NTIA and RUS Have Taken Steps to Address Scheduling, Staffing, and Data Challenges; However, Some Risks Remain

NTIA and RUS face scheduling, staffing, and data challenges in evaluating  applications and awarding funds. The agencies have taken steps to meet  these challenges, such as adopting a two-step evaluation process, utilizing  nongovernmental personnel, and publishing information on the applicant’s  proposed service area. While these steps address some challenges, the  agencies lack the needed time to apply lessons learned from the first  funding round and face a compressed schedule to review new  applications. As a result, the agencies may risk awarding funds to projects  that are not sustainable or do not meet the priorities of the Recovery Act.

		NTIA and RUS Face Scheduling, Staffing, and Data Challenges in the Evaluation of Applications and Awarding of Funds

Scheduling challenges. The agencies have 18 months to establish their  respective programs, solicit and evaluate applications, and award all  funds. While in some instances a compressed schedule does not pose a  challenge, two factors enhance the challenges associated with the 18- month schedule. First, NTIA must establish the BTOP program from  scratch, and RUS has existing broadband grant and loan programs, albeit  on a much smaller scale than BIP. Second, the agencies face an  unprecedented volume of funds and anticipated number of applications  compared to their previous experiences.
The funding associated with BTOP and BIP exceed NTIA’s and RUS’s prior  experience with other grant or loan programs (see fig. 1). In comparison to  the $4.7 billion appropriation NTIA received for BTOP, its Public  Telecommunications Facilities Program received an average of $23 million  annually and its Telecommunications Opportunities Program received $24  million annually. NTIA also administered the one-time Public Safety  Interoperable Communications Program (PSIC), with an appropriation of  about $1 billion, in close coordination with the Department of Homeland  Security (DHS). In comparison to the $2.5 billion appropriation RUS  received for BIP, its Community Connect Program’s average annual  appropriation was $12 million and its Broadband Access Loan Program’s   Program’s  average annual appropriation was $15 million.  average annual appropriation was $15 million.
NTIA and RUS also face an increase in the number of applications that  they must review and evaluate in comparison to similar programs (see fig.  2). According to preliminary information from the agencies, they received  approximately 2,200 applications requesting $28 billion in grants and loans  in the first funding round. Of these 2,200 applications, NTIA received 940  applications exclusively for BTOP and RUS received 400 applications  exclusively for BIP and 830 dual applications that both agencies will  review. In comparison, NTIA received an average of 838 applications  annually for the Telecommunications Opportunities Program; for PSIC,  NTIA and DHS received 56 applications from state and territorial  governments containing a total of 301 proposed projects. RUS received an  average of 35 applications annually for the Broadband Access Loan  program and an average of 105 applications annually for the Community  Connect Program.
Staffing challenges. NTIA and RUS will need additional personnel to  administer BTOP and BIP. NTIA’s initial risk assessment indicated that a  lack of experienced and knowledgeable staff was a key risk to properly  implementing the program in accordance with the priorities of the  Recovery Act. In its fiscal year 2010 budget request to Congress, NTIA  estimated that it will need 30 full-time-equivalent staff in fiscal year 2009  and 40 more full-time-equivalent staff for fiscal year 2010. While RUS  already has broadband loan and grant programs in place and staff to  administer them, it also faces a shortage of personnel. RUS’s staffing  assessments indicated that the agency will need 47 additional full-time- equivalents to administer BIP.
Data challenges. NTIA and RUS lack detailed data on the availability of  broadband service throughout the country that may limit their ability to  target funds to priority areas. According to the agencies, priority areas  include unserved and underserved areas. The agencies require applicants  to assemble their proposed service areas from contiguous census blocks  and to identify the proposed service area as unserved or underserved.  However, the agencies will be awarding loans and grants before the  national broadband plan or broadband mapping is complete. FCC must  complete the national broadband plan by February 17, 2010, and NTIA  does not expect to have complete, national data on broadband service  levels at the census block level until at least March 2010.

