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[House Report 112-228]
[From the U.S. Government Printing Office]


112th Congress                                            Rept. 112-228
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================

 
TO RETURN UNUSED OR RECLAIMED FUNDS MADE AVAILABLE FOR BROADBAND AWARDS 
 IN THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 TO THE TREASURY 
                          OF THE UNITED STATES

                                _______
                                

 September 29, 2011.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

         Mr. Upton, from the Committee on Energy and Commerce, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 1343]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 1343) to return unused or reclaimed funds made 
available for broadband awards in the American Recovery and 
Reinvestment Act of 2009 to the Treasury of the United States, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Legislation......................................................     2
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     4
Hearings.........................................................    10
Committee Consideration..........................................    10
Committee Votes..................................................    10
Committee Oversight Findings.....................................    10
Statement of General Performance Goals and Objectives............    10
New Budget Authority, Entitlement Authority, and Tax Expenditures    10
Earmarks.........................................................    11
Committee Cost Estimate..........................................    11
Congressional Budget Office Estimate.............................    11
Federal Mandates Statement.......................................    12
Advisory Committee Statement.....................................    12
Applicability to Legislative Branch..............................    12
Section-by-Section Analysis of the Legislation...................    12
Changes in Existing Law Made by the Bill, as Reported............    13
Additional Views.................................................    14

                              Legislation

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. ACCOUNTABILITY FOR BROADBAND STIMULUS FUNDS.

  (a) In General.--Notwithstanding any other provision of law, the 
Administrator of the Rural Utilities Service or the Assistant Secretary 
of Commerce for Communications and Information shall take prompt and 
appropriate action to terminate for cause any award made under the 
Broadband Initiatives Program or the Broadband Technology Opportunities 
Program, respectively, established pursuant to the American Recovery 
and Reinvestment Act of 2009, if the Administrator or Assistant 
Secretary determines that cause exists to terminate the award. Such 
cause may include an insufficient level of performance, wasteful 
spending, or fraudulent spending.
  (b) Deobligation and Return of Funds to Treasury.--
          (1) Deobligation.--Upon terminating an award under subsection 
        (a), the Administrator or the Assistant Secretary shall 
        immediately deobligate an amount equivalent to such award, less 
        allowable costs, to the extent funds with respect to such award 
        are available in the account relating to the Broadband 
        Initiatives Program or the Broadband Technology Opportunities 
        Program, respectively. If the Administrator or the Assistant 
        Secretary subsequently recovers any additional amounts from 
        such award, the Administrator or the Assistant Secretary shall 
        deobligate such additional amounts immediately upon receipt.
          (2) Return to treasury.--Not later than 30 days after 
        deobligating an amount under paragraph (1), the Administrator 
        or the Assistant Secretary shall, without exception, return 
        such amount to the general fund of the Treasury of the United 
        States.
          (3) No expenditures during termination process.--The 
        Administrator or the Assistant Secretary shall promptly pursue 
        available corrective measures to ensure that funds received 
        through an award terminated under subsection (a) are not 
        expended during the termination process.
          (4) Accounting by award recipient.--The Administrator or the 
        Assistant Secretary shall direct the recipient of an award 
        terminated under subsection (a) to provide to the Administrator 
        or the Assistant Secretary a complete and accurate accounting, 
        which may include an independent accounting, for any award 
        funds that, as of the date of termination, the recipient has 
        received but has not expended on allowable costs.

SEC. 2. DISPOSITION OF UNUSED FUNDS.

  The Administrator of the Rural Utilities Service or the Assistant 
Secretary of Commerce for Communications and Information shall return 
to the general fund of the Treasury of the United States an amount 
equivalent to any award, less allowable costs, made under the Broadband 
Initiatives Program or the Broadband Technology Opportunities Program, 
respectively, established pursuant to the American Recovery and 
Reinvestment Act of 2009, if such award has been returned to the 
Administrator or Assistant Secretary or disclaimed by the award 
recipient at any time after the date of enactment of such Act.

SEC. 3. OVERSIGHT AND REPORTING REQUIREMENTS.

