
loan from funds available for the fiscal year. If such priority is
achieved, RUS will process the loan application on a first-in, first-out
basis, provided that the total amount of applications on-hand for loans
does not exceed 90 percent of the total loan funding available for the
fiscal year. At such time as the total amount of applications eligible
for loans, if such applications were approved, exceeds 90 percent of
amount of loan funding available, RUS will process the remaining
applications using the evaluation criteria set forth in § 1703.126.

\(c\) A loan will not be approved if it is determined that:

\(1\) The applicant's proposal does not indicate financial feasibility,
or is not adequately secured in accordance with the requirements of §
1703.144(d);

\(2\) The applicant's proposal indicates technical flaws, which, in the
opinion of RUS, would prevent successful implementation, or operation of
the project; or

\(3\) Any other aspect of the applicant's proposal fails to adequately
address any requirements of this subpart or contains inadequacies which
would, in the opinion of RUS, undermine the ability of the project to
meet the general purpose of this subpart or comply with policies of the
DLT program contained in § 1703.101.

\(d\) RUS will provide the applicant with a statement of any
determinations made with regard to paragraphs (c)(1) through (c)(3) of
this section. The applicant will be provided 15 days from the date of
the RUS letter to respond, provide clarification, or make any
adjustments or corrections to the project. If, in the opinion of the
Administrator, the applicant fails to adequately respond to any
determinations or other findings made by the Administrator, the loan
will not be approved, and the applicant will be notified of this
determination. If the applicant does not agree with this finding an
appeal may be filed in accordance with § 1703.147.

**§ 1703.146 Submission of applications.**

\(a\) RUS will accept applications for loans submitted by RUS
telecommunications General Field Representatives (GFRs), by Rural
Development State Directors, or by applicants themselves. Applications
for loans under this subpart may be filed at any time and will be
evaluated as received on a non-competitive basis.

\(b\) Applications submitted to the State Director, Rural Development,
in the State serving the headquarters of the project will be evaluated
as they are submitted. All applicants must submit an original and two
copies of a completed application. The applicant must also submit a copy
of the application to the State government point of contact, if one has
been designated for the State, at the same time it submits an
application to the State Director. The State Director will:

\(1\) Review each application for completeness in accordance with §
1703.144, and notify the applicant, within 15 working days of receiving
the application, of the results of this review, acknowledging a complete
application, or citing any information that is incomplete. To be
considered for a loan, the applicant must submit any additional
information requested to complete the application within 15 working days
of the date of the State Director's written response. If the applicant
fails to submit such information, the application will be returned to
the applicant.

\(2\) Within 30 days of the determination of a completed application in
accordance with paragraph (1) of this section, review the application to
determine suitability for financial assistance in accordance with §
1703.145, and other requirements of this subpart. Based on its review,
the State Director will work with the applicant to resolve any questions
or obtain any additional information. The applicant will be notified, in
writing, of any additional information required to allow a financial
assistance recommendation and will be provided a reasonable period of
time to furnish the additional information.

\(3\) Based on the review in accordance with § 1703.145 and other
requirements of this subpart, make a preliminary determination of
suitability for financial assistance. A loan recommendation will be
prepared by the State Director with concurrence of the RUS
telecommunications GFR that addresses the provisions of §§ 1703.144 and
1703.145 and other applicable requirement of this subpart.

\(4\) If the application is determined suitable for further
consideration by RUS, forward an original and one copy of the
application with a loan recommendation, signed jointly, to the Assistant
Administrator, Telecommunications Program, Rural Utilities Service,
Washington DC. The applicant will be notified by letter of this action.
Upon receipt of the application from the State Director, RUS will
conduct a cursory review of the application and the recommendation. A
final determination will be made within 15 days. If the Administrator
determines that a loan can be approved, the State Director will be
notified and the State Director will notify the applicant. Applications
for loans will be processed, and approved loans serviced, in accordance
with §§ 1703.105 through 1703.112.

\(5\) If the State Director determines that the application is not
suitable for further consideration by RUS, notify the applicant with the
reasons for this determination. The applicant will be offered appeal
rights in accordance with § 1703.147.

\(c\) Applications submitted by RUS telecommunications GFRs or directly
by applicants will be evaluated as they are submitted. All applicants
must submit an original and two copies of a completed application. The
applicant must also submit a copy of the application to the State
government point of contact, if one has been designated for the State,
at the same time it submits an application to the RUS. RUS will:

\(1\) Review each application for completeness in accordance with §
1703.144, and notify the applicant, within 15 working days of receiving
the application, of the results of this review, acknowledging a complete
application, or citing any information that is incomplete. To be
considered for a loan, the applicant must submit any additional
information requested to complete the application within 15 working days
of the date of the RUS written response. If the applicant fails to
submit such information, the application will be returned to the
applicant.

\(2\) Within 30 days of the determination of a completed application in
accordance with paragraph (c)(1) of this section, review the application
to determine suitability for financial assistance in accordance with
this subpart. Based on its review, RUS will work with the applicant to
resolve any questions or obtain any additional information. The
applicant will be notified, in writing, of any additional information
required to allow a financial assistance recommendation and will be
provided a reasonable period of time to furnish the additional
information.

\(3\) If the application is determined suitable for further
consideration by RUS, conduct a review of the application and financial
assistance recommendation. A final determination will be made within 15
days. If the Administrator determines that a loan can be approved, the
applicant will be notified. Applications will be processed, and approved
loans serviced, in accordance with §§ 1703.105 through 1703.112 of
subpart D.

\(4\) If RUS determines that the application is not suitable for further
consideration, notify the applicant with the reasons for this
determination. The applicant will be offered appeal rights in accordance
with § 1703.147 of this subpart.

**§ 1703.147 Appeals.**

Any appeal must be made, in writing, within 10 days after the applicant
is notified of the determination to deny the application. Appeals shall
be submitted to the Administrator, RUS, U.S. Department of Agriculture,
1400 Independence Ave., SW., STOP 1590, Washington, DC 20250-1590.
Thereafter, the Administrator will review the appeal to determine
whether to sustain, reverse, or modify the original determination. Final
determinations will be made after consideration of all appeals. The
Administrator's determination will be final. A copy of the
Administrator's decision will be furnished promptly to the applicant.

**Hilda Gay Legg,**

**Administrator, Rural Utilities Service**

as amended March 11, 2002