		NTIA and RUS Have Taken Steps That Address Some Challenges in the Evaluation of Applications and Awarding of Funds

Two-step evaluation process. To address the scheduling and staffing  challenges, NTIA and RUS are using a two-step process. In the first step,  the agencies will evaluate and score applications based on the criteria in  the NOFA, such as project purpose and project viability. During this step,  the agencies will select which applications proceed to the second step.  After the first step is complete and the pool of potential projects is  reduced, the agencies intend to conduct the second step—due diligence,  which involves requesting extra documentation to confirm and verify  information contained in an application. Since not all applications will  proceed to the second step, not all applicants will be required to submit  extra documentation which will reduce the amount of information the  agencies must review.
Use of nongovernmental personnel. Both NTIA and RUS are using  nongovernmental personnel to address anticipated staffing needs  associated with the evaluation of applications and awarding of funds. To  evaluate applications, NTIA is using a volunteer peer review system, in  which three unpaid, expert reviewers examine and score applications;  these volunteers must have significant expertise and experience in  broadband-related activities, such as the construction and operation of a  broadband network. In addition, NTIA will use contractors in an  administrative role to assist the expert reviewers. RUS will also use  contractors to evaluate and score applications. Regardless of who reviews  the application, the final selection and funding decisions are to be formally  made by a selecting official in each agency.
Publish applicant information. To address the challenge of incomplete  data on broadband service, NTIA and RUS require applicants to identify  and attest to the service availability—either unserved or underserved—in  their proposed service area. In order to verify these self-attestations, NTIA  and RUS will post a public notice identifying the proposed funded service  area of each broadband infrastructure applicant. The agencies intend to  allow existing service providers in the proposed service area to question  an applicant’s characterization of broadband service in that area. If this  information raises eligibility issues, RUS may send field staff to the  proposed service area to conduct a market survey. RUS will resolve  eligibility issues by determining the actual availability of broadband  service in the proposed service area. NTIA has no procedure for resolving  these types of issues.

		The Agencies’ Remaining Schedule May Pose Risks to the Review of Applications

During the first funding round, the compressed schedule posed a challenge  for both applicants and the agencies. As mentioned previously, NTIA and  RUS initially proposed to utilize three separate funding rounds during the  18-month window to award the $7.2 billion. As such, each funding round  would operate under a compressed schedule. Eight of the 15 industry  stakeholders with whom we spoke expressed concern that a small entity  would have difficulties in completing an application in a timely manner.  The compressed schedule also posed challenges for the agencies. During  the first funding round, the agencies missed several milestones. For  example, RUS originally intended to select a contractor on June 12, 2009,  and NTIA intended to select a contractor on June 30, 2009; however, both  agencies missed their target dates, with RUS selecting its contractor on  July 31, 2009, and NTIA selecting its contractor on August 3, 2009.
Because of the compressed schedule within the individual funding rounds,  NTIA and RUS have less time to review applications than similar grant and  loan programs. In the first funding round, the agencies have approximately  2 months to review 2,200 applications. In contrast, from fiscal year 2005  through 2008, RUS took from 4 to 7 months to receive and review an  average of 26 applications per year for its Broadband Access Loan  Program. NTIA’s Public Telecommunications Facilities Program operated  on a year-long grant award cycle. For the PSIC program, NTIA and DHS  completed application reviews in roughly 6 months.
Based on their experience with the first funding round, NTIA and RUS are  considering reducing the number of funding rounds from three to two. In  the second and final funding round, the agencies anticipate extending the  window for entities to submit applications. This change will help mitigate  the challenges the compressed schedule posed for applicants in the first  funding round. However, it is unclear whether the agencies will similarly  extend the amount of time to review the applications and thereby bring  the review time more in line with the experiences of other broadband  grant and loan programs. NTIA officials indicated that the agency would  like to make all awards by summer 2010, to promote the stimulative effect  of the BTOP program. Alternatively, RUS officials indicated that the  agency will make all awards by September 30, 2010, as required by the  Recovery Act, indicating a potentially longer review process.
Depending on the timeframes NTIA and RUS select, the risks for both  applicants and the agencies may persist with two funding rounds. In  particular, these risks include:    Limited opportunity for “lessons learned.” Based on the current  schedule, NTIA and RUS will have less than one month between the  completion of the first funding round and the beginning of the second  funding round. Because of this compressed time frame, applicants might  not have sufficient time to analyze their experiences with the first funding  round to provide constructive comments to the agencies. Further, the  agencies might not have sufficient time to analyze the outcomes of the first  round and the comments from potential applicants. As such, a compressed  schedule limits the opportunity to apply lessons learned from the first  funding round to improve the second round.
Compressed schedule to review applications. Due to the complex  nature of many projects, NTIA and RUS need adequate time to evaluate  the wide range of applications and verify the information contained in the  applications. NTIA is soliciting applications for infrastructure, public  computer center, and sustainable adoption projects. Therefore, NTIA will  receive applications containing information responding to different  criteria and it will evaluate the applications with different standards. Even  among infrastructure applications, a wide variability exists in the  estimates, projections, and performance measures considered reasonable  for a project. For example, in RUS’s Broadband Access Loan Program,  approved broadband loans for the highest-cost projects, on a cost-per- subscriber basis, ranged as much as 15, 18, and even 70 times as high as  the lowest-cost project, even among projects using the same technology to  deploy broadband.
Continued lack of broadband data and plan. According to NTIA,  national broadband data provide critical information for grant making.  NTIA does not expect to have complete data for a national broadband map  until at least March 2010. Also, as mentioned previously, FCC must deliver  to Congress a national broadband plan by February 17, 2010. By operating  on a compressed schedule, NTIA and RUS will complete the first funding  round before the agencies have the data needed to target funds to  unserved and underserved areas and before FCC completes the national  broadband plan. Depending on the time frames the agencies select for the  second funding round, they may again review applications without the  benefit of national broadband data and a national broadband plan.

