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52–649 PDF 2009

HEARING TO REVIEW RURAL DEVELOPMENT 

PROGRAMS OPERATED BY THE U.S. 

DEPARTMENT OF AGRICULTURE AND STATUS 

OF AMERICAN RECOVERY AND 

REINVESTMENT ACT FUNDS FOR THESE 

PROGRAMS

HEARING

BEFORE THE

SUBCOMMITTEE ON RURAL DEVELOPMENT, 

BIOTECHNOLOGY, SPECIALTY CROPS, 

AND FOREIGN AGRICULTURE

OF THE

COMMITTEE ON AGRICULTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

JUNE 10, 2009

Serial No. 111–18

(

Printed for the use of the Committee on Agriculture 

agriculture.house.gov 

COMMITTEE ON AGRICULTURE 

COLLIN C. PETERSON, Minnesota, Chairman 

TIM HOLDEN, Pennsylvania, 

Vice Chairman 

MIKE MCINTYRE, North Carolina 

LEONARD L. BOSWELL, Iowa 

JOE BACA, California 

DENNIS A. CARDOZA, California 

DAVID SCOTT, Georgia 

JIM MARSHALL, Georgia 

STEPHANIE HERSETH SANDLIN, South 

Dakota 

HENRY CUELLAR, Texas 

JIM COSTA, California 

BRAD ELLSWORTH, Indiana 

TIMOTHY J. WALZ, Minnesota 

STEVE KAGEN, Wisconsin 

KURT SCHRADER, Oregon 

DEBORAH L. HALVORSON, Illinois 

KATHLEEN A. DAHLKEMPER, 

Pennsylvania 

ERIC J.J. MASSA, New York 

BOBBY BRIGHT, Alabama 

BETSY MARKEY, Colorado 

FRANK KRATOVIL, JR., Maryland 

MARK H. SCHAUER, Michigan 

LARRY KISSELL, North Carolina 

JOHN A. BOCCIERI, Ohio 

SCOTT MURPHY, New York 

EARL POMEROY, North Dakota 

TRAVIS W. CHILDERS, Mississippi 

WALT MINNICK, Idaho 

FRANK D. LUCAS, Oklahoma, Ranking 

Minority Member 

BOB GOODLATTE, Virginia 

JERRY MORAN, Kansas 

TIMOTHY V. JOHNSON, Illinois 

SAM GRAVES, Missouri 

MIKE ROGERS, Alabama 

STEVE KING, Iowa 

RANDY NEUGEBAUER, Texas 

K. MICHAEL CONAWAY, Texas 

JEFF FORTENBERRY, Nebraska 

JEAN SCHMIDT, Ohio 

ADRIAN SMITH, Nebraska 

ROBERT E. LATTA, Ohio 

DAVID P. ROE, Tennessee 

BLAINE LUETKEMEYER, Missouri 

GLENN THOMPSON, Pennsylvania 

BILL CASSIDY, Louisiana 

CYNTHIA M. LUMMIS, Wyoming 

PROFESSIONAL STAFF

ROBERT L. LAREW, Chief of Staff 

ANDREW W. BAKER, Chief Counsel 

APRIL SLAYTON, Communications Director 

NICOLE SCOTT, Minority Staff Director 

SUBCOMMITTEE ON RURAL DEVELOPMENT, BIOTECHNOLOGY, SPECIALTY CROPS, AND

FOREIGN AGRICULTURE

MIKE MCINTYRE, North Carolina, Chairman 

BOBBY BRIGHT, Alabama 

JIM MARSHALL, Georgia 

HENRY CUELLAR, Texas 

LARRY KISSELL, North Carolina 

WALT MINNICK, Idaho 

K. MICHAEL CONAWAY, Texas, Ranking 

Minority Member 

DAVID P. ROE, Tennessee 

GLENN THOMPSON, Pennsylvania 

BILL CASSIDY, Louisiana 

ALETA BOTTS, Subcommittee Staff Director

(II) 

(III)

C O N T E N T S 

Page 

Conaway, Hon. K. Michael, a Representative in Congress from Texas, opening 

statement .............................................................................................................. 5

McIntyre, Hon. Mike, a Representative in Congress from North Carolina, 

opening statement ................................................................................................ 1

Prepared statement .......................................................................................... 4

Peterson, Hon. Collin C., a Representative in Congress from Minnesota, prepared statement ................................................................................................... 6

WITNESSES

Tonsager, Hon. Dallas P., Under Secretary for Rural Development, U.S. Department of Agriculture, Washington, D.C. ....................................................... 7

Prepared statement .......................................................................................... 8

Fong, Hon. Phyllis K., Inspector General, Office of Inspector General, U.S. 

Department of Agriculture, Washington, D.C. .................................................. 12

Prepared statement .......................................................................................... 13

Rivenbark, Hon. Franklin D., Commissioner, Pender County, North Carolina; 

Member, Agriculture and Rural Affairs Steering Committee, Rural Action 

Caucus Steering Committee, National Association of Counties (NACo); Past 

Vice Chairman, Rural Development Subcommittee, NACo, Burgaw, NC ....... 27

Prepared statement .......................................................................................... 29

Martin, Debra, Director, Great Lakes Rural Community Assistance Partnership, WSOS Community Action Commission, Fremont, OH ............................ 36

Prepared statement .......................................................................................... 37

Supplementary material .................................................................................. 62

Sanchez, Hon. Chandler, Governor, Pueblo of Acoma, Acoma, NM; on behalf 

of National Congress of American Indians ........................................................ 41

Prepared statement .......................................................................................... 42

Anderton, Doug, General Manager, Dade County Water and Sewer Authority; 

Vice President, National Rural Water Association; President, Georgia Rural 

Water Association, Trenton, GA ......................................................................... 48

Prepared statement .......................................................................................... 49

Duck, Tom, Executive Director, Texas Rural Water Association, Austin, TX .... 51

Prepared statement .......................................................................................... 53

SUBMITTED MATERIAL

Hoelmer, David R., Senior Vice President and General Counsel, AgStar Financial Services, ACA, submitted letter ............................................................ 61

Submitted questions ................................................................................................ 65

(1)

HEARING TO REVIEW RURAL DEVELOPMENT 

PROGRAMS OPERATED BY THE U.S. 

DEPARTMENT OF AGRICULTURE AND STATUS 

OF AMERICAN RECOVERY AND 

REINVESTMENT ACT FUNDS FOR THESE 

PROGRAMS 

WEDNESDAY, JUNE 10, 2009

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON RURAL DEVELOPMENT, 

BIOTECHNOLOGY, SPECIALTY CROPS, AND FOREIGN

AGRICULTURE, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 10:05 a.m., in Room 

1300, Longworth House Office Building, Hon. Mike McIntyre 

[Chairman of the Subcommittee] presiding. 

Members present: Representatives McIntyre, Cuellar, Kissell, 

Conaway, and Cassidy. 

Staff present: Aleta Botts, Claiborn Crain, Tyler Jameson, John 

Konya, Scott Kuschmider, Rebekah Solem, Patricia Barr, Mike 

Dunlap, and Jamie Mitchell. 

OPENING STATEMENT OF HON. MIKE MCINTYRE, A 

REPRESENTATIVE IN CONGRESS FROM NORTH CAROLINA 

The CHAIRMAN. This hearing of the Subcommittee on Rural Development, Biotechnology, Specialty Crops, and Foreign Agriculture 

to review Rural Development programs operated by the U.S. Department of Agriculture and the status of the American Recovery 

and Reinvestment Act funds for these programs and their review 

will now come to order. 

My name is Mike McIntyre. As Chairman of the Subcommittee, 

I want to welcome each of you to be here with us this morning. 

Thank you for your patience and thank you for joining us. 

We want to welcome everyone to review the rural development 

programs and the funding for these programs provided in the economic stimulus legislation that Congress passed earlier this year. 

Thank you for being here as we examine this topic. And I especially want to thank our witnesses, many of whom I have already 

spoken to just prior to the top of the hour. We appreciate your time 

and your efforts in coming today, and also the testimony you will 

soon be giving. 

2

This is the first appearance of Mr. Tonsager before our Subcommittee in his new role as Under Secretary for Rural Development, and we look forward to working with him for the benefit of 

rural areas throughout our country. Thank you, particularly, for 

being with us today. 

Back on the very first week of the 111th Congress, in this very 

room—before the Agriculture Committee had even fully organized—some of you were there that day—especially some of our 

staff folks—but some others from national organizations came. I 

wanted to make sure we had an economic roundtable, literally, at 

that table as we sat around and we talked about some of the concerns that we had, and whether or not rural areas would be included in the stimulus package. Unfortunately, there was not much 

attention given to rural areas. 

That week was a critical week because, being the very first week 

the new Congress was in session and when the hot topic, nationally, was the economic stimulus package that was being proposed, 

we wanted to make sure that taxpaying citizens of rural areas of 

America were not left out. 

Indeed, as we discussed further the infrastructure needs faced by 

rural communities and how rural areas were faring in the difficult 

economic environment, we realized more and more that there needs 

to be an emphasis on rural areas receiving assistance. That included not only the water and wastewater concerns but also rural 

broadband, and making sure we had essential help with regard to 

rural facilities. 

Thankfully, in light of that hearing, also my good friend Jim Clyburn, who hails from the adjoining state, South Carolina, just 

south of where I live in North Carolina, and others, our voices were 

heard and rural areas were included in the final economic stimulus 

package, much more so than they would have been initially or otherwise. 

So today we have come full circle now. The economic stimulus 

package has passed, of course, and we now have opportunity for 

implementation of some of the economic stimulus programs. 

Once the bill became law in February, I had announced the Subcommittee would hold hearings to provide necessary oversight of 

USDA’s expenditures of this historic level of funds provided for 

rural economic development. So this is the first of those hearings 

to look back now on where we are, and where we are going, with 

regard to the actual use of funds to make sure we are getting the 

best for our taxpayer dollars, the most bang for our buck, if you 

will. We want to make sure we hear about the progress of those 

programs via the stimulus package. 

We also intend to hold a hearing in early July on another large 

part of that spending, and that will be particularly on rural 

broadband. 

Those of us who believe that the heartbeat of America continues 

to beat loudest in the quietest of our rural areas, we are pleased 

to see the funds that we have allocated go to the needs of rural 

areas. The American Recovery and Reinvestment Act authorizes 

$4.36 billion in budget authority over 2 years for Rural Development Loan and Grant programs, supporting a total level of $24.37 

billion. Five programs receive funds through this particular legislaVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
3

tion: Rural Water and Water Disposal, Rural Housing and Community Facilities, Rural Businesses, and Rural Broadband. 

Congress did not allocate those funds without serious consideration to the programs receiving the funds, and without serious 

questions as to whether the agencies involved would be able and 

ready to handle the task of investing these funds in our rural areas 

with sufficient oversight. 

If the funds were left unspent or, even worse, if they were expended on uses which Congress did not intend, then any stimulus 

would be lost. 

Time is critical. We realize that the taxpayers are really ready 

to see what bang for their buck that they are getting with the stimulus package. Now that we are almost halfway through this year, 

we want to make sure that we are going to see how the stream of 

those economic stimulus dollars are being spent. That accountability is the least we owe the taxpayers and, beyond that, we want 

to make sure they are being efficiently spent. 

Many of the programs in question within our jurisdiction with 

rural development have been in existence for years. So we have the 

great advantage that in our plea to get money for rural development and help through the stimulus package, we have had personnel in place in many agencies, around the country, ready to provide that effective relief, work, and oversight. 