  (a) Action on Information From OIG or GAO.--If the Administrator of 
the Rural Utilities Service or the Assistant Secretary of Commerce for 
Communications and Information receives information from an official 
described in subsection (b) with respect to an award made under the 
Broadband Initiatives Program or the Broadband Technology Opportunities 
Program, respectively, established pursuant to the American Recovery 
and Reinvestment Act of 2009, and such information pertains to material 
noncompliance with the award terms or provisions or improper usage of 
award funds, the Administrator or the Assistant Secretary shall--
          (1) immediately review such information; and
          (2) not later than 30 days after receiving such information, 
        determine whether cause exists to terminate such award under 
        section 1(a), unless the official who provided such information 
        recommends that the Administrator or the Assistant Secretary 
        limit or not make such a determination.
  (b) Officials Described.--The officials described in this subsection 
are the following:
          (1) With respect to the Broadband Initiatives Program, the 
        Inspector General of the Department of Agriculture.
          (2) With respect to the Broadband Technology Opportunities 
        Program, the Inspector General of the Department of Commerce.
          (3) The Comptroller General of the United States.
  (c) Congressional Notification.--
          (1) In general.--Not later than 3 days after making a 
        determination described in subsection (a)(2), the Administrator 
        or the Assistant Secretary shall provide a notification of such 
        determination to--
                  (A) the Committee on Agriculture of the House of 
                Representatives and the Committee on Agriculture of the 
                Senate or the Committee on Energy and Commerce of the 
                House of Representatives and the Committee on Commerce, 
                Science, and Transportation of the Senate, 
                respectively; and
                  (B) the official who provided the information 
                described in subsection (a).
          (2) Contents of notification.--The notification required by 
        paragraph (1) shall include an explanation of--
                  (A) the determination described in subsection (a)(2); 
                and
                  (B) any action taken as a result of the determination 
                or why no action was necessary.
          (3) Confidential notification under certain circumstances.--
        In the case of a determination by the Administrator or the 
        Assistant Secretary under subsection (a)(2) that cause does not 
        exist to terminate the award, the Administrator or the 
        Assistant Secretary may make the congressional notification 
        required by paragraph (1)(A) on a confidential basis, if the 
        Administrator or the Assistant Secretary determines, after 
        consultation with the official who provided the information 
        described in subsection (a), that--
                  (A) there is no merit to such information; and
                  (B) notification on a public basis would cause 
                irreparable harm to any person the information is 
                regarding.

SEC. 4. CONFORMING AMENDMENTS.

  Section 6001(i)(4) of the American Recovery and Reinvestment Act of 
2009 (47 U.S.C. 1305(i)(4)) is amended--
          (1) by striking ``may'' and inserting ``shall''; and
          (2) by striking ``, and award these funds competitively to 
        new or existing applicants consistent with this section''.

SEC. 5. AWARD DEFINED.

  In this Act, the term ``award'' includes grants and loans.

                          Purpose and Summary

    H.R. 1343 clarifies the responsibility of the National 
Telecommunications and Information Administration (NTIA) in the 
U.S. Department of Commerce and the Rural Utility Service (RUS) 
in the U.S. Department of Agriculture to terminate failed or 
failing grants and loans awarded from the $7.2 billion the 
American Recovery and Reinvestment Act of 2009 (ARRA) allocated 
for broadband subsidies and mapping grants, and to return to 
the U.S. Treasury any rescinded or relinquished funds. The bill 
also improves oversight of the broadband programs. 
Specifically, the bill requires:
           The NTIA and RUS to determine whether to 
        terminate an award within 30 days of receiving 
        information from their respective inspectors general or 
        the comptroller general regarding material 
        noncompliance with award terms. The NTIA and RUS must 
        also explain to Congress what action they took or why 
        they took no action, and do so within three days of 
        their determination. The NTIA and RUS may notify 
        Congress confidentially if they determine after 
        consultation with the comptroller general or inspectors 
        general that the information they received has no merit 
        and that public release would irreparably harm an 
        individual;
           The NTIA and RUS to terminate an award if 
        they find cause--including waste, fraud, or 
        insufficient performance;
           The NTIA and RUS to deobligate and return to 
        the Treasury funds from terminated awards, as well as 
        to return unused funds from any relinquished awards; 
        and
           Recipients of awards to provide an 
        accounting of funds received but not yet expended, if 
        the NTIA or RUS terminate the awards.