	NTIA and RUS Face Staffing Challenges in Overseeing Funded Projects, and Despite Steps Taken, Several Risks to Project Oversight Remain

NTIA and RUS will need to oversee a far greater number of projects than  in the past, including projects with large budgets and a diversity of  purposes and locations. In doing so, the agencies face the challenge of  monitoring these projects with far fewer staff per project than were  available in similar grant and loan programs they have managed. To  address this challenge, NTIA and RUS procured contractors to assist with  oversight activities and will require funding recipients to complete  quarterly reports and, in some cases, obtain annual audits. Despite the  steps taken, several risks remain to adequate oversight. These risks  include insufficient resources to actively monitor funded projects beyond  fiscal year 2010 and a lack of updated performance measures for NTIA and  RUS. In addition, NTIA has yet to define annual audit requirements for  commercial entities funded under BTOP.

		A Large Number of Projects to Oversee Creates Staffing Challenges

NTIA and RUS will need to oversee a far greater number of projects than  in the past. Although the exact number of funded projects is unknown,  both agencies have estimated that they could fund as many as 1,000  projects each—or 2,000 projects in total—before September 30, 2010. In  comparison, from fiscal year 1994 through fiscal year 2004, NTIA awarded  a total of 610 grants through its Technology Opportunities Program—or an  average of 55 grants per year. From fiscal year 2005 through fiscal year  2008, RUS awarded a total of 84 Community Connect grants, averaging 21  grants per year; and through its Broadband Access Loan Program, RUS  approved 92 loans from fiscal year 2003 through fiscal year 2008, or about  15 loans per year.
In addition to overseeing a large number of projects, the scale and  diversity of BTOP- and BIP-funded projects are likely to be much greater  than projects funded under the agencies’ prior grant programs. Based on  NTIA’s estimated funding authority for BTOP grants and RUS’s estimated  potential total funding for BIP grants, loans, and loan/grant combinations,  if the agencies fund 1,000 projects each, as estimated, the average funded  amount for BTOP and BIP projects would be about $4.35 million and $9  million, respectively. In comparison, from fiscal year 1994 to fiscal year  2004, NTIA’s average grant award for its Technology Opportunities  Program was about $382,000 and from fiscal year 2005 to fiscal year 2008,  RUS awarded, on average, about $521,000 per Community Connect grant  award. Further, the agencies expect to fund several different types of  projects that will be dispersed nationwide, such as infrastructure and  public computer center projects.
Because of the volume of expected projects, NTIA and RUS plan to  oversee and monitor BTOP- and BIP-funded projects with fewer staff  resources per project than the agencies used in similar grant and loan  programs (see table 1). NTIA reported that it will need 41 full-time- equivalent staff to manage BTOP; at the time of our review it had filled 33  of these positions. Based on NTIA’s estimate of funding 1,000 projects and  its estimated 41 full-time-equivalent staff needed, NTIA will have about 1  full-time-equivalent staff available for every 24 projects. NTIA reported  that it is continually assessing its resources and is considering additional  staff hires. Similarly, RUS reported that it will need 47 full-time-equivalent  staff to administer all aspects of BIP, and the majority of these positions  were to be filled by the end of September 2009. These 47 staff members  are in addition to the 114 full-time-equivalent staff in the Rural  Development Telecommunications program which support four existing  loan or grant programs. If RUS funds a total of 1,000 projects, as  estimated, based on the 47 staff assigned to BIP, it would have 1 staff of  any capacity available for every 21 funded projects. RUS reported that it  could use other staff in the Rural Development Telecommunications  program to address BIP staffing needs, if necessary.