Thus far, while a significant amount of funds have been obligated for rural water, rural housing, and rural community facilities, no funds have been obligated yet either under rural business, 

or rural broadband. As I mentioned a while ago, we will have a 

separate hearing on rural broadband due to the significant technical and unique issues related to that category. Right now, I 

would just say I am very interested in the publication of both the 

broadband funding notice and the broadband loan regulation that 

are currently pending, and we will eagerly await those as we look 

ahead to the end of this month and into our hearing in early July. 

Ultimately, Congress and this Subcommittee need to ensure that 

rural development programs are run efficiently and effectively, and 

we want to make sure that as we request new dollars for rural 

areas in the future we can show that the existing dollars are being 

spent wisely and appropriately. 

The funds provided in the stimulus legislation are not the only 

source of Federal rural investment. The regular appropriation for 

these programs also provides a significant infusion of funds, and 

we would like to hear how all of these funds are being tracked by 

the agencies charged with these programs, and any problems that 

may be arising as interested applicants pursue funding for these 

programs either through the stimulus, or through regular funding. 

I know that each weekend that I am home, and that many of my 

colleagues I am sure as well have heard, people want to know: How 

do I access; how can I get help; who can I call so I don’t go through 

just a bunch of bureaucratic entanglement? All of us here in Congress, also in the Executive Branch, and I know those representing 

organizations and rural communities that are also in attendance, 

or who may be watching or listening to this hearing, want to improve on what opportunities are available in rural areas and make 

4

investments in the key infrastructure for the benefit of today’s 

rural citizens for future generations. 

We want to make sure that through the actions of the Federal 

Government that thousands of communities have benefited, will 

continue to benefit, and that they can benefit from new or refurbished safe water systems, rebuilt health care centers, or new libraries with upgraded technologies, and we want to make sure that 

these funds that have been provided in the stimulus are used wisely. 

I encourage the witnesses today to use the 5 minutes provided 

for their statements to highlight the most important points in their 

testimony. Please do not read your testimony unless you can complete it within the 5 minutes, or unless you can read just the highlights and complete those within the 5 minutes. 

Pursuant to Committee rules, testimony by witnesses along with 

questions and answers by Members of the witnesses will be 

stopped at 5 minutes. However, your complete written testimony 

will be submitted in its entirety in the record. 

[The prepared statement of Mr. McIntyre follows:]

PREPARED STATEMENT OF HON. MIKE MCINTYRE, A REPRESENTATIVE IN CONGRESS

FROM NORTH CAROLINA

Good morning, and welcome to today’s hearing to review rural development programs and funding for these programs provided in the economic stimulus legislation 

Congress passed earlier this year. I want to thank all of you for being here as we 

examine this important topic, and I want to especially thank our witnesses who will 

be testifying before us today. This is the first appearance of Mr. Tonsager before 

our Subcommittee in his new role as Under Secretary for Rural Development, and 

we look forward to working with him for the benefit of rural areas in this nation. 

In January of this year, during the first week this Congress was in session, I 

joined several organizations working with rural communities to point out the significant infrastructure needs faced by these communities and how rural areas were 

faring in the current difficult economic environment. As a result, we were able to 

secure funds within the stimulus package to address some of the needs for rural 

water systems, rural broadband, and essential community facilities. I promised in 

March that we would be holding hearings on these programs to provide oversight 

over their operations and the expenditure of this historic level of funds provided for 

rural economic development. This is the first of those hearings and we intend to 

hold a hearing in July on another large part of that spending—rural broadband. 

Those of us who believe the heart beat of America sometimes beats loudest in the 

quietest rural places were pleased to see these funds allocated to the needs of rural 

areas. The American Recovery and Reinvestment Act authorizes $4.36 billion in 

budget authority over 2 years for rural development loan and grant programs, supporting a total program level of $24.37 billion. Five programs received funds 

through this legislation: rural water and waste disposal, rural housing, rural community facilities, rural business, and rural broadband. 

Congress did not allocate those funds without serious consideration of the programs receiving the funds and without serious questions as to whether the agencies 

involved were up to the task of investing these funds in our rural areas with sufficient oversight. After all, if the funds went unspent, or even worse, were expended 

on uses for which Congress did not intend, any ‘‘stimulus’’ would be lost. Fortunately, many of the programs in question have been in existence for many years, 

with personnel in place both nationally and in the states to help provide effective 

oversight. 

Thus far, while a significant amount of funds have been obligated for rural water, 

rural housing, and rural community facilities, no funds have been obligated under 

either the rural business or rural broadband programs. As I mentioned, this Subcommittee will be holding a separate hearing on rural broadband due to the significant technical and unique issues related to this category of program. Right now, I 

would just say that I am very interested in the publication of both the broadband 

funding notice and the broadband loan regulation that are currently pending, and 

I look forward to the hearing we will be having on this program in early July. 

5

Ultimately, Congress and this Subcommittee need to ensure that rural development programs are run efficiently and effectively for the benefit of the U.S. taxpayer 

and for the benefit of the rural areas they are designed to assist. We cannot in good 

conscience request new dollars for rural areas if existing dollars are not spent responsibly and tracked appropriately. 

The funds provided in the stimulus legislation are not the only source of Federal 

rural investment. The regular appropriation for these programs also provided a significant infusion of funds. I am interested in hearing how all of these funds are 

being tracked by the agencies charged with these programs and any problems that 

may be arising as interested applicants pursue funding from these programs, either 

through the stimulus or regular annual funding streams. 

I believe that all of us here—in Congress, from the Executive Branch, and representing organizations and rural communities—want to improve on what opportunities are available in rural areas and make investments in key infrastructure for 

the benefit of today’s rural citizens and future generations. Through actions by the 

Federal Government, thousands of communities have benefited over the years from 

new or refurbished safe water systems, rebuilt healthcare centers, or new libraries 

with upgraded technologies. More recently hundreds of rural communities have benefited already from the funds provided in the stimulus. Nevertheless, if rural communities are going to continue to be helped by these programs, we should continue 

to examine ways to make them more relevant to communities’ needs and make sure 

every dollar is spent toward making a rural community a better place for our rural 

citizens.

The CHAIRMAN. At this time I would like to recognize the Ranking Member of the Subcommittee, Representative Mike Conaway, 

for any opening comments that he may have. 

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A 

REPRESENTATIVE IN CONGRESS FROM TEXAS 

Mr. CONAWAY. Thank you, Mr. Chairman. I too am pleased that 

we have this opportunity to hear testimony today regarding the investment in rural America. I appreciate the time that each of our 

witnesses has put into preparing their remarks, and look forward 

to hearing their comments. I am especially excited to hear from 

Tom Duck with the Texas Rural Water Association and his ideas 

on Wastewater Program issues in Texas. 

Rural America is one of the great economic machines of our economy, providing food, fiber, and fuel to the U.S. and the world. Our 

farmers, ranchers, and small businesses contribute to an agriculture industry which exports a fourth of its production and consistently maintains a trade surplus. Wise investment in education, 

infrastructure, and technology are important to a vibrant rural 

America. 

This year, we are monitoring the implementation of the 2008 

Farm Bill, which helped to refine and refocus our approach to rural 

development. This included an authorization for an additional $120 

million to address a backlog in water and wastewater applications. 

The farm bill also authorized funding for rural business opportunity grants, the rural Microentrepreneur Assistance Program, a 

rural collaborative business investment program, and a comprehensive rural broadband strategy. 

This Subcommittee is also closely watching how funds for the 

stimulus bill are being disbursed. The stimulus was an imperfect 

approach to an economic policy with an unprecedented increase in 

the size and cost of government. However, now that it is in place, 

it is incumbent upon Congress to ensure that when the Administration spends over a trillion dollars authorized in the stimulus, it 

is directed to areas with the greatest impact possible. 

6

I will be interested to see how rural Texas may benefit from the 

nearly $6 billion in broadband deployment, water and waste 

projects, community facilities, grants, loans and the rural business 

development programs. 

What we hope to focus on this morning is how funds are being 

allocated through both the farm bill programs and the spending 

through the stimulus. We are taking a very close look at the coordination of projects, strategic infrastructure planning, and the distribution of funding obligations. 

Proponents of the stimulus have made big promises, though little 

or no funding has been disbursed to USDA’s Rural Development 

programs to date. Some questions that I hope would be answered 

today are what communities and counties will be disadvantaged if 

their needs are not counted in the backlog of projects; have communities been discouraged from applying for funds in the past due to 

associated costs and previous perceptions of funding shortages; and 

how our Fiscal Year 2009 appropriated funds and stimulus funds 

are being distributed across pending and new infrastructure applications. 

Again, I want to thank each of our witnesses for being here, and 

look forward to their remarks. Now that the Chairman and I have 

proved that we are the two smartest people on the face of the 

Earth, let’s hear from our witnesses instead. 

The CHAIRMAN. I will defer to your judgment. Thank you, Mr. 

Conaway. The chair requests that other Members submit their 

opening statements for the record. 

[The prepared statement of Mr. Peterson follows:]

PREPARED STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE IN

CONGRESS FROM MINNESOTA

Thank you, Chairman McIntyre for calling this hearing today. I also want to commend you for the work you have done this year on calling attention to the specific 

needs of rural America during the economic downturn. 

Today’s oversight hearing is an important one, and I would like to echo Chairman 

McIntyre’s welcome to Mr. Tonsager to this Committee in his new role. Mr. 

Tonsager holds an important position as USDA administers the greatest number of 

Federal rural development programs and has the highest average of program funds 

that go directly to rural counties. 

While there are a lot of moving parts to Rural Development, their mission remains focused on serving the areas of greatest need with the financial and technical 

resources that are available. It is our job to make sure that the mission is being 

fulfilled. 

USDA’s Rural Development programs are tasked with addressing the unique challenges of our country’s less populous areas. Logistics, distance, lack of infrastructure 

and economic under-investment are significant challenges rural America faces, 

whether it is lack of health care and first responder services, promoting homeownership, increasing broadband deployment, or providing water and waste disposal systems. Rural Development programs are designed to fill in the gaps where needed, 

and spur vital economic development whenever possible. 

Rural Development programs finance essential infrastructure that most urban 

and suburban residents take for granted. Reliable, affordable broadband Internet 

service, for example, is one of the most important needs facing rural America today. 

It is vital to job creation and retention, economic development, entrepreneurship, 

education, and medical technology. 

I also want to welcome the Office of the Inspector General for appearing today. 

With the recent directive from the Administration to speed up stimulus funding, the 

IG’s office has its hands full monitoring the use of these taxpayer dollars on top of 

its normal function of auditing and accounting for the proper use of appropriated 

funds. 

7

Ever since I have been elected, I have had somebody out there in my district 

working full time on economic development. A lot of that work has been through 

rural development, and we have gotten a lot accomplished as a result of those programs. So I know firsthand the value that these programs provide and the potential 

return on investment that exists. Along those lines, I welcome the witnesses on today’s second panel who will hopefully give this Committee some good insight on how 

RD funds can help make things work on the ground out in rural America. 

I welcome today’s witnesses and I look forward to their testimony. I yield back 

my time.

The CHAIRMAN. We will begin with our first panel, Mr. Dallas 

Tonsager, the Under Secretary for Rural Development; and Phyllis 

Fong, Office of Inspector General for the USDA. Thank you for 

coming and being with us today and giving me the pleasure of 

meeting you. 

Mr. Tonsager, please begin. 