                  Background and Need for Legislation

    The ARRA allocated $7.2 billion for the NTIA and RUS to use 
for broadband-related grants and loans. In particular, it 
tasked the NTIA with overseeing a $4.7 billion Broadband 
Technology Opportunities Program and tasked the RUS with 
overseeing another $2.5 billion project later named the 
Broadband Initiatives Program. See Pub. L. No. 111-5, 123 Stat. 
115, 118-19, 128, 512-16 (2009) (ARRA).
    According to the ARRA, the BTOP was designed to promote 
access to consumers currently unserved or underserved by 
broadband; to provide broadband education, training, access, 
equipment, and support to schools, libraries, healthcare 
providers, and organizations and agencies that facilitate 
broadband use by low-income, unemployed, aged, and otherwise 
vulnerable populations; to improve access and use by public 
safety agencies; and to stimulate the demand for broadband, 
economic growth, and job creation. Id. at 512-13. An area is 
deemed ``unserved'' if at least 90 percent of the households 
lack access to facilities-based, fixed or mobile, terrestrial 
broadband service that provides at least 768 kilobits per 
second downstream and at least 200 kilobits upstream. An area 
is deemed ``underserved'' if no more than 50 percent of 
households have access to facilities-based, terrestrial 
broadband service that provides at least 768 kilobits per 
second downstream and at least 200 kilobits upstream; no fixed 
or mobile broadband service provider advertises speeds of at 
least 3 megabits per second downstream; or 40 percent of 
households or less subscribe to broadband service that provides 
at least 768 kilobits per second downstream and at least 200 
kilobits upstream. See Broadband Initiatives Program and 
Broadband Technology Opportunities Program Notice of Funds 
Availability, 74 Fed. Reg. 33104, 33130-31 (July 9, 2009) (NOFA 
I).
    The ARRA authorized the RUS to use its $2.5 billion for 
grants, loans and loan guarantees for broadband infrastructure, 
so long as at least 75 percent of the project area was rural 
and lacked ``sufficient access to high speed broadband service 
to facilitate rural economic development.'' ARRA, 123 Stat. at 
118. The RUS was to prioritize awards to projects that would 
provide consumers a choice of more than one service provider 
and to projects that would provide service to the highest 
proportion of rural residents that do not have access to 
broadband service. Id. No area of a project funded under the 
RUS program was allowed to receive funding to provide broadband 
service under the NTIA program. See id. at 119.
    For the first round of awards, the NTIA and RUS created a 
single application for both programs. An applicant was required 
to apply for RUS money if 75 percent of the applicant's 
proposed service area was ``rural,'' and the NTIA would not 
award a grant to such a project unless the RUS refused to do 
so. See NOFA I, 74 Fed. Reg. at 33105. To qualify for 100 
percent funding under the RUS program, a project was required 
to serve an area that was not only rural, but also ``remote,'' 
which the RUS defined as an unserved area at least 50 miles 
from a non-rural area. See id. at 33106, 33109. Because few 
projects could meet the remote criterion, most projects were 
only eligible for RUS funding if they provided at least 50 
percent in matching funds. That was more than the 20 percent 
matching requirement for the NTIA program. See id. at 33112.
    Based on the experience gained and applicant feedback from 
round one, the NTIA and RUS made a number of changes for round 
two. Round two applicants were required to file separate 
applications for the NTIA and RUS programs. See Broadband 
Technology Opportunities Program Notice of Funds Availability, 
75 Fed. Reg. 3792, 3794 (Jan. 22, 2010) (BTOP NOFA II). The 
NTIA announced it would take a ``comprehensive communities 
approach'' for infrastructure projects, which focused on 
``middle mile'' broadband projects that connect anchor 
institutions such as libraries, hospitals, community colleges, 
universities, and public safety institutions. See id. The NTIA 
also eliminated the requirement that infrastructure projects 
target unserved or underserved areas, although whether a 
proposed project would reach such areas was still a factor in 
deciding whether to grant an application. See id. at 3795. 
Similarly, the RUS eliminated the last mile ``remote'' project 
designation for awards. See Broadband Initiatives Program 
Notice of Funds Availability, 75 Fed. Reg. 3820, 3822 (Jan. 22, 
2010).
    From the $4.7 billion allocated to the BTOP, the ARRA 
directed that up to $350 million be spent on grants to help map 
the availability of broadband among the states. ARRA, 123 Stat. 
at 128. From that $350 million, the NTIA awarded $293 million 
to 56 recipients--one each from the 50 states, five 
territories, and the District of Columbia--to gather the data, 
see NTIA, U.S. Dept. of Commerce, Broadband Technology 
Opportunities Program Quarterly Program Status Report 1 (Feb. 
2011) (Eighth Quarterly Report), available at http://
go.usa.gov/0G9, and $18.65 million to the FCC to assemble the 
map, see FCC, Program-Specific Recovery Act Plan for the FCC's 
Efforts on the Broadband Technology Opportunities Program 1 
(June 1, 2010 Update) (FCC June 2010 Update), available at 
http://go.usa.gov/0cH. As of Dec. 31, 2010, 52 of the 
recipients had spent a total of $179 million of that money. 
Eighth Quarterly Report, at 5.
    Of the $4.39 billion in non-mapping BTOP funding ($4.7 
billion, less $293 million in mapping grants and $18.65 million 
for the FCC), the NTIA awarded 233 broadband grants worth 
approximately $4 billion. See id. at 1. Approximately $116 
million was used for administrative expenses. Ten million 
dollars was provided to the inspector general of the U.S. 
Department of Commerce for oversight. ARRA, 123 Stat. at 128. 
The NTIA transferred $20 million to the FCC for creation of a 
national broadband plan. See id.; FCC June 2010 Update, at 1. 
Approximately $300 million was reallocated for other purposes 
by a spending bill passed in 2010. See Pub. L. No. 111-226, 124 
Stat. 2389, 2404.
    Of the $4 billion in non-mapping NTIA broadband grants, 
recipients had spent approximately $138 million as of December 
31, 2010. Eighth Quarterly Report at 5. Three of the 233 awards 
worth a total of $38.7 million have been declined or returned. 
The State of Wisconsin Department of Administration returned 
its $23 million grant and Education Networks of America in 
Indiana returned its $14 million grant. See letter from NTIA 
Administrator Lawrence E. Strickling to Congressmen Upton and 
Walden, March 30, 2011. Additionally, the Leech Lake 
Reservation Business Committee Inc. in Minnesota declined its 
$1.7 million award on the grounds that it would not be able to 
meet its grant requirements. Eighth Quarterly Report at 5 n.7.
    Of the $2.5 billion the ARRA allocated to the RUS, the RUS 
used $2.3 billion for grants and leveraged $87 million of it to 
back loans worth $1.2 billion. See ARRA Broadband Spending: 
Hearing Before the Subcomm. on Communications and Technology of 
the House Energy and Commerce Committee, 112th Cong., Written 
Testimony of Mark L. Goldstein, GAO, at 2-3 (Feb. 10, 2011), 
available at http://go.usa.gov/0mt. Approximately $100 million 
had actually been spent by the end of March according to RUS. 