		To Address Project Oversight Challenges, NTIA and RUS Are Procuring Contractor Services and Requiring Funding Recipient Reports and Audits

Contractor services. NTIA and RUS will use contractors to help monitor  and provide technical assistance for BTOP and BIP projects. On August 3,  2009, NTIA procured contractor services to assist in a range of tasks,  including tracking and summarizing grantees’ performance, developing  grant-monitoring guidance, and assisting with site visits and responses to  audits of BTOP-funded projects. On July 31, 2009, RUS awarded a contract  to a separate contractor for a wide range of program management  activities for BIP. RUS’s contractor will be responsible for a number of  grant-monitoring activities, including developing a workflow system to  track grants and loans, assisting RUS in developing project monitoring  guidance and policies, and assisting in site visits to monitor projects and  guard against waste, fraud, and abuse.
In addition to its contractor, RUS intends to use existing field staff for  program oversight. RUS reported that it currently has 30 general field  representatives in the telecommunications program and 31 field  accountants in USDA’s Rural Development mission area that may be  available to monitor broadband programs. In addition, RUS officials told  us that Rural Development has an estimated 5,000 field staff available  across the country that support a variety of Rural Development loan and  grant programs. Although these individuals do not have specific  experience with telecommunications or broadband projects, according to  RUS, this staff has experience supporting RUS’s business and community  development loan programs, and this workforce could be used for project  monitoring activities if there were an acute need. Unlike RUS, NTIA does  not have field staff. According to NTIA, the agency has been in talks with  RUS about sharing some of RUS’s field staff to monitor BTOP projects,  although no formal agreement is in place.
Recipient reports and audits. To help address the challenge of  monitoring a large number of diverse projects, NTIA and RUS have  developed program-specific reporting requirements that are intended to  provide transparency on the progress of funded projects. Based on our  review of the requirements, if NTIA and RUS have sufficient capacity to  review and verify that information provided by funding recipients is  accurate and reliable, these requirements could provide the agencies with  useful information to help them monitor projects. The following reporting  requirements apply to BTOP and BIP funding recipients:    General recovery act reports. Section 1512 of the Recovery Act and  related OMB guidance requires all funding recipients to report quarterly to  a centralized reporting system on, among other things, the amount of  funding received that was expended or obligated, the project completion  status, and an estimate of the number of jobs created or retained through  the funded project, among other information. Under OMB guidance,  awarding agencies are responsible for ensuring that funding recipients  submit timely reports, and must perform a data quality review and request  further information or corrections by funding recipients, if necessary.
BTOP-specific reports. The Recovery Act requires BTOP funding  recipients to report quarterly on their use of funds and NTIA to make these  reports available to the public. NTIA also requires that funding recipients  report quarterly on their broadband equipment purchases and progress  made in achieving goals, objectives, and milestones identified in the  recipient’s application, including whether the recipient is on schedule to  substantially complete its project no later than 2 years after the award and  complete its project no later than 3 years after the award. Recipients of  funding for infrastructure projects must report on a number of metrics,  such as the number of households and businesses receiving new or  improved access to broadband as a result of the project, and the  advertised and averaged broadband speeds and the price of the broadband  services provided.
BIP-specific reports. RUS requires BIP funding recipients to submit  quarterly balance sheets, income and cash-flow statements, and the  number of customers taking broadband service on a per community basis,  among other information. BIP funding recipients must also report annually  on the number of households; businesses; and educational, library, health  care, and public safety providers subscribing to new or improved access to  broadband. RUS officials reported that it plans to use quarterly reports to  identify specific projects for on-site monitoring and to determine when  that monitoring should take place.
NTIA and RUS also require some funding recipients to obtain annual,  independent audits of their projects; however, NTIA has yet to determine  what annual audit requirements, if any, will apply to commercial grantees  (see table 2). The primary tool for monitoring federal awards through  annual audits is the single audit report required under the Single Audit Act,  as amended. We recently reported that the Single Audit is a valuable  source of information on internal control and compliance for use in a  management’s risk assessment and monitoring processes—and with some  adjustments, we said, the Single Audit process could be improved for  Recovery Act oversight. The Single Audit report is prepared in  accordance with OMB’s implementing guidance in OMB Circular No. A- 133. All states, local governments, and nonprofit organizations that  expend over $500,000 in federal awards per year must obtain an annual  Single Audit or, in some cases, a program-specific audit. Commercial (for  profit) entities awarded federal funding of any amount are not covered by  the Single Audit Act, and states, local governments, and nonprofit  organizations expending less than $500,000 in federal awards per year are  also not required to obtain an annual Single Audit under the Single Audit  Act. RUS, however, requires all commercial recipients of BIP funds to  obtain an annual, independent audit of their financial statements under  requirements that also apply to RUS’s existing broadband grant and loan  programs. NTIA has yet to determine what annual audit requirements, if  any, will apply to commercial grantees.