STATEMENT OF HON. DALLAS P. TONSAGER, UNDER

SECRETARY FOR RURAL DEVELOPMENT, U.S. DEPARTMENT 

OF AGRICULTURE, WASHINGTON, D.C. 

Mr. TONSAGER. Mr. Chairman, Members of the Subcommittee, 

thank you for the invitation to testify on USDA Rural Development 

programs. This is the first time I have appeared before you, and 

I look forward to continuing this discussion in the future. 

The onset of a new Administration is always an opportunity for 

reevaluation and change. Today is no exception. In this case, reevaluation and change are driven not just by a new Administration, but by a new farm bill and the Recovery Act as well. 

Let me say at the beginning, however, that I have the highest 

regard for the vision and commitment of my predecessors and our 

6,000 dedicated employees. USDA Rural Development is a going 

concern. We will be celebrating our 75th anniversary next year. 

There is a continuity in the work that we do. 

I had the privilege of being a state director during the Clinton 

Administration. Eight years ago, two farm bills, and another Administration have intervened but, for me, this still feels like home. 

That said, there are some things that we do intend to do differently. This is my fourth week, so I must speak of my goals rather than my accomplishments. Although I do want to take note of 

the almost $4.9 billion of Recovery Act dollars that we have obligated since April 1 for rural housing, community facilities, and 

water projects, that alone is a significant achievement, but looking 

ahead, I believe that we can and should do a better job of reaching 

out to underserved communities and devoting more energy and resources to the poorest of the poor. 

I would hope when one maps our investments in 2 or 3 years 

from now there will be a greater focus on heavily rural, as opposed 

to near urban jurisdictions. Similarly, we can and should do a better job going forward of getting out of the office and providing 

greater support in the more remote areas. 

I pledge to do a better job of providing my staff with the tools 

they need to become a more mobile 21st century workforce. I would 

hope that we could accelerate the remarkable progress that we 

have begun making on renewable energy. It is a critical priority. 

Finally, I hope that we will be able to strengthen our programs 

that provide a critically important foundation for economic and 

8

community development. The Value-Added Producer Grant Program, for example, is a very powerful but, in my view, underutilized tool. The farm and rural economies are interdependent. 

Value-added agriculture drives sustainable development both on 

and off the farm, and I anticipate a renewed emphasis on it in the 

years to come. 

These are not new issues. I do not mean to suggest that Rural 

Development has been insensitive to these concerns. That would 

not be fair to our staff who have been engaged in these areas and 

who are passionate advocates for their programs, nor do I mean to 

suggest that we will be drawing lines in the sand. We serve all of 

rural America. But in terms of outreach and the allocation of scarce 

staff resources, I do anticipate there will be a shift in priorities. 

My written testimony summarizes the status of our Recovery Act 

and major new farm bill programs. Let me make two brief points 

now to frame that discussion. 

First, this year we face the challenge of concurrently managing 

a continuing resolution, the Omnibus Bill, the rollout of the new 

farm bill, the Recovery Act, and disaster funding. This has been a 

challenge. Most of that work was done before I arrived a few weeks 

ago. I know it wasn’t easy, but it has been done. 

The Recovery Act investments are flowing, most of the new farm 

bill Program NOFAs have been published, or will be shortly. The 

section 903 Biorefinery Assistance Program has already announced 

its first guarantee and another is soon expected. 

This represents a substantial amount of work in a short time 

frame, and I want to acknowledge the efforts of the Rural Development staff who made it happen. 

Second, the several tranches of funding represents opportunities 

as well as challenges. Recovery Act funding, for example, is time 

sensitive. If a project is eligible for Recovery Act or regular appropriations funding, we will have a systematic preference to use that 

time limited funding first. On the other hand, Recovery Act funding 

is also subject to numerous conditions, some statutory and some 

policy driven. Meritorious projects that fall outside the Recovery 

Act parameters will be funded through regular program dollars. 

This is a balancing act, and we will be prudent stewards of the 

funds you entrust to us. 

The bottom line remains the same—economic recovery and improving economic opportunities and the quality of life in rural communities. It is an important job, and I look forward to working 

with you to get it done. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Tonsager follows:]

PREPARED STATEMENT OF HON. DALLAS P. TONSAGER, UNDER SECRETARY FOR RURAL

DEVELOPMENT, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C. 

Mr. Chairman, Members of the Subcommittee, thank you for your invitation to 

testify on USDA Rural Development’s programs. This is the first time I have appeared before you, and I trust that it will be the beginning of an ongoing dialogue. 

I know that you share our commitment to increasing economic opportunity and improving the quality of life in rural America, and I look forward to many more opportunities to continue this discussion in the future. 

USDA Rural Development next year will celebrate our 75th anniversary, dating 

back to the creation in 1935 of the Rural Electrification Administration and the Resettlement Administration, which later became the Farmers Home Administration. 

9

Since that time, rural America has changed. So have our programs, our organizational structure, and even our name. We have adapted with the times. But rural 

America continues to face unique challenges, and we continue to stand ready to assist in meeting them. 

The onset of a new Administration is always an opportunity for reevaluation and 

change. Today is no exception, and in this case reevaluation and change are driven 

not just by a new Administration, but by implementation of a new farm bill and 

the Recovery Act as well. 

Let me emphasize at the outset, however, that I have the highest regard for the 

vision, energy, and commitment of both my predecessors and our approximately 

6,000 dedicated employees. USDA Rural Development is a going concern. We have 

been ‘‘at this’’ for a long time. Even at a time of transition, it is important to recognize that there is a deep continuity in the work that we do. I had the privilege of 

serving as a Rural Development State Director during the Clinton Administration. 

Eight years, two farm bills, and another Administration have intervened, but for 

me, this still feels like coming home. 

Nonetheless, there are some things that we intend to do differently. I have been 

on the job for 3 weeks, so I must put this in terms of goals rather than accomplishments—but I believe that we can and should do a better job of reaching out to underserved constituencies and devoting more energy and resources to the poorest of 

the poor. 

I would hope, 2 or 3 years from now, that when one maps our investments, there 

will be less of a concentration in exurban areas and a greater presence in more 

rural jurisdictions. 

Similarly I would hope, again 2 or 3 years from now, that we will see less clustering of investments in close proximity to our field offices, and that we will be 

doing a demonstrably better job of getting out of the office and providing technical 

support in more remote areas. 

I would hope that we will not only sustain, but accelerate, the remarkable 

progress that we have begun to make in the deployment of renewable energy, and 

that we will have reinvigorated a number of our traditional programs that may not 

be new . . . that may not have been the focus of innovation, and change in the farm 

bill . . . but that continue to provide a critically important foundation for economic 

and community development in rural America. 

The Value-Added Producer Grant program, for example, is a very powerful, highly 

flexible, but yet underutilized tool. I recognize that most rural Americans don’t farm 

and that most rural income, including most farm family income, is earned off the 

farm. But I also know that the farm and rural economies are interdependent and 

that value-added agriculture drives sustainable development across the board in 

rural communities. The Value-Added program has proven itself over the years to be 

effective, cost-efficient, and productive. This is another area in which I anticipate 

that we will place a renewed emphasis in the years ahead. We serve all of rural 

America and we will work aggressively and on an equal opportunity basis with all 

comers. 

But in terms of outreach, marketing, technical assistance, and the allocation of 

scarce staff resources, I do anticipate that there will be a shift in priorities. This 

will be a point of emphasis with our new state directors as they come aboard in the 

coming weeks, and I look forward to continuing discussions with you on these topics 

as we move ahead. 

I will focus today on two urgent priorities: economic recovery, and implementation 

of the new farm bill. Economic recovery is the first order of business for the Obama 

Administration and USDA Rural Development is a full partner in that effort. 

The American Recovery and Reinvestment Act of 2009 (ARRA) provided $4.36 billion in Budget Authority to Rural Development to support a projected Program 

Level of more than $28 billion. Loans, loan guarantees and grants will be awarded 

to build high speed broadband infrastructure, construct or improve rural water and 

waste disposal systems, finance homes for rural families, build critical community 

facilities, such as rural hospitals, community centers and public safety facilities, and 

to fund new rural business ventures. We have a full plate. 

To support the goals of the Recovery Act, it is important that these funds be deployed rapidly. But it is equally important that they be spent smart, and right. We 

will take the time and invest the resources required to ensure that these objectives 

are met. ARRA is also being implemented with unprecedented transparency and accountability. I would direct your attention to the geo-spatial mapping tool on the 

USDA homepage; which will show the location of every ARRA investment nationwide. We will also in the near future be deploying an RD–ARRA ‘‘dashboard,’’ another online tool that will provide a wealth of detailed program information in an 

accessible, easily searchable format. While these tools have been developed as part 

10

of the ARRA initiative, they are clearly adaptable to Rural Development’s other programs as well, and that application is already under discussion for the future. 

With the exception of the ARRA broadband program and ARRA Business and Industry, all USDA Recovery Act funds are being administered through our regular 

program channels, subject to the additional ARRA statutory provisions related to 

prevailing wage standards, Buy American requirements, and recipient reporting requirements. Our more than 450 state and area service centers are fully engaged, 

providing us with an unmatched ability for outreach and to provide technical support. 

We are also working to ensure that funds are available to rural communities that 

need them the most. In doing so, we are considering factors such as unemployment, 

outmigration, rural population, income level, areas of persistent poverty, lack of 

service, aging infrastructure and health issues. While we are just getting started, 

ARRA is already making a tangible difference in rural communities:

USDA Rural Development—ARRA Accomplishments to Date: As of June 3, 2009

Program Area Funding Received

(Program Level) 

Total Project $

Announced 

Total Project $

Obligated 

Broadband $9.1 billion $0 $0

B&I Guaranteed TBD $0 $0

Community Facilities $1.197 billion $57.75 million $13.34 million 

RBEG $19 million $0 $0

SFH Direct $967 million $134.6 million 

SFH Guaranteed $10.250 billion $4.3 billion

Water and Waste $3.7 billion $758 million $451 million 

The numbers don’t tell the full story. The ARRA funds obligated through the end 

of last month translate into over 37,000 new homes financed in rural communities 

across all 50 states. They include 252 water and waste disposal infrastructure 

projects in 34 states that will improve the quality of life for more than 424,375 residents. They include 279 essential community facilities projects—for health care, 

public safety, educational and cultural facilities—that will help communities in 39 

states. 

And that’s just the beginning. ARRA was signed into law on February 17, less 

than 4 months ago, and it required a substantial amount of work to implement. 

Funds are just beginning to flow. We have already obligated more than $539 million, and we have established even more aggressive goals for the next 100 days.

• The Rural Business Enterprise Grant Program (RBEG) has not yet obligated 

any ARRA funds, but 191 applications from the first application window were 

in hand as of May 18. We anticipate awarding $19.4 million in RBEG grants 

by Labor Day. These funds will support a variety of activities including adult 

distance learning programs, job retraining programs, and business incubators to 

provide support and guidance to new rural small businesses. We anticipate publication of a ARRA Rural Business Enterprise Grant NOFA this summer.

• We also anticipate publication of the ARRA broadband NOFA by early summer. 

I understand that the Subcommittee expects to hold another hearing later this 

summer on the broadband program. I look forward to discussing this in detail 

with you at that time.

• The Single Family Housing Program is on track to provide an additional $1.4 

billion in new guarantees for rural home loans between now and Labor Day, 

enough to support 50,000 residential mortgage loans to rural residents.

• We expect to provide an additional $120 million for 1,900 new direct housing 

loans to low and moderate income families.