All told, the RUS issued 320 awards. Ten ``last mile'' awards 
had been returned as of April, worth more than $55 million 
altogether in grants and loans: $5.05 million in grants for 
Litestream Holdings LLC (FL); $397,224 in grants and $397,224 
in loans for DigitalBridge Communications Corp. (IN); $1.97 
million in grants and $657,833 in loans for Digital Bridge 
Communications Corp. (MS); $7.73 million in grants and $3.3 
million in loans for Norlight, Inc (IL); $3.47 million in 
grants for Mid-Hudson Cablevision Inc. (MA); $435,500 in grants 
for Dell Telephone Cooperative, Inc. (NM); $2.45 million in 
grants for Five Area Telephone Cooperative, Inc. (TX); $634,000 
in grants for Telecom Cable, LLC (TX); $9.19 million in grants 
for South Central Utah Telephone Association, Inc. (UT); and 
$14.16 million in grants and $6.13 million in loans for 
Lenowisco Planning District (VA).
    Under the statute, all awards were to be made by September 
30, 2010. The nationwide broadband map, however, was not 
launched until February 17, 2011. Some observers expressed 
concern that this placed ``the cart before the horse,'' and 
that allocating funds before maps of unserved areas were in 
place almost guaranteed that the money would not be used 
effectively. Some cable and phone companies believe awards have 
been issued for projects that substantially duplicate their 
existing service areas. NTIA and RUS disagree, noting that the 
agencies carefully reviewed applications and surveyed local 
communities to ensure that networks were funded in areas with a 
need for additional broadband services.
    Although there has been ongoing debate from the outset over 
the wisdom of creating the BTOP and BIP programs, as well as 
over whether the money should have been better targeted to 
households completely unserved by broadband, there is general 
consensus regarding the importance of oversight. The number of 
NTIA and RUS awards that have already been returned, and the 
fact that more than 90 percent of the money the ARRA allocated 
for broadband still remains obligated but unspent, makes 
effective oversight all the more important, especially since 
the Department of Commerce Inspector General, the Department of 
Agriculture Inspector General, and the Government 
Accountability Office have already flagged concerns with the 
programs.
    The Department of Agriculture Inspector General last 
audited existing RUS broadband programs in March 2009 before 
enactment of the ARRA. See Office of Inspector General, U.S. 
Dep't of Agric., Audit Report: Rural Utilities Service 
Broadband Loan and Loan Guarantee Program (March 2009), 
available at http://go.usa.gov/0cF. That report found that the 
RUS had yet to implement eight of the Inspector General's 14 
recommendations from its September 2005 report. See Office of 
Inspector General, U.S. Dep't of Agric., Audit Report: Rural 
Utilities Service Broadband Grant and Loan Program (Sept. 
2009), available at http://go.usa.gov/0cL. Although the RUS 
proposed rule changes to address two of the Inspector General's 
recommendations, it continued to make loans to providers in 
areas with existing service while waiting on the enactment of 
the 2008 Farm Bill. The Agriculture Inspector General expressed 
concern that a majority of the ``program funds have not been 
utilized in expanding broadband service to rural areas where no 
prior service exists.'' When the GAO commenced oversight of the 
ARRA grant and loan programs, the Inspector General deferred to 
the GAO to avoid duplication of effort.
    Because the Department of Agriculture has many existing 
grant programs, including those administered by the RUS, it has 
substantial infrastructure and personnel to manage its programs 
and conduct oversight of its grantees. The RUS also used ARRA 
money to fully fund a contract with ICF International to 
provide BIP program support through 2014. The NTIA, on the 
other hand, does not have similar infrastructure to administer 
such a large and complex grant program. It therefore paid the 
National Oceanic and Atmospheric Administration $4.15 million 
to administer grants pursuant to a memorandum of understanding 
and paid the National Institute of Standards and Technology 
$2.23 million to provide management services pursuant to a 
service level agreement. Those agreements lasted through 
September 30, 2010.
    The Commerce Inspector General issued a November 2010 
report on the BTOP. See U.S. Department of Commerce, Office of 
Inspector General, Broadband Program Faces Uncertain Funding, 
and NTIA Needs to Strengthen Its Post-Award Operations (Final 
Report 2010), available at http://go.usa.gov/0g8. The report 
highlighted that because the ARRA did not authorize use of any 
funds beyond September 30, 2010, uncertain funding posed a risk 
to management and oversight of the program. The Commerce 
Inspector General recommended that the NTIA develop alternative 
approaches to monitoring and oversight in anticipation of a 
lack of funding. The report also highlighted the progress the 
NTIA made to establish administration, management, and 
oversight systems, but recommended additional strengthening of 
its post-award monitoring and oversight, including vendor 
management oversight and monitoring of grant recipients. The 
Commerce Inspector General is also affected by the funding 
uncertainty, since the Commerce Inspector General anticipates 
it will need to continue oversight of the NTIA's management 
until as late as 2015.
    Since the report, Congress passed the Continuing 
Appropriations and Surface Transportation Extension Act of 2011 
(P.L. 111-322), which funded the Federal government through 
March 4, 2011, including a $20 million addition to the NTIA 
Salaries and Expenses account which could be used for BTOP 
oversight. In the 112th Congress, the Department of Defense and 
Continuing Appropriations Act of 2011 (P.L. 112-10) included 
the $20 million in additional funds for NTIA to use for 
oversight for the rest of FY 2011.
    The GAO last issued a report in August 2010 reviewing both 
the NTIA and RUS broadband stimulus programs. See GAO, Recovery 
Act: Further Opportunities Exist to Strengthen Oversight of 
Broadband Stimulus Programs, available at http://go.usa.gov/
0cM. Although most second-round awards had not yet been made at 
the time, the August 2010 report highlighted the need to 
strengthen oversight of both the NITA and RUS programs. 
Specifically, the report concluded that both the NTIA and RUS 
will face challenges overseeing dramatically larger, more 
numerous, and more diverse projects than they have ever 
managed. Like the Commerce Inspector General, the GAO noted the 
uncertain funding the NTIA faces.
    The inspectors general and the GAO reiterated these points 
at the Communications and Technology Subcommittee's February 
10, 2011, hearing. See ARRA Broadband Spending: Hearing Before 
the Subcomm. on Communications and Technology of the House 
Energy and Commerce Committee, 112th Cong. (Feb. 10, 2011) 
(testimony and webcast of hearing available at http://
go.usa.gov/0yZ). The size of the programs, the short timeframe 
the statute provided the NTIA and the RUS to evaluate 
submissions and issue awards, and the inexperience of many of 
the award recipients led Commerce Department Inspector General 
Zinser to testify during the hearing that the programs were 
``high risk'':