		Several Risks to Project Oversight Remain

Lack of sufficient resources beyond fiscal year 2010. Both NTIA and  RUS face the risk of having insufficient resources to actively monitor  BTOP- and BIP-funded projects after September 30, 2010, which could  result in insufficient oversight of projects not yet completed by that date.  As required by the Recovery Act, NTIA and RUS must ensure that all  awards are made before the end of fiscal year 2010. Under the current  timeline, the agencies do not anticipate completing the award of funds  until that date. Funded projects must be substantially complete no later  than 2 years, and complete no later than 3 years following the date of  issuance of the award. Yet, the Recovery Act provides funding through  September 30, 2010. The DOC Inspector General has expressed concerns  that “without sufficient funding for a BTOP program office, funded  projects that are still underway at September 30, 2010, will no longer be  actively managed, monitored, and closed.” NTIA officials told us that  NTIA has consulted with the OMB about seeking BTOP funding after  September 30, 2010, to allow it to close grants. RUS officials reported that  given the large increase in its project portfolio from BIP, RUS’s capacity to  actively monitor these projects after its BIP funding expires may be  stressed. Without sufficient resources to actively monitor and close BTOP  grants and BIP grants and loans by the required completion dates, NTIA  and RUS may be unable to ensure that all recipients have expended their  funding and completed projects as required.
Lack of updated performance measures. The Government  Performance and Results Act of 1993 (GPRA) directs federal agencies to  establish objective, quantifiable, and measurable goals within annual  performance plans to improve program effectiveness, accountability, and  service delivery. Specifically, performance measures allow an agency to  track its progress in achieving intended results and help inform  management decisions about such issues as the need to redirect resources  or shift priorities.
NTIA has established preliminary program performance measures for  BTOP, including job creation, increasing broadband access, stimulation of  private sector investment, and spurring broadband demand. However,  NTIA has not established quantitative, outcome-based goals for those  measures. NTIA officials reported that the agency lacks sufficient data to  develop such goals and is using applications for the first round of funding  to gather data, such as the expected number of households that will  receive new or improved broadband service. According to NTIA officials,  data collected from applications for the first funding round could be used  to develop program goals for future funding rounds.
RUS has established quantifiable program goals for its existing broadband  grant and loan programs, including a measure for the number of  subscribers receiving new or improved broadband service as a result of  the programs. However, according to USDA’s fiscal year 2010 annual  performance plan, RUS has not updated its measures to reflect the large  increase in funding it received for broadband programs under the  Recovery Act. In addition, RUS officials told us that the agency’s existing  measure for the number of subscribers receiving new or improved  broadband access as a result of its programs is based on the estimates  provided by RUS borrowers in their applications. Consequently, these  program goals do not reflect actual program outcomes, but rather the  estimates of applicants prior to the execution of their funded projects.
Undefined audit requirements for commercial recipients. At the time  of our review, NTIA did not have audit requirements or guidelines in place  for annual audits of commercial entities receiving BTOP grants. NTIA  officials reported that because BTOP is the first program managed by  NTIA to make grants to commercial entities, the agency does not have  existing audit guidelines for commercial entities. However, NTIA reported  that it intends to develop program-specific audit requirements and  guidelines that will apply to commercial recipients that receive broadband  grants and it plans to have those guidelines in place by December 2009. In  the absence of clear audit requirements and guidelines for commercial  recipients of BTOP funding, NTIA will lack an important oversight tool to  identify risks and monitor BTOP grant expenditures.
Mr. Chairman and Members of the Committee, this concludes my prepared  statement. Our future work, which we expect to complete in November,  will provide additional information on the implementation and oversight of  the broadband programs. We also expect to make recommendations at  that time. I would be pleased to respond to any questions that you or other  members of the committee might have.
For questions regarding this statement, please contact Mark L. Goldstein  at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of  Congressional Relations and Public Relations can be found on the last  page of this statement. Michael Clements, Assistant Director; Eli Albagli;  Matt Barranca; Elizabeth Eisenstadt; Dean Gudicello; Tom James; Kim  McGatlin; Sara Ann Moessbauer; Josh Ormond; and Mindi Weisenbloom  also made key contributions to this statement.
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Summary:
Why GAO Did This Study