• These investments will bring the total by Labor Day to more than $5.7 billion 

in guaranteed home loans and $250 million in direct housing loans since ARRA 

began.

• Finally, the Rural Development Water and Waste Program will provide an additional $585 million in new loans and grants by Labor Day to construct and upgrade approximately 200 water and waste systems in rural America. With these 

new applications, we will reach the $1 billion mark for total ARRA funding of 

water and waste programs by Labor Day, and approximately 150 projects funded under ARRA will be into construction.

Implementation of ARRA has entailed a very heavy additional burden on a very 

talented and dedicated USDA Rural Development staff. We are not in the business 

11

of block granting large lump sums to states, municipalities, and other governmental 

entities. We are a direct lending agency; we lend to individuals, rural small businesses, and nonprofits; and our portfolio largely consists of relatively small loans 

and loan guarantees. The increased workflow is very substantial, and I am very 

proud of the way in which our people have risen to the challenge. 

We face different but no less important challenges with regard to the new farm 

bill. In 2002, the farm bill contained for the first time an Energy Title and a rural 

broadband program. These initiatives reflected the fundamental structural changes 

and new opportunities emerging in rural America. It is not surprising that Congress 

revisited both of these issues in 2008, and we recognize that broadband and renewable energy are key priorities going forward. 

As with the ARRA broadband initiative, I will withhold detailed comment on the 

farm bill broadband program until our next meeting. I know that this is of great 

interest to you, and I look forward to discussing it in detail. 

With regard to renewable energy, the 2008 Farm Bill strengthened and expanded 

an already robust Rural Development program area. Since 2002, Rural Development 

has emerged as a leader in the deployment of renewable energy. We have assisted 

agricultural producers and rural small businesses in improving the energy efficiency 

of their operations and in investing in ethanol, biodiesel, wind, solar photovoltaics, 

solar thermal, digester anaerobic and geothermal energy production. We are excited 

by the opportunity to build upon this record of success. 

Renewable energy and energy efficiency are urgent national security, economic security, and environmental imperatives. They are a priority for the President, and 

for Rural Development. America needs to diversify our energy supply. We need 

clean, sustainable, alternative energy to reduce our dependence on oil. We urgently 

need to support, and indeed to lead, a strong international effort to reduce greenhouse gas emissions. And we cannot afford to miss the historic opportunity for valued-added agriculture and sustainable rural economic development offered by renewable energy. 

I am pleased to report today that Rural Development has now completed the initial rollout of our new farm bill energy programs, with the sole exception of the Section 9009 Rural Energy Self Sufficiency Initiative for which no funding is available. 

Section 9003: Biorefinery Assistance Program. 

The Section 9003: Biorefinery Assistance Program provides loan guarantees for 

the development, construction and retrofitting of viable commercial-scale biorefineries producing advanced biofuels. The Fiscal Year 2009 NOFA was published November 20, 2008. Two application windows were announced. The first closed on December 31, 2008. 

From Round 1, the first award was made in January, 2009, for an $80 million 

loan guarantee for the production of cellulosic ethanol. A second application is currently under review. This is an application for a $25 million loan guarantee to retrofit a biodiesel refinery to produce second generation biofuel. A decision is imminent. 

The Round 2 application window closed April 30, 2009 of the 12 applications received, only five were determined to be complete applications. Of these five applications two are currently under review. These involve second generation biofuel technologies to produce cellulosic ethanol, biodiesel, and methane gas and electricity. 

Awards for the second round are projected for September 15, 2009. 

Section 9004: Repowering Assistance. 

The Section 9004: Repowering Assistance Program provides for payments to biorefineries (that were in existence at the time the 2008 Farm Bill was passed) to replace fossil fuels used to produce heat or operate biorefineries with renewable biomass. The NOFA was signed this Monday, June 8, and has been submitted for publication in the Federal Register. We anticipate publication within the next several 

days. 

Section 9005: Bioenergy Program for Advanced Biofuels. 

The Section 9005: Bioenergy Program for Advanced Biofuels provides for payments to eligible agricultural producers to support and ensure an expanding production of advanced biofuels. A Notice of Contract Proposal (NOCA) was signed this 

Monday, June 8, and has been submitted for publication in the Federal Register. We 

anticipate publication within the next several days. 

Section 9007: Rural Energy for America Program. 

The Section 9007: Rural Energy for America Program expands and renames the 

program formerly called the Renewable Energy Systems and Energy Efficiency Improvements Program (formerly Section 9006). Since the enactment of the first-ever 

12

Energy Title in a farm bill in 2002, this program has provided grants and loan guarantees to agricultural producers and rural small businesses for more than 2,140 energy efficiency and renewable energy projects ranging from biofuels to wind, solar, 

geothermal, methane gas recovery, and other hybrid projects. While not limited to 

biofuels, the Section 9007 Program is nonetheless available on a competitive basis 

to biofuels producers (agriculture producers and rural small businesses). 

Four percent of Section 9007 funding is reserved for Energy Audits and technical 

assistance. A Notice of Solicitation of Applications (NOSA) for the Energy Audit and 

technical assistance funding was published March 11,2009 with an application deadline of June 9, 2009. This is a competitive grant program and we are now beginning 

to review and score applications. We anticipate announcing awards by August 1, 

2009. 

The remainder of Section 9007 funding will be awarded on a competitive basis 

and will finance feasibility studies along with investments in energy efficiency and 

renewable energy production. The NOFA was published on May 26, 2009. 

Two non-energy related farm bill programs have also elicited a high level of public 

interest. The Section 6022 Rural Microentrepreneur Assistance Program is an exciting opportunity to target technical assistance and financial support on very small 

rural businesses, many of them home-based. We anticipate publication of an interim 

rule later this fiscal year. 

And last but not least, the Fiscal Year 2009 NOFA for the Value-Added Producer 

Grant program, initially published on May 6, 2009, has been withdrawn in order 

to address concerns raised by this Subcommittee. We will republish a revised NOFA 

at the earliest possible date. To ensure that potential recipients have the greatest 

opportunity to apply, we also intend to extend the application period to 3 months, 

which will push the award date into October. As I indicated at the beginning of my 

testimony, value-added agriculture is a personal priority for me, and I look forward 

to working with this Subcommittee to ensure that we maximize the potential of this 

highly effective program. 

In closing, let me again thank this Subcommittee and the Congress for the generous support you have provided over the years to USDA Rural Development. We 

administer a plethora of programs, but in the end, our mission is simple. We are 

here to serve rural America, to create economic opportunity, and to improve the 

quality of life in rural communities. I am both honored and humbled by the opportunity to return to Rural Development as the Under Secretary, and I regard it as 

a privilege and an opportunity to work with you on behalf of the 60 million Americans who call rural America home. Thank you.

The CHAIRMAN. Thank you very much. That was very well done, 

and we will look forward to discussing some of those matters with 

you further, in just a moment, with questions from the Members. 

For now, I would like Inspector General Fong to proceed. 

STATEMENT OF HON. PHYLLIS K. FONG, INSPECTOR

GENERAL, OFFICE OF INSPECTOR GENERAL, U.S.

DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C. 

Ms. FONG. Good morning, Mr. Chairman. Thank you, Ranking 

Member Conaway, and other Members of the Subcommittee for inviting me here this morning. We are very pleased to be able to testify about the oversight work we are doing on our Recovery Act 

funds at USDA. 

As you have noted, RD has significant responsibilities in this 

area with the tremendous portfolio and large number of dollars to 

be put out in programs. So, we have, in the IG’s office, put together 

an oversight plan and program to take a look at all of these dollars 

as they are planned to be spent and obligated. 

So this morning I want to just take a few minutes to highlight 

three key points for you in terms of the work that we are doing. 

First of all, in the IG’s office we are taking a proactive approach 

to working with RD and with other USDA agencies to ensure, to 

the greatest extent possible, that agencies have good procedures in 

place to award funds to eligible recipients. We want to prevent 

13

1 H.R. 1, Public Law 111–5, February 17, 2009. 

fraud, waste, and mismanagement before it occurs rather than 

coming in at the end and finding it after the funds have already 

been spent. 

Of course, if we do identify instances of fraud or other improper 

activities, we will take steps to address those instances with the 

appropriate authorities. But we are emphasizing very much in our 

work the proactive approach. 

Second, we recognize the importance of timely reporting to both 

RD and to Congressional Committees so that you can carry out 

your oversight responsibilities. In order to do this, we have started 

a program of issuing quick audit reports whereby we notify agency 

managers of potential problems as soon as we find them, so that 

they can consider taking immediate corrective actions where appropriate. 

We have recently issued four of these quick reports concerning 

different aspects of the Single-Family Housing Guaranteed Loan 

Program in order to address concerns that substandard loan applications could be submitted to RD for approval. 

I am happy to report that RD has responded very positively to 

our recommendations. They have outlined to us a number of significant actions that they will take to address the issues that we 

have identified. These issues are discussed in detail in my full 

statement. 

The main point that I want to make here is that we are trying 

to work very constructively and cooperatively with RD to identify 

these issues up front, and we are very pleased with the way these 

discussions are going. 

My final point is that we in the IG Office have planned audit 

coverage of every USDA and RD program that is receiving Recovery Act funds. In the RD program, we currently have six audits in 

process, and they relate to loans and grants for single-family housing, water and waste disposal systems, community facilities, and 

rural business ventures. We expect to initiate three more audits related to the housing programs before the end of this fiscal year. In 

general, our approach will be to look at internal controls up front, 

to test recipient eligibility, to determine whether funds are being 

used for authorized purposes, to look at the tracking and reporting 

of the use of funds, and ultimately to go in and take a look at program effectiveness and whether program measures are being met. 

As we complete our reports we will be providing them to the 

Committee pursuant to our usual procedures, as well as internally 

within the Department. 

This concludes my testimony. I am very happy to be here to testify, and look forward to addressing your questions. 

[The prepared statement of Ms. Fong follows:]

PREPARED STATEMENT OF HON. PHYLLIS K. FONG, INSPECTOR GENERAL, OFFICE OF

INSPECTOR GENERAL, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C. 

Good morning, Chairman McIntyre, Ranking Member Conaway, and Members of 

the Subcommittee. Thank you for inviting me to testify about our work at the U.S. 

Department of Agriculture (USDA) Office of Inspector General (OIG) regarding oversight of the American Recovery and Reinvestment Act of 2009 (Recovery Act) 1 funds 

14

provided to USDA’s Rural Development programs. USDA OIG is directly responsible 

for continuous oversight of USDA’s vast programs and operations; in Fiscal Year 

2008, the Department had expenditures of approximately $95 billion and approximately 90,000 employees. USDA alone received $28 billion in Recovery Act funding 

for a broad array of Department programs and operations, ranging from rural development programs, nutrition assistance, and watershed activities, to wildfire management and broadband activities. Nine separate USDA programs or accounts received at least $300 million in supplemental funding. 

I will begin my testimony with an overview of our plan to conduct oversight of 

USDA Recovery Act activities and report our results. I will then summarize the results of several specific audits we have completed relating to Rural Development’s 

Recovery Act programs as well as work that is in process and planned. 

I. USDA OIG’s Oversight Plan for USDA’s Recovery Act Activities 

We have developed a number of actions to enable OIG to provide timely and effective oversight of USDA’s Recovery Act expenditures. In addition to the efforts described below, we conducted immediate outreach to the Department—including 

meetings with the top officials of the relevant USDA agencies—to advise them of 

OIG’s plans and to solicit their input on where our efforts would be most effective. 