          The large dollar amounts involved, the number of 
        grants, the mix of grant recipients which include 
        government, not for profit, for-profit entities, higher 
        education, and Native American tribes, all with 
        different levels of experience with federal grants, the 
        technical nature of many of the grants, and the 
        relative inexperience of the agency and its staff in 
        administering such a large grant program all contribute 
        to making this the most complex grant program NTIA has 
        ever administered and the highest risk Recovery Act 
        program for the Department of Commerce.

    USDA Inspector General Fong's written testimony highlighted 
ongoing concerns with the RUS administration of previous 
broadband programs:

          Since 2001, RUS has been responsible for 
        administering USDA's broadband grant and loan programs 
        . . . In 2005, we completed our first review of RUS' 
        administration of those programs. Of the $895 million 
        in grants and loans RUS issued from 2001 to 2005, we 
        reviewed $599 million and questioned the expenditure of 
        $340 million for reasons including loans that were 
        approved despite incomplete applications, loans that 
        defaulted, and grant funds used for inappropriate 
        purposes. We further found that RUS had not maintained 
        its focus on rural communities lacking preexisting 
        broadband service . . . RUS used a definition of rural 
        communities that was too broad to distinguish between 
        rural areas and areas that were close to major 
        metropolitan centers. As a result, the agency issued 
        $103.4 million of its $895 million in grants and loans 
        (12 percent) to 64 communities near large cities, 
        including $45.6 million in loans to 19 suburban 
        subdivisions within a few miles of downtown Houston, 
        Texas.

    Mark Goldstein, Director for Physical Infrastructure Issues 
for the GAO, described concerns in his written testimony 
regarding both programs:

          [T]he agencies awarded funds to many large projects, 
        which may pose a greater risk for misuse of federal 
        funds than smaller projects . . . Adding to these 
        challenges, NTIA and RUS must ensure that the recipient 
        constructs the infrastructure project in the entire 
        project area, not just the area where it may be most 
        profitable for the company to provide service. For 
        example, the Recovery Act mandates that RUS fund 
        projects where at least 75 percent of the funded area 
        is in a rural area that lacks sufficient access to 
        high-speed broadband service to facilitate rural 
        economic development; these are often rural areas with 
        limited demand, and the high cost of providing service 
        to these areas make them less profitable for broadband 
        providers.