Access to broadband service is seen as vital to economic, social, and educational development, yet many areas of the country lack access to, or their residents do not use, broadband. To expand broadband deployment and adoption, the American Recovery and Reinvestment Act (the Recovery Act) provided $7.2 billion to the Department of Commerce's National Telecommunications and Information Administration (NTIA) and the Department of Agriculture's Rural Utilities Service (RUS) for grants or loans to a variety of program applicants. The agencies must award all funds by September 30, 2010. This testimony provides preliminary information on the challenges NTIA and RUS face; the steps taken to address challenges; and the remaining risks in (1) evaluating applications and awarding funds and (2) overseeing funded projects. This statement is based on related ongoing work that GAO expects to complete in November. To conduct this work, GAO is reviewing relevant laws and program documents and interviewing agency officials and industry stakeholders. While this testimony does not include recommendations, GAO expects to make recommendations in its November report.

What GAO Found

Application evaluation and awards. NTIA and RUS face scheduling, staffing, and data challenges in evaluating applications and awarding funds. NTIA, through its new Broadband Technology Opportunities Program, and RUS, through its new Broadband Initiatives Program, must review more applications and award far more funds than the agencies formerly handled through their legacy telecommunications grant or loan programs. NTIA and RUS initially proposed distributing these funds in three rounds. To meet these challenges, the agencies have established a two-step application evaluation process that uses contractors or volunteers for application reviews and plan to publish information on applicants' proposed service areas to help ensure the eligibility of proposed projects. While these steps address some challenges, the upcoming deadline for awarding funds may pose risks to the thoroughness of the application evaluation process. In particular, the agencies may lack time to apply lessons learned from the first funding round and to thoroughly evaluate applications for the remaining rounds. Oversight of funded projects. NTIA and RUS will oversee a significant number of projects, including projects with large budgets and diverse purposes and locations. In doing so, the agencies face the challenge of monitoring these projects with far fewer staff per project than were available for their legacy grant and loan programs. To address this challenge, NTIA and RUS have hired contractors to assist with oversight activities and plan to require funding recipients to complete quarterly reports and, in some cases, obtain annual audits. Despite these steps, several risks remain, including a lack of funding for oversight beyond fiscal year 2010 and a lack of updated performance measures to ensure accountability for NTIA and RUS. In addition, NTIA has yet to define annual audit requirements for commercial entities funded under the Broadband Technology Opportunities Program.