We are providing them with information on oversight ‘‘best practices’’ as they come 

to our attention. For example, we provided USDA agencies with a recently issued 

guide to grant oversight and best practices for combating grant fraud and with information related to a fraud scheme pertaining to Recovery Act funds. 

Summarized below are the major elements of our oversight plan, organized by 

audit and investigative activity. 

A. Recovery Act Oversight at USDA: Audits 

We are focusing on key elements such as whether USDA agency officials have established proper internal control procedures and compliance operations, as well as 

reviewing whether participants in Recovery Act-related programs meet eligibility requirements. OIG’s audit work will be conducted in multiple phases based on USDA’s 

Recovery Act activities and expenditures. 

Phase 1:

(1) In recent years, OIG has made audit recommendations on virtually every 

USDA program that will receive Recovery Act funding. We assessed the extent 

to which USDA agencies implemented our recommendations to determine 

whether program weaknesses have been corrected. In cases where OIG’s recommendations were not fully implemented, we worked with agency officials to 

identify the corrective action necessary to ensure effective controls on USDA’s 

Recovery Act expenditures. (The results of this work for Rural Development are 

described in subsequent sections of this testimony.)

(2) We expanded the scope of audits that were already in process or planned 

for USDA programs receiving Recovery Act funds. Among them are reviews of 

the Farm Service Agency’s oversight of farm loans; Rural Development programs for single family housing, business and industry loans, and water and 

waste disposal programs; the Forest Service’s wildland firefighting program; 

and the Food and Nutrition Service’s Supplemental Nutrition Assistance Program (SNAP).

(3) We are expediting the completion and release of several audits related to 

Recovery Act-funded programs, including Rural Development’s broadband program and the rehabilitation of flood control dams by the Natural Resource Conservation Service. (The results of our work for broadband are described in subsequent sections of this testimony.)

Phase 2:

(1) We are designing new audits to specifically review various aspects of the 

programs receiving Recovery Act funding.

(2) We are reviewing each USDA agency’s Recovery Program Plan and then will 

develop targeted oversight initiatives.

(3) Our newly formed Data Analysis and Data Mining group will begin its Recovery Act-related oversight by analyzing data pertaining to Rural Development’s Single Family Housing Direct Loan Program.

Phase 3:

We will evaluate the determinations USDA agencies make about the effectiveness of their Recovery Act activities by analyzing their performance measures 

with respect to outcomes. 

15

B. Recovery Act Oversight at USDA: Investigations 

Our Recovery Act investigative efforts will emphasize preventing and identifying 

fraud, initiating timely investigations when potential criminal activity occurs, and 

responding to whistleblower reprisal complaints from non-Federal employees. OIG 

will work with U.S. Attorneys and States Attorney General Offices to prosecute violators and seek asset forfeiture when appropriate. 

Phase 1:

(1) OIG agents are increasing the fraud awareness briefings they conduct for 

agency personnel and will be distributing information to program stakeholders 

on our investigative capabilities and the avenues available for citizens to report 

Recovery Act-related fraud.

(2) Our National Computer Forensic Division will be assisting in fraud identification related to USDA’s Recovery Act programs, such as matching our audit 

data mining results against external databases.

(3) We are actively participating on national and regional task forces such as 

the Contract and Procurement Fraud Task Forces and the Mortgage Fraud 

Task Forces. These organizations increase OIG’s ability to identify fraud and 

partner with other Federal/state investigators and prosecutors.

(4) OIG is continuing close liaison with USDA agencies to identify fraudulent 

activities and coordinate with their compliance and investigations units for joint 

investigations, as appropriate.

(5) We will use OIG’s Hotline as a source of information on potential criminal 

activity affecting USDA’s recovery activities. Each month, our Hotline staff receives approximately 275 contacts and performs an initial assessment of the 

complaints and allegations to determine the level of OIG investigative inquiry 

that is warranted. OIG is separately tracking complaints regarding Recovery 

Act funding and related whistleblower reprisal complaints.

Phase 2:

(1) After assessing the results of the initiatives described above (and information revealed by our Recovery Act-related audit work), we will open criminal investigations, as appropriate.

(2) We will work to ensure that entities involved in criminal or serious misconduct are held accountable via criminal and/or civil prosecution, asset forfeiture, agency fines, and administrative sanctions (suspension/debarments, 

etc.). 

C. Reporting OIG’s Recovery Act Activities and Results 

We recognize the importance of timely reporting by IGs about Recovery Act-related activities. Fulfilling our reporting obligations under the Recovery Act will assist agency heads and Congressional oversight committees in carrying out their responsibilities. We will therefore alert USDA officials to program integrity and efficiency problems as quickly as possible to expedite corrective actions. We will incorporate the Recovery Act’s new requirements regarding whistleblower reprisal complaints into our semi-annual reports to Congress. As provided by Office of Management and Budget (OMB) guidance, OIG is separately reporting our use of Recovery 

Act monies and other funds for Recovery Act-related activities in our reports and 

‘‘Recovery.gov’’ submissions. 

We have instituted a new process to timely issue audit reports related to Recovery 

Act funds. As we perform our audits, if we identify an issue that could/should be 

addressed quickly by program officials to prevent fraud, waste, or mismanagement, 

we will produce a report recommending immediate action. These quick turn-around 

reports can then be rolled up into consolidated reports. (Examples of these reports 

are detailed in subsequent sections of this testimony.) 

II. Recovery Act-Related Audit and Investigative Work for Rural Development 

Rural Development has significant responsibilities related to the Recovery Act. 

The agency has been charged with administering $4.36 billion in recovery funds, 

that when implemented will deliver more than $20 billion in loans and grants to 

improve economic opportunity and the quality of life in rural America. Loans and 

grants will be awarded to build high-speed broadband infrastructure; construct or 

improve rural water and waste disposal systems; finance homes for rural families; 

build critical community facilities, such as rural hospitals, community centers, and 

public safety facilities; and fund new rural business ventures. 

16

2 Rural Utilities Service’s Broadband Loan and Loan Guarantee Program, Audit Report No. 

09601–8–Te, issued March 31, 2009. 3 Rural Utilities Service’s Broadband Grant and Loan Programs, Audit Report No. 09601–4–

Te, issued September 30, 2005. 4 Existing Risk to Rural Development’s Economic Recovery Program, Audit Report No. 85703–

1–HQ, issued April 3, 2009. 

A. Broadband 

In March 2009, we released our report 2 on the broadband loan and loan guarantee program. This work was initiated at the request of Congress to determine if 

the Rural Utilities Service (RUS) had made sufficient corrective actions in response 

to our September 2005 report 3 and to answer specific questions posed by the House 

and Senate Committees on Appropriations. 

We found that RUS had not fully implemented corrective action in response to 

our September 2005 audit report. RUS had written a proposed change to the regulation which would have addressed some of our recommendations; however, they did 

not implement the rule, choosing to wait for passage of the Food, Conservation, and 

Energy Act of 2008 (2008 Farm Bill) to ensure that their proposed rule met the new 

requirements. During the period prior to enactment of the 2008 Farm Bill, RUS continued to make loans to providers in areas with preexisting service, sometimes in 

close proximity to large urban areas. 

In its response to our report, the agency agreed to take corrective actions. However, we remain concerned with the current direction of the broadband program, 

particularly as it receives greater funding under the Recovery Act. As structured, 

RUS’ broadband program may not meet the Recovery Act’s objective of awarding 

funds to projects that provide service to the greatest number of rural residents who 

do not have access to broadband service. 

Given our concerns, we are coordinating with both the Government Accountability 

Office (GAO) and the Department of Commerce (DOC) OIG. In March and April 

2009, GAO initiated two audits on RUS’ broadband program. DOC–OIG is currently 

conducting audit work to oversee the $4.7 billion that the National Telecommunications and Information Administration has been awarded to deploy broadband 

using Recovery Act funds. 

B. Prior Audit Recommendations 

In April 2009, we reported on our initial Recovery Act oversight project, which 

was to review audit recommendations that could impact internal controls over Recovery Act activities for each agency.4 We identified recommendations where Rural 

Development had not implemented the agreed-upon corrective actions within the 

mandatory 1 year timeframe. We then determined which of these recommendations, 

if left unresolved or not mitigated, would introduce a significant risk of inefficient 

or improper use of Recovery Act funding. For Rural Development, we identified 17 

audit recommendations that met these criteria involving approximately $10 billion 

of Recovery Act funds. 

In response to our report, Rural Development itemized the actions it was taking 

to address the risks associated with the unimplemented recommendations related 

to the business and industry guaranteed loan program, the single family housing 

direct loan program, and the broadband grant and loan program. For example, the 

agency explained that corrective action for eight of the 11 recommendations related 

to the business and industry guaranteed loan program is affected by the publication 

of the new guaranteed loan regulation. The agency also responded that, until the 

new regulation is published, it has taken the steps necessary to minimize the risk 

of loss to the program, including annual training to state offices and lenders, monitoring to ensure compliance, and periodic notices to provide instruction and clarification. 

For the five recommendations related to the broadband grant and loan programs, 

Rural Development states that it is implementing the evaluations, oversight, and 

monitoring systems and procedures required for Recovery Act programs under OMB 

guidance. Rural Development has said it plans to have these systems and procedures in place before Recovery Act funds are obligated. 

C. Single Family Housing Guaranteed Loan Program 

The Rural Housing Service is responsible for distributing Recovery Act funds 

through the Single Family Housing Guaranteed Loan Program. As of June 3, 2009, 

Rural Development had obligated over $4.3 billion to guarantee over 36,000 loans. 

Our role, as mandated by the Recovery Act, is to oversee agency activities and to 

ensure funds are expended in a manner that minimizes the risk of improper use. 

As of May 22, 2009, we have issued four reports related to our oversight activities 

17

of rural housing. These reports address: (1) internal control weaknesses related to 

the agency’s Guaranteed Underwriting System (GUS); (2) waivers of the agency’s 

debt ratio policy for borrowers participating in the program; (3) lenders’ use of independent mortgage brokers (‘‘brokers’’) to originate loans that are guaranteed by 

Rural Development; and (4) procedures used by agency field staff when reviewing 

and approving applications for loan guarantees. These issues will be compiled into 

a final report at the conclusion of our audit. During this initial phase, we did not 

perform testing to verify lender compliance with agency policies and procedures. As 

a result, we have no conclusions on the overall extent of abuse that is, or may be, 

occurring in the program. Our concern is that substandard loan applications could 

be submitted to and approved by Rural Development.

(1) GUS Internal Control Weakness

In January 2007, Rural Development implemented GUS, an automated underwriting system, to streamline the process used by lenders to submit loan 

guarantee applications. According to agency national officials, approximately 40 

percent of all applications for loan guarantees involving Recovery Act funds 

have been processed through GUS, compared to a historical average of 25 percent. The internal control weakness we identified relates to the documentation 

requirements for lenders who submit loan guarantee applications through GUS. 

We found lenders do not submit documentation that supports the eligibility of 

borrowers for applications accepted by GUS. For example, while lenders are required to maintain supporting documents, they do not provide evidence such as 

employer earning statements that supports borrower income to agency officials. 

This type of evidence is provided when applications are manually processed by 

agency officials. Thus, lenders are able to enter inaccurate borrower information 

into GUS with minimal risk of detection by agency officials prior to approving 

a loan guarantee. 