    A number of statutory shortcomings further demonstrate the 
need for this legislation.
    First, existing law leaves the NTIA and the RUS too much 
discretion in deciding whether to deobligate and return funds 
from failed or failing awards. Section 6001(i)(4) of ARRA 
establishing the BTOP stipulates only that the Assistant 
Secretary ``may'' deobligate awards in cases of waste, fraud, 
or insufficient performance. The statutory language provides 
even less guidance to the RUS on the BIP, remaining silent on 
the issue of deobligation and return of funds. Chairman Walden 
asked at the February 10, 2011, hearing whether the statute 
left the decision to deobligate entirely within the discretion 
of the NTIA and RUS. Agriculture Inspector General Fong 
testified: ``That is my understanding.'' Commerce Inspector 
General Zinser answered: ``Yes, I believe it is discretionary, 
sir.'' When Commerce Assistant Secretary Strickling testified 
before the Subcommittee April 1, 2011, Chairman Walden asked: 
``Doesn't section 6001(i)(4) of the ARRA state you may 
deobligate funds?'' The Assistant Secretary replied: ``You are 
correct.'' Although the Assistant Secretary said he is relying 
on the current guidance of the Department of Commerce on 
whether and when to deobligate funds, Chairman Walden asked 
whether this legislation would ``put certainty in the statute 
because the guidance out of the department could change in 
another Administration or even in this one, could it not?'' The 
Assistant Secretary replied: ``I would agree with that.''
    Second, rescission provisions added to the ARRA by the 
Dodd-Frank Wall Street Reform and Consumer Protection Act are 
not only similarly discretionary, but also unclear both in 
their meaning and application. Section 1306 of Dodd-Frank added 
a new section 1613 into the Recovery Act that states: ``if the 
head of any executive agency withdraws or recaptures'' ARRA 
funds, such funds shall be rescinded and returned to the 
Treasury. The word ``if'' still leaves to the NTIA and RUS 
administrators the discretion whether to ``withdraw or 
recapture'' funds from failed or failing programs. Moreover, it 
is unclear whether the terms ``withdraw'' and ``recapture'' 
have the same meaning as ``deobligate'' in section 6001 of the 
ARRA, leaving unclear how the Dodd-Frank provision would be 
interpreted and applied to the broadband grants.

                                Hearings

    The Subcommittee on Communications and Technology held an 
oversight hearing February 10, 2011, on American Recovery and 
Reinvestment Act broadband spending. Witnesses included 
representatives from the Department of Commerce, the Department 
of Agriculture, the Government Accountability Office, Eagle 
Communications, and Merit Network, Inc.
    The Subcommittee held a second hearing April 1, 2011, on a 
Committee Print to return to the U.S. Treasury unused or 
reclaimed funds made available for broadband awards in the 
American Recovery and Reinvestment Act of 2009, and to improve 
oversight of the grant programs. On the same day, the 
Subcommittee met in open markup session and favorably reported 
the Committee Print to the Full Committee, without amendment, 
by a voice vote. Mr. Bass introduced the Committee Print on 
April 4, 2011, as H.R. 1343.

                        Committee Consideration

    On April 5, 2011, the Committee on Energy and Commerce met 
in open markup session and ordered H.R. 1343 favorably reported 
to the House, as amended, by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were no record votes taken in connection with ordering 
H.R. 1343. A motion by Mr. Upton to order H.R. 1343 reported to 
the House, as amended, was agreed to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held legislative and 
oversight hearings and made findings that are reflected in this 
report.

         Statement of General Performance Goals and Objectives

    The goals and objectives of H.R. 1343 are to ensure that 
the NTIA and RUS terminate failed or failing broadband grants 
and loans and rescind any remaining funds, return to the U.S. 
Treasury any rescinded or relinquished funds, and improve 
oversight.

           New Budget Authority, Entitlement Authority, and 
                            Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
1343 would result in no new or increased budget authority, 
entitlement authority, or tax expenditures or revenues.

                                Earmarks

    In compliance with clause 9(e), 9(f), and 9(g) of rule XXI, 
the Committee finds that H.R. 1343 contains no earmarks.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

H.R. 1343--A bill to return unused or reclaimed funds made available 
        for broadband awards in the American Recovery and Reinvestment 
        Act of 2009 to the Treasury of the United States