In response to our recommendations, Rural Development implemented additional controls for processing single family guaranteed housing loans with Recovery Act funds. For example, effective May 18, 2009, Rural Development suspended the use of Recovery Act loan funds for new conditional commitment requests so it could revise GUS quality control processes currently in place. The 

agency developed additional quality control standards by incorporating a preloan closing review of five percent of GUS submissions for each GUS-approved 

lender. The agency also plans to increase compliance testing conducted after 

loan closing with a focus on GUS loan origination quality. Reviews will concentrate on the participating lenders that originate a high volume of GUS loans 

or that may have certain GUS loan performance metrics.

(2) Waiver of Debt Ratios

During our review, we noted that agency policy regarding the waiver of debt 

ratio requirements was unclear and not being administered by field staff as expected by national officials. Agency policy states that lenders are to submit a 

request for waivers to debt ratio requirements in writing to Rural Development 

and include documentation of the appropriate compensating factors for support 

of sound underwriting judgment. Based on this policy, agency national officials 

expected field staff to obtain evidence of the compensating factors, such as bank 

statements for instances where the compensating factor was a large savings account. However, in the field, we observed that Rural Development staff approved lender request for waivers based only on the request and a description 

of the compensating factor. For example, the agency’s guidelines state that the 

ratio of total debt to income should not exceed 41 percent; however, we identified a case where this ratio was over 60 percent. Our concern is that lenders 

may create or exaggerate compensating factors to justify approving a loan for 

a substandard borrower. 

In response to our recommendations, Rural Development has stated that it 

will issue additional quality control procedures for its field offices. For example, 

manually underwritten loans with debt ratios above certain thresholds will be 

required to be reviewed by the loan approval official’s immediate supervisor. 

Written supervisory concurrence will be required to be retained and/or imaged. 

Supporting documentation of the compensating factors will be required to be retained as part of the permanent record.

(3) Lenders’ Use of Brokers

The agency relies on lenders’ underwriting processes to scrutinize loan applications originated by brokers. Rural Development guidance states that a lender 

may use agents (i.e., brokers) in carrying out its responsibilities. However, lenders are fully responsible for the actions of their agents. We are concerned that 

18

some lenders will not adequately evaluate broker-originated loans before submitting them to Rural Development officials. Our concern is based on two factors that, in our view, increase the risk that lenders will submit substandard 

loans to Rural Development. The two factors are (1) the compensation method 

for brokers and (2) the industry practice by which originating lenders typically 

sell loans to other lenders after loan closing. Brokers are compensated for each 

originated loan. (Specific compensation depends on the brokers’ contracts with 

the originating lenders and state regulations.) Thus, there is an incentive to 

submit as many loan applications as possible to originating lenders to increase 

the brokers’ income. The agency relies on lenders to review information on applications during the underwriting process to prevent such abuse. However, 

those reviews may not always be effective because it is a common industry practice for originating lenders to sell the loans they make to other lenders for servicing. Therefore, some originating lenders may be less willing to dedicate resources to scrutinize loans that will be sold to other lenders. In addition, the 

agency generally does not deny loss claims made by servicing lenders or seek 

recourse against originating lenders. 

In response to our recommendations, Rural Development has stated that it 

will increase its compliance testing with a focus on loan origination quality for 

loans originated by brokers. Reviews will concentrate on participating lenders 

that originate a high volume of loans initiated by brokers.

(4) Procedures for Reviewing and Approving Applications

During our visits to four agency field offices, we observed that agency loan 

specialists routinely performed all functions in the loan guarantee process with 

no supervisory review prior to issuance of the guarantee. These functions included the review of loan guarantee applications for completeness and borrower 

eligibility, the approval of the application for guarantee, and the input of applications into the agency’s system of records (GUS) where the obligation of funds 

will occur. The agency does not require a segregation of duties or supervisory 

(or second party) review prior to issuance of the loan guarantee. This creates 

a situation where agency loan specialists and other field staff could fail to detect 

lender errors or collude with lending officials to guarantee substandard loans. 

Of greatest concern to us is that agency field staff may not detect lender errors 

and mistakes because of the significant loan volume associated with the distribution of Recovery Act funds. In less than 2 months of distributing Recovery 

Act funds, the agency has already exceeded the typical number of guarantees 

in a year. We are aware that some area offices have too few employees to adequately separate duties. For instance, one of the four offices we visited had 

three employees, only one of which was a loan specialist. It would be difficult 

to adequately separate duties in that office. However, the other three offices had 

five employees, four of which were loan specialists. Therefore, it would be more 

feasible to separate duties in those circumstances. 

Rural Development did not agree with our recommendation that the agency 

implement segregation of duties in offices where it was feasible based on staffing levels to ensure the accuracy of all applications versus just a sample. Instead, the agency proposed additional quality control procedures to ensure a second party review is taking place on a selection of loans approved by Rural Development officials. The agency explained that this review will be performed by 

designated agency employees and better ensure loans originated were adequately reviewed for eligibility. OIG will continue to assess this issue as we further examine this program. 

D. Work in Process and Planned 

As of June 2, 2009, OIG had six Rural Development Recovery Act audits in process related to guaranteed and direct single family housing, water and waste disposal 

loans and grants, community facility loans and grants, business enterprise grants, 

and business and industry guaranteed loans. We expect to initiate as many as three 

additional assignments related to housing before the end of this fiscal year. Our 

audit plan for Fiscal Year 2010 will be developed this summer and put in place by 

October 2009. It is likely that the Fiscal Year 2010 plan will include audits of Rural 

Development programs to determine if funding recipients complied with program requirements and to evaluate agency determinations about the effectiveness of Recovery Act activities. 

This concludes my testimony. I want to thank Chairman McIntyre, Ranking Member Conaway, and Members of the Subcommittee for the opportunity to present testimony on behalf of OIG. I would be pleased to address your questions.

19

The CHAIRMAN. Thank you both for your efficiency and for highlighting the most important parts of your testimony, and thank you 

for your written testimony, which is also very helpful and has some 

great detail I am sure Members may want to ask about. 

The chair would like to remind Members they will be recognized 

for questioning in order of seniority for Members who were here at 

the start of the hearing. After that, Members will be recognized in 

order of arrival. I appreciate the Members’ understanding, pursuant to our regular procedures. 

Also, if any Members had opening statements that they wanted 

to submit for the record, we will be glad to accept those and to 

print those in full. 

With regard to questions, Secretary Tonsager, Rural Development makes loans and grants in rural areas, of course, but what 

impact do you see the downturn in the economy having on rural 

economy and rural businesses? To your knowledge, has RD seen an 

increase in late payments or delinquencies on loans? And, if so, 

how do you address those issues in the current economic climate 

with these programs? 

Mr. TONSAGER. I think the downturn has had a significant impact on rural areas. The studies I have seen suggest that there has 

been a higher percentage of unemployment in rural areas than 

there was in urban areas occurring because of the downturn. I do 

not have data on the exact performance of the programs at this 

point, but my belief is that we have not yet seen a significant increase in the number of delinquencies occurring. We will have to 

get back to you on that. 

The CHAIRMAN. Is there a particular point person, for those who 

are listening or watching today or that may later ask the question, 

if they are finding they are having a difficulty with late payment 

or potential delinquency, that in order to avoid further problems 

that they should contact in your agency? 

Mr. TONSAGER. We have different processes, depending on the 

programs. We have a servicing center that deals with single-family 

housing programs in St. Louis. So there is a process associated 

with that. The other programs, I believe, are dealt with out of local 

offices. 

But, again, forgive me, 4 weeks on the job, I don’t have as good 

a knowledge as I maybe should at this point. 

The CHAIRMAN. If you would after your testimony today, perhaps 

the best person for a community that may be experiencing a problem, or a business, to contact is their local or regional Rural Development Director or State Rural Development Director. You can 

have someone from your office confirm that for the record. Or if 

there is a central clearinghouse phone number that your agency 

may have, or may want to establish, so that anyone can call an 800 

number or a central number, that might also be helpful so that we 

can maximize assistance to the taxpayer. 

Also, I understand that the Business and Industry Loan Program 

is, of course, seeing increased demand, given the tight credit market. Have there been any discussions regarding whether some current business and industry limits should be relaxed? In other 

words, I know there has been some questions about the maximum 

20

level of guarantee or the timing of the loan with regard to the start 

of construction on a project. 

Mr. TONSAGER. Yes. We are examining some issues relative to 

the Business and Industry Loan Guarantee Program. We believe 

there may be some adjustments, and we hope to make those within 

our regulatory authorities. We are not prepared to step out and announce what changes might occur. But we are looking very close 

because we think the circumstances have changed at this moment 

in our economy, and we have to evaluate the risk we can take with 

the program against the good we can do in assisting more communities. 

The CHAIRMAN. Thank you, sir. 

Ms. Fong, the Office of the Inspector General has recently formed 

a Data Analysis and Data Mining Group. Can you tell us how you 

have provided the key technical expertise and resources that are 

required for such work? 

Ms. FONG. We have, as you pointed out, formed that group very 

recently. We happen to have on staff a number of very experienced 

statisticians who are already in our Audit Division in a number of 

our locations. We also hired some additional staff to supplement 

that expertise, and we now have a small unit of highly qualified, 

highly technical expert people to start running these kinds of work 

for us. 

The CHAIRMAN. Mr. Conaway, I now recognize you for questions. 

Mr. CONAWAY. Thank you, Mr. Chairman. I also want to thank 

the witnesses for your precision in your answers. Mr. Tonsager, 

welcome. Tonsager? 

Mr. TONSAGER. Tonsager. 

Mr. CONAWAY. Right, I will work on that. Dallas is easier. 

Mr. TONSAGER. Okay, Dallas works. 

Mr. CONAWAY. You mentioned in your testimony you hope that 

the focus will be on rural broadband as opposed to preexisting services. A recent IG audit said that hadn’t been the case. Who is in 

charge of making sure your hope is fulfilled? 

Mr. TONSAGER. Well, of course we must coordinate our efforts 

with the NTIA and the resources they have been given by you all 

from Congress for the Broadband Program. So we have been working closely with them, and the White House has been engaged in 

the discussions regarding rural broadband issues. 

So clearly it is my intention, my assertion with people that we 

must try to serve the more challenging rural areas of the U.S. I am 

late to this process. Much of the work has been done already regarding the NOFA that will come out, hopefully, very soon. 

Mr. CONAWAY. So based on what you understand so far, you 

think it is headed in that direction or is it going down the path of 

least resistance, which is to continue to serve the biggest communities? 

Mr. TONSAGER. I have not been fully briefed on the NOFA. 

Mr. CONAWAY. Okay. Looking through both testimonies, the bias 

so far has been toward clearing out the backlog. Can you help me 

understand, is the backlog rank ordered in terms of the date of application, or are they rank ordered in the order of importance or 

biggest impact or bang for the buck. Which one is it? 

21

Mr. TONSAGER. It is ranked, I believe, by the criteria associated 

with the grant application. I do not believe it is rank ordered by 

date. Is it, Jim? Oh, it is first in, first out. 

Mr. CONAWAY. So why does that make sense? 

Mr. TONSAGER. I don’t have a good response for you, sir. I know 

there is an identified backlog associated with what was given to us 

to meet, and so we are trying to move our way through that backlog as quickly as we can. 

Mr. CONAWAY. Okay. I guess in terms of—it is hard to use the 

word ‘‘scarce’’ in resources when you are talking about the stimulus 

bill, because that seems to have a wealth of money out there, and 

a wealth of money leads to wasted money. And so focusing whatever resources we have on that, on the most important first, seems 

to me a better plan than simply who showed up asking first versus

something else. So that is very troubling. 

Ms. Fong, welcome. Thank you very much. I am a CPA by background, and so your audits are keen. Why the sudden full-court 

press on auditing all things rural? Is that just a recent focus that 

you guys have? Why just all of a sudden? 

Ms. FONG. Let me just back up a step and just mention that with 

respect to Recovery Act programs, that is such an important initiative involving huge amounts of dollars that we, as an IG office, felt 

that that was one of the highest priorities for us to look at. And 

so we have developed a plan to look at every program within USDA 

that receives recovery dollars. RD, of course, received a large 

amount. So did the Forest Service, so did the Food and Nutrition 

Service. And so we are looking at all of those programs as well. 

Mr. CONAWAY. In your experience and background, if an entity, 

whatever it has, has weak, poor, or nonexistent internal controls in 

the way they operate and shepherd dollars, and that is the position 

that is already there, in your experience, if you double, triple, 

quadruple their funding stream is there some sort of a self-curative 

process that means the weaknesses from the internal controls get 

cured? 

Ms. FONG. I am not sure if there is a cause and effect there. I 

think——

Mr. CONAWAY. Would spending more money help them spend it 

wiser? 

Ms. FONG. Not necessarily. I think our view would be that if the 

program has strong internal controls, it will operate well regardless 

of the amount of money going through the program. If it does not 

have strong internal controls, then if you put more money into it 

there will be more opportunity for poor expenditures. And so we 

would always want to strengthen internal controls. 

Mr. CONAWAY. You audited one of the groups from 2005. You had 

some preexisting audit recommendations that were basically ignored by the entity and then they began to say well, we are going 

to wait until 2008. I will find your testimony here specifically. We 

are going to wait until 2008 before we fix that. 

Is that the normal way that the Agriculture Department works? 

You guys go audit and see these errors or mistakes or weaknesses 

in internal controls, and they can just ignore them, at somebody’s 

peril, I suspect? 

22

Ms. FONG. I think there you are getting to the very crux of the 

relationship between our office and the Department. As you know, 

from an auditor’s standpoint it is our responsibility to make recommendations to correct issues that we see. We don’t have the authority to make the changes ourselves. And so we do our best to 

persuade program managers, and we do our best to work with 

them to develop the best solution to the issues. In fact, we are continually working with the agencies within USDA. 

Mr. CONAWAY. I yield back. We have another round. 

The CHAIRMAN. Thank you, Mr. Conaway. 

Mr. Kissell, my colleague from North Carolina. 

Mr. KISSELL. Thank you, Mr. Chairman, and thank you, panelists, for being here today. 

Mr. Tonsager, just for everybody’s information, we had a chance 

to talk some yesterday in my office, and I appreciate you coming 

by there. We talked about the role of biofuels, ethanol in rural development, and you mentioned to me that you had recently been 

to a world conference on biofuels in Brazil. If you would expound 

just a little bit on what your view is of the role of biofuels in rural 

America, and, especially, the ideas that you found in Brazil in 

terms of biofuels and the impacts on land usage in Brazil. 

Mr. TONSAGER. Thank you, sir. I think that biofuels are a huge 

economic opportunity for rural America, and we are very aggressively going to look for every way we can help to enhance the economic opportunities for the creation of a cellulosic biofuels industry, as well as the preservation of corn-based biofuels industry. 

I found that in Brazil they have done a remarkable job. Their 

sugarcane-based industry is growing significantly. They have found 

ways to cogenerate electrical power from bio-gas from the process 

associated with that. They are aggressively moving forward with 

their industry and reaching out to the rest of the world with their 

industry. So, it was an excellent experience, and I hope we can 

learn lessons from them on how they have moved forward in their 

industry and apply them here as well. I hope we can—we are competitors, of course, with Brazil, but hopefully we can be partners 

in many ways as well. 

Mr. KISSELL. We talked specifically about land usage in Brazil 

and what effects on the rain forests, which is a concern expressed 

by some, of biofuels and growing these products. What did the Brazilians say in terms of their land use in making up the acreage 

that produces the biofuels? 

Mr. TONSAGER. What they told me is that less than one percent 

of their land mass is associated with the creation of feedstocks for 

biofuels. So they would make the argument that they are not significantly impacting because of biofuels, specifically, on the rain 

forests. 

Mr. KISSELL. Thank you, sir. 

Switching to broadband for just a second, we are looking at 

phrases that say rural and unserved, and—how can we define 

rural? How are you defining rural in terms of providing these services? How are you defining unserved in terms of who will be getting 

the first wave, so to speak, of the opportunity to have this investment? 

23

Mr. TONSAGER. I wish I could specifically speak to that. We are 

going to see a NOFA published soon. In my opinion—and, again, 

I really can’t go into the discussion about how I see it at this point 

because of the pending NOFA that will be published. I would 

hope—it would be my intent as I run this agency that we go to the 

more challenging areas of the country to provide the best service 

we can in those areas. I think I am reluctant to define specifically 

for you my understanding of the rural or underserved areas. 

The CHAIRMAN. If the gentleman will yield just a moment, I will 

give you your time back. 

I know I mentioned at the outset we will have a hearing separately on rural broadband, and I respect the fact you are waiting 

for the rules to come out. But the definitions that Mr. Kissell has 

asked about I trust you would be able to provide after they were 

published at the end of the month. 

Mr. TONSAGER. Sure. 

The CHAIRMAN. We would want to make sure and follow up. And 

in respect to Mr. Kissell’s question, if you would plan to provide 

that within 10 days after they are published because that will be 

a key definition that will also help our Committee go forward, our 

Subcommittee, when we do have that hearing, to know what definition you have given to what he asked on rural and unserved; underserved as well. 

Thank you. Mr. Kissell. 

Mr. KISSELL. Thank you, Mr. Chairman. I believe that goes to a 

lot of the questions about how these services will be provided and 

will we really be getting to the rural areas, as we know them, in 

providing that service, or will it be more continuing of the serving 

the same areas and not getting to these areas that we need to draw 

attention to. 

The last question being, it was an indication that this money 

may be coming out in like three waves, with the first wave being 

available in June, towards the unserved areas. I am just wondering, when will the money really start to become available? 

Mr. TONSAGER. Well, we of course have to wait for the publication of the NOFA, and then we will move as quickly as we can. I 

do not know the deadlines or the time frames at this point. 

Mr. KISSELL. And as soon as we do, then we can make them 

available to us so we can start letting the people know that it is 

available. 

Mr. TONSAGER. We will be most anxious to let it be known broadly as possible to make sure that everyone has an opportunity. 

Mr. KISSELL. Thank you, sir. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Mr. Kissell. Mr. Under Secretary, if 

in particular, in response to Mr. Kissell’s question as a follow-up, 

when you make that broadly known, if you would particularly be 

sure to contact the Members of this Subcommittee, because I know 

we are going to have an intense interest in it since we will be having a hearing on it in July. We want to make sure we don’t overlook it, because we know the end of June some time will be lost 

here because of the natural inclination for us to spend time in our 

districts during the work period over the 4th of July. So we will 

be having the hearing the week we get back. So as soon as that 

is available, if you would provide it to our offices in particular, in 

24

addition to how you may generally disseminate that information, 

we would greatly appreciate it. Thank you so much. 

Mr. Cassidy. 

Mr. CASSIDY. I am going to say Mr. Under Secretary, I know why 

you told the Texan to say Dallas. 

I have a couple of questions. The stimulus money is subject to 

Davis-Bacon, regular program funding is not. Some of these applications have been developed, price-structured under the regular 

program funding, and yet because of Davis-Bacon we are going to 

have higher costs associated with this stimulus funding. 

So I guess several questions for my community that put these 

packages together; first, do they have to resubmit under the different cost structure. Second, this is going to ask them to come up 

with additional dollars, and these are rural communities often with 

a poor tax base. And so is there any accounting for any possibility 

of waiving the Davis-Bacon under the stimulus package funding if 

they cannot come up with the extra dollars required to meet the 

Davis-Bacon requirement? 

So I guess the first question, do they have to resubmit? Second, 

what happens if they have to come up with additional dollars? 

Third, is there a way that they can choose what funding source 

they apply to, because it is going to be cheaper to go through regular funding if the money is there than it would be through stimulus? 

Mr. TONSAGER. Of course, they could make the applications in 

the categories they would wish to pursue. The funding sources for 

the stimulus package are significant. I understand the issues associated with Davis-Bacon, as I have come into the office and been 

briefed regarding that and what it means. 

We are still waiting for some guidance relative to Davis-Bacon 

and the Buy America provisions. At this point I would say yes, that 

is correct. That was what was given to us by Congress as direction 

to apply Davis-Bacon for the stimulus funds. 

Mr. CASSIDY. So, as it turns out, the extra money that will be 

required as matching on the part of the community, you acknowledge that will have to take place. Frankly, it is just a fact of life 

and I am not trying to put words in your mouth. I am trying to, 

if you will, make my communities back home understand the game. 

Mr. TONSAGER. My deputy has been helpful with me in suggesting that we look at the grant loan combination on an affordability basis, which has always been true of the water and sewer 

programs. So our goal is to make the program affordable for our 

communities. So we would attempt to balance the loan/grant combination under the new cost structure just as we would have previously. So there is some offset, I believe, to it. 

Mr. CASSIDY. Okay. Second, although you haven’t published the 

rules, I am very interested in the Rural Microentrepreneur Assistance Program. It seems like that would be a good program. So 

knowing you haven’t published the rules, but nonetheless can you 

at least give a bearing by which folks interested in this program 

can kind of start setting their course as they await the final Rural 

Development rule? 

25

Mr. TONSAGER. I am a fan of the program. I have not been engaged in a dialogue on the program yet. I apologize for my lack of 

knowledge in several program areas at this point. 

Mr. CASSIDY. That is okay. I understand. Last, I guess because 

I am almost out of time, the stimulus is trying to move money into 

communities. There are formulae through which it can be given 

through state formulae, but also through direct application. Will all 

funding be allocated by state formulae or, if not, how will USDA 

be allocating the stimulus funding among the states? 

Mr. TONSAGER. I believe we focused on the backlog for funding 

that was existing in the national office. Typically, we of course do 

a formula approach with the regular program money. I am unsure 

whether there was any allocations to states of the stimulus money. 

My belief is it just applied to the existing applications. 

Mr. CASSIDY. Thank you. I yield back. 

The CHAIRMAN. Thank you, Mr. Cassidy. 

As a follow-up to Mr. Cassidy’s question, and because it did emanate through this Subcommittee in the House, as well as our similar Subcommittee in the Senate, the Rural Entrepreneur Business 

and the Microenterprise Assistance Program, we are very excited 

about when they were put in last year’s farm bill. So as soon as 

you have the parameters for that in the rules, would you please let 

us, as a Committee, also know? 

We would encourage you to do that with great accuracy but also 

with great haste, because as we go around, I know in our district 

and from hearing conversations with my other colleagues in their 

districts, that program is indeed one that had great bipartisan support. It would be of great assistance to the fastest growing segment 

of small business, which are microenterprises, those that employ 

less than ten people. So we are highly interested in the Business 

Entrepreneur and Microenterprise Assistance Program. Please advise us as soon as you are able to have that ready. We urge that 

to be done with all due haste, as I mentioned, and we thank you 

for your attention to that. 

I want to thank our panel. Because of your promptness, we are 

going to take just a few moments to see if any other Members of 

the panel have questions. I know the Ranking Member, Mr. 