    H.R. 1343 would require the National Telecommunications 
Information Administration (NTIA) and the Rural Utilities 
Service (RUS) to promptly terminate certain grant awards if the 
agency determines that award recipients are engaged in wasteful 
or fraudulent activities or have not met performance 
expectations. The bill also would require each agency, upon 
receiving notification of material noncompliance with award 
terms or improper usage of award funds, to determine whether 
the award should be terminated and to notify the Congress of 
any terminated awards.
    The American Recovery and Reinvestment Act of 2009 (ARRA) 
established two programs to promote the development of 
broadband services. The NTIA awarded $4.4 billion in grants to 
public and private entities to develop a map of broadband 
availability nationwide and to encourage construction and use 
of broadband networks. The RUS awarded $2.3 billion in grants 
and $1.2 billion in federal loans to fund the deployment and 
construction of broadband infrastructure in rural areas.
    Both agencies are required under current law to promptly 
terminate grants for wasteful or fraudulent spending or for 
failure to meet specific performance milestones. In addition, 
the Pay-it-Back-Act (Public Act 111-203) requires agencies to 
promptly return to the Treasury any funds awarded under ARRA 
that are terminated. Thus, restating those requirements, as 
provided in H.R. 1343, would not affect federal spending or 
revenues.
    Based on information from the agencies, CBO estimates that 
implementing the new reporting requirements in H.R. 1343 would 
have no significant effect on spending subject to 
appropriation. Enacting H.R. 1343 would not affect direct 
spending or revenues; therefore, pay-as-you-go procedures do 
not apply.
    H.R. 1343 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contacts for this estimate are Susan Willie 
(for NTIA) and Daniel Hoople (for RUS). The estimate was 
approved by Theresa Gullo, Deputy Assistant Director for Budget 
Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation

    Section 1(a) requires the NTIA and RUS to terminate an 
award if the Assistant Secretary or Administrator finds cause--
including waste, fraud, or insufficient performance.
    Section 1(b) requires the NTIA and RUS to deobligate funds 
from awards they have terminated. Specifically, they must 
deobligate the entire amount of the award, less allowable costs 
that were legally disbursed and spent. The funds shall be 
returned to the U.S. Treasury within 30 days of deobligation. 
Should the NTIA or RUS subsequently recover additional amounts 
from an award--such as through administrative or legal action--
any additional amount received shall immediately be 
deobligated. The recipients must provide an accounting of funds 
received but not yet expended.
    Section 2 requires unused funds that are returned or 
disclaimed to be returned to the U.S. Treasury.
    Section 3 requires the Assistant Secretary and 
Administrator to determine, within 30 days of receiving 
information regarding an award from their respective 
Department's Inspectors General or Comptroller General, and 
such information pertains to material noncompliance with award 
terms or provisions, or improper use of the funds, whether 
cause exists to terminate the award. The Administrator and 
Assistant Secretary, upon making a determination, shall provide 
notification within three days to Congress and the official who 
provided the information. The notification shall include an 
explanation of the determination made and what action they took 
or why no action was taken. In certain circumstances where the 
Administrator or Assistant Secretary determines cause does not 
exist to terminate the award, the required notification to 
Congress may be made on a confidential basis, but only if the 
Administrator or Assistant Secretary determines, after 
consultation with the official who provided the information 
that was the basis for a determination, that there is no merit 
to the information and a public notification would cause 
irreparable harm to any person the information is regarding 
should that person's identity be made public.
    Section 4 provides conforming amendments to Section 6001 of 
the ARRA to make explicit that BTOP funds for awards that are 
terminated because of insufficient performance, waste, or fraud 
shall be deobligated.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

           *       *       *       *       *       *       *



 DIVISION B--TAX, UNEMPLOYMENT, HEALTH, STATE FISCAL RELIEF, AND OTHER 
PROVISIONS

           *       *       *       *       *       *       *


TITLE VI--BROADBAND TECHNOLOGY OPPORTUNITIES PROGRAM

           *       *       *       *       *       *       *


SEC. 6001. BROADBAND TECHNOLOGY OPPORTUNITIES PROGRAM.

  (a) * * *

           *       *       *       *       *       *       *

  (i) The Assistant Secretary--
          (1) * * *

           *       *       *       *       *       *       *

          (4) [may] shall, in addition to other authority under 
        applicable law, deobligate awards to grantees that 
        demonstrate an insufficient level of performance, or 
        wasteful or fraudulent spending, as defined in advance 
        by the Assistant Secretary[, and award these funds 
        competitively to new or existing applicants consistent 
        with this section]; and

           *       *       *       *       *       *       *


                                     

                            ADDITIONAL VIEWS

    H.R. 1343 requires the Assistant Secretary of the National 
Telecommunications and Information Administration (NTIA) and 
the Administrator of the Rural Utility Service (RUS) to 
deobligate and return to the U.S. Treasury any grant or award 
made under the Broadband Technology Opportunities Program 
(BTOP) or Broadband Initiatives Program (BIP) if either agency 
determines that the recipient of such grant or award has 
``demonstrated an insufficient level of performance or wasteful 
or fraudulent spending.'' This is a worthy goal that has broad, 
bipartisan support. Existing law and agency policy, however, 
already accomplish this. Accordingly, although H.R. 1343 does 
not undermine or hinder ongoing oversight efforts by NTIA and 
RUS, the legislation is unnecessary and of limited utility.
    Specifically, funds available for BTOP/BIP awards expired 
on September 30, 2010.\1\ NTIA's statutory authority to make 
new grants or re-award existing grants for BTOP also expired on 
September 30, 2010.\2\ Therefore, the provisions of H.R. 1343 
that restrict agency discretion to deobligate awards in cases 
of waste, fraud or insufficient performance apply to an already 
expired provision of ARRA that is no longer in effect. Changing 
the statute from ``may'' to ``shall'' in this instance has no 
effect because the provision is no longer operable. Simply put, 
even if funds for an award become deobligated, NTIA and RUS are 
not authorized to make new grants or re-award existing grants 
with these monies. According to appropriations law and existing 
agency practices, the deobligated funds should be returned to 
the Treasury.\3\
---------------------------------------------------------------------------
    \1\The American Recovery and Reinvestment Act (ARRA), Pub. L. No. 
111-5, at Sec. 1603.
    \2\In light of this expired authorization, it is not clear why 
Section 4 of the discussion draft, which provides conforming amendments 
to the Recovery Act provisions authorizing the BTOP program, is 
necessary. See id., at Section 6001((d)(2).
    \3\31 Sec. U.S.C. 1552.
---------------------------------------------------------------------------
    Pursuant to provisions of the Pay It Back Act, which was 
enacted into law on July 21, 2010, as part of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act), all deobligated or returned funds must be transferred 
promptly to the General Fund of the U.S. Treasury. The Dodd-
Frank Act specifies that if the head of any executive agency 
``withdraws or recaptures for any reason funds appropriated or 
otherwise made available'' under the Recovery Act, such 
recaptured funds must be rescinded and deposited in the General 
Fund of the Treasury ``dedicated for the sole purpose of 
deficit reduction'' and ``prohibited from use as an offset for 
other spending increases or revenue reductions.''\4\ The Dodd-
Frank Act also requires that any discretionary appropriations 
made available in the Recovery Act that have not been obligated 
as of December 31, 2012, be rescinded and returned to the 
Treasury.\5\
---------------------------------------------------------------------------
    \4\Pay It Back Act, Title XXIII of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, Pub. L. No. 111-203, Sec. 1306 
(Repayment of Unobligated ARRA Funds) (July 21, 2010).
    \5\Id.
---------------------------------------------------------------------------
    It is unclear why new legislation is necessary to ensure 
that this policy continues. H.R. 1343 does not increase the 
prospects for federal recovery of ARRA funds. As the 
Congressional Budget Office (CBO) noted in its cost estimate of 
the bill, since existing law already requires agencies to 
promptly return to the Treasury any funds awarded under ARRA 
that are terminated, ``restating those requirements, as 
provided in H.R. 1343, would not affect federal spending or 
revenues.''\6\
---------------------------------------------------------------------------
    \6\Congressional Budget Office, Cost Estimate for H.R. 1343, A bill 
to return unused or reclaimed funds made available for broadband awards 
in the American Recovery and Reinvestment Act of 2009 to the Treasury 
of the United States, (April 14, 2011).
---------------------------------------------------------------------------
    Proponents of H.R. 1343 have asserted that there are 
ambiguities in existing law concerning whether the NTIA and the 
RUS are actually required to return deobligated funds to the 
U.S. Treasury. During the legislative hearing on the draft bill 
held on Friday, April 1, 2011, however, both NTIA Assistant 
Secretary Lawrence E. Strickling and RUS Administrator Jonathan 
Adelstein testified that the agencies do not see any ambiguity 
on this point. They emphasized that their actions to date--
promptly returning any deobligated funds to the U.S. Treasury--
demonstrated that existing law covers this contingency and that 
the legislation is consistent with the standard process already 
in place.
    Mr. Strickling and Mr. Adelstein nevertheless both 
emphasized that they shared the concerns raised by the draft 
bill and were willing to work with the Committee to enhance 
oversight of these programs as well as to ensure that the 
legislation does not inadvertently complicate the ability of 
the agencies to oversee projects effectively. Similarly, 
despite questions about the necessity of this legislation, 
Democratic members agreed to work with the Republican sponsors 
to incorporate changes that ensure the legislation does not 
hinder the ability of the agencies to oversee these programs.
    Toward this end, we appreciate that the Manager's Amendment 
adopted during full Committee markup of the bill incorporated 
several changes suggested by the Administration and Democratic 
members to address these concerns.
    Vigorous oversight to guard against waste, fraud, and abuse 
were core elements of the Recovery Act as passed during the 
111th Congress. Nevertheless, Democrats and Republicans agree 
that the agencies managing the broadband programs will be 
challenged by the scope and breadth of these groundbreaking 
projects and oversight must be enhanced wherever possible. 
Although we have confidence that NTIA and RUS will continue to 
emphasize accountability and oversight, we support the very 
modest enhancements that would be implemented if H.R. 1343 
becomes law.

                                   Henry A. Waxman.
                                   Jay Inslee.
                                   Jan Schakowsky.
                                   G.K. Butterfield.
                                   Diana DeGette.
                                   Tammy Baldwin.
                                   Lois Capps.
                                   John D. Dingell.
                                   Anna G. Eshoo.
                                   Bobby L. Rush.
                                   Eliot L. Engel.
                                   Edward J. Markey.
                                   Mike Doyle.
                                   Frank Pallone, Jr.
                                   Doris O. Matsui.

                                  
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