Conaway, does. 

I will recognize you for your remaining questions. 

Mr. CONAWAY. Thank you, Mr. Chairman. We may want to just 

pose the questions and then ask the witnesses to either respond 

quickly or get back to us. One has to do with transparency. If we 

have 2008 money, we have 2009 money, and we have stimulus 

money, that we all want to know where it went, we all want to 

know who is getting it and those kinds of things. I need a commitment from you, Dallas, that you are going to put together some sort 

of a system that reconciles all the various databases and that we 

in fact will be able to know where all the money is, where it has 

gone, and which categories and those kind of things. So, that we 

don’t lose ourselves in this plethora of data and then miss the big 

picture or the little picture. Your efforts, and Ms. Fong as well, to 

make sure that the world is able to see, good or bad, where this 

money went, is going to be important. 

26

I am also concerned that the FIFO method on backlogs clearly 

disadvantages new emerging issues that may in fact be more important than something that has been on the backlog for a long 

time and may not be as important. 

So some way that you take a fresh look at that process that says 

for the stimulus money, just funding stuff that had been asked for 

for a long time, automatically, versus something that has newly 

emerged, make sure we understand how that works. 

Ms. Fong, if you go through your report, particularly the housing 

area, it reads like a litany of the things that went wrong in the 

broader housing market where you have detached collection of 

loans from the folks making the loans. And your report shows extensive weaknesses in internal control throughout the system. A 

commitment from you that this will be a quick turnaround to look 

at what the agencies have done. I know you can’t force them to do 

anything, but you can shine some pretty bright lights on them 

should they not do that. And, also, some sense of what the collection has been, or delinquencies I guess is a better phrase, has been 

in the housing areas, particularly as we move through this area because of bad loan applications, misinformation on applications, 

waiving the standards on debt-to-equity ratios and income-to-debt 

ratios. All of that is exactly what happened in the broader housing 

market across this country, and we don’t really want to facilitate 

that going further wrong if it is not already wrong in rural America. 

Finally, with respect to your data mining efforts, I would call to 

your attention Tarleton State and the data mining work they do 

with RMA, the Risk Management Agency, and the other things as 

maybe a partner, perhaps, in that arena because I do think that 

can be very helpful. 

So, Mr. Tonsager—Dallas—if you could make sure that we get a 

pretty clear picture from a transparency standpoint where this 

money is going by community, by county, all those kind of things, 

and then help me understand why a FIFO method works best in 

this arena for these vast amounts of money that is being spent 

with respect to these stimulus dollars. 

So I look forward to hearing back from you and have some conversations. Ms. Fong, if you need any help, I will be glad to pitch 

in. 

I yield back. 

The CHAIRMAN. Thank you, Mr. Conaway. Any other panel Members have additional questions? If not, we thank you very much for 

your time today to both of you. I wish you well and Godspeed, and 

thank you for your commitment to our nation and your public service. God bless you. 

We invite our next panel to come on up to the table and let’s get 

ready. We want to get your testimony in before we get summoned 

to vote. We want to respect your time. So please come forward immediately and assume your positions at the table. 

Welcome to our second panel and to your staff and other friends 

that may be here to support you in your testimony. 

We have Mr. F.D. Rivenbark, Commissioner from Pender County, from Willard, North Carolina, on behalf of the National Association of Counties; Debra Martin, Director of the Great Lakes Rural 

27

Community Assistance Partnership, from Fremont, Ohio; Chandler 

Sanchez, Governor of the Pueblo of Acoma, Acoma, New Mexico, on 

behalf of the National Congress of American Indians; Doug 

Anderton, General Manager of the Dade County Water and Sewer 

Authority, Trenton, Georgia, on behalf of the National Rural Water 

Association; Tommy Duck, Executive Director of the Texas Rural 

Water Association of Austin, Texas, and I believe Mr. Conaway 

would like to provide an introduction of the witness from Texas. 

Mr. Conaway, I welcome the introduction of your special guest 

from Texas. 

Mr. CONAWAY. Well, I just want to add my thanks to Tommy for 

coming up here and pitching in on these important issues, and we 

look forward to having your comments and your wisdom on how we 

should proceed. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. I am especially pleased to present 

our first presenter starting off the panel. F.D. Rivenbark serves as 

a County Commissioner in Pender County, North Carolina, which 

is in the Seventh Congressional District that I am blessed with the 

opportunity to represent. Mr. Rivenbark represents the National 

Association of Counties here today, which was one of the groups in 

this room back in the first week of January when we had that discussion, I mentioned earlier, to make sure rural areas were not left 

out of the stimulus package. 

Mr. Rivenbark brings his service as a County Commissioner for 

over 30 years; his experience teaching vocational agriculture, serving as a principal in the Pender County School System, and over 

30 years of service in the U.S. Army and Army Reserves. And also 

as a Member of the Armed Services Committee, I want to thank 

you in particular for your service to our country in that capacity, 

Mr. Rivenbark. 

Commissioner Rivenbark grew up on a Pender County farm located in the Horsebranch community just north of Burgaw and, 

from what I understand, has a perfect attendance record over the 

last decade at Burgaw Baptist Church. 

Mr. Rivenbark, we welcome you. We recognize your church, community, and national service that you have given, and here today 

in particular your service as a County Commissioner and on behalf 

of the National Association of Counties. I enjoyed being in your 

county, in Pender County just last week, and am thrilled that you 

have come to be with us here in Washington today. 

Mr. Rivenbark, you may proceed. 

STATEMENT OF HON. FRANKLIN D. RIVENBARK,

COMMISSIONER, PENDER COUNTY, NORTH CAROLINA;

MEMBER, AGRICULTURE AND RURAL AFFAIRS STEERING 

COMMITTEE, RURAL ACTION CAUCUS STEERING

COMMITTEE, NATIONAL ASSOCIATION OF COUNTIES (NACO); 

PAST VICE CHAIRMAN, RURAL DEVELOPMENT

SUBCOMMITTEE, NACO, BURGAW, NC 

Mr. RIVENBARK. Thank you, Chairman McIntyre, Ranking Member Conaway, and Members of the Committee, for the opportunity 

to testify on behalf of the National Association of Counties on the 

status of rural development programs operated by USDA and the 

28

status of the American Recovery and Reinvestment Act funds for 

these programs. 

More importantly, I want to thank you, Mr. Chairman, for your 

leadership and ensuring that USDA Rural Development funding 

was included in the Recovery Act. 

My name is Franklin D. Rivenbark. I am a County Commissioner 

in Pender County, North Carolina, and I currently serve in several 

leadership roles with the National Association of Counties. In my 

testimony, Mr. Chairman, I want to express NACo’s overwhelming 

support for the programs and mission of USDA Rural Development 

and offer some constructive feedback. 

USDA’s regularly appropriated funding and Recovery Act funding is making a significant difference across rural America during 

the economic crisis, and in my county it has been critical to the 

continuation of vital infrastructure projects. I want to commend the 

Administration and especially Secretary Vilsack and Under Secretary Tonsager for their deep commitment to rural development 

and leadership of the implementation process. 

This morning, I would like to make three key points, which are 

described in much greater detail in my written statement. First, 

the Recovery Act is making a significant difference in my county 

and in rural communities across the country. However, challenges 

exist for rural counties in their request to obtain Recovery Act 

funds and implement new reporting requirements. USDA Rural 

Development is acting extremely quickly to award projects, and the 

Administration has been open and transparent during its rulemaking processes. 

In my county, the construction of the Pender County Water 

Treatment Plant Project and Pender Emergency Medical Services 

Facility and Emergency Operations Center were in jeopardy at the 

beginning of this year, but will now continue, due to USDA Rural 

Development funding provided in the Recovery Act. 

Despite the good work of USDA, the overall size of the Recovery 

Act and speed of implementation has left many rural counties 

struggling to navigate the maze of funding opportunities and move 

forward on implementation, while many Federal rules and regulations are still in the process of being created. 

USDA Rural Development staff is widely recognized for excellent 

customer service. NACo suggests that staff be trained to work with 

rural counties, especially our most distressed counties, to strengthen the linkages that exist between USDA Rural Development and 

other Federal and state programs, and to help them navigate the 

new transparency and reporting requirements. 

Second, infrastructure development remains one of the most significant roadblocks to economic development and competitiveness 

in small towns and rural America. USDA Rural Development is effective at helping communities overcome these roadblocks, but 

needs to receive additional resources in the coming fiscal years to 

meet these infrastructure needs. 

NACo supports Congress’s and the Administration’s growing support for rural broadband deployment and rural renewable energy 

development. However, the successful expansion of these two opportunities for rural America is dependent upon a simultaneous expansion of support for basic rural infrastructure. 

29

County governments provide and maintain basic public infrastructure services, especially costly water and sewer systems that 

are essential building blocks for economic and community development. Therefore, local and state funding for infrastructure needs 

cannot meet demand for the foreseeable future. This fact, combined 

with the aging infrastructure in rural America, means that USDA 

Rural Development’s Water and Environmental Programs and 

Community Facilities Program will need enhanced funding, especially grant funding, if rural America is going to be able to meet 

the infrastructure needs that are necessary for economic development. 

Third, USDA Rural Development’s traditional and newly authorized programs are an essential ingredient for rural communities as 

they seek to enhance their basic infrastructure, as well as employ 

techniques to promote entrepreneurs and businesses. However, 

these traditional programs should be bolstered by new and more 

aggressive incentives to promote and award flexibly funded regional approaches to rural development. 

The newly authorized Rural Collaborative Investment Program is 

one model that would provide much-needed incentives and resources for the enrichment of rural development strategies on a regional and local basis, as well as flexible program dollars to implement regional and local projects and priority initiatives. 

In my county, local flexibility and incentives for regional collaboration would allow us to work better regionally to develop a water 

system that can better meet our expected future demand. 

I have clarified these three points in depth in my written testimony. 

Thank you, again, Chairman McIntyre, Ranking Member 

Conaway, and Members of the Subcommittee, for the opportunity 

to testify this morning on behalf of the National Association of 

Counties on these critical rural development issues. I appreciate 

your time and interest, and I look forward to answering any questions. 

[The prepared statement of Mr. Rivenbark follows:]

PREPARED STATEMENT OF HON. FRANKLIN D. RIVENBARK, COMMISSIONER, PENDER

COUNTY, NORTH CAROLINA; MEMBER, AGRICULTURE AND RURAL AFFAIRS STEERING

COMMITTEE, RURAL ACTION CAUCUS STEERING COMMITTEE, NATIONAL

ASSOCIATION OF COUNTIES (NACO); PAST VICE CHAIRMAN, RURAL DEVELOPMENT

SUBCOMMITTEE, NACO, BURGAW, NC 

Thank you, Chairman McIntyre, Ranking Member Conaway and Members 

of the Subcommittee for the opportunity to testify today on the status of 

rural development programs operated by USDA and the status of American 

Recovery and Reinvestment Act funds for these programs. Most importantly, 

I want to thank you Mr. Chairman for your leadership in ensuring that USDA 

Rural Development funding was included in the Recovery Act. The roundtable you 

held during the Recovery Act debate was instrumental in educating Members of 

Congress and their staff about the vital role USDA Rural Development programs 

could play in our nation’s recovery efforts. 

My name is Franklin D. Rivenbark. I am a County Commissioner in Pender 

County, North Carolina and I currently serve in several leadership roles with the 

National Association of Counties (NACo). Pender County is located in the Chairman’s Congressional district in the far southeast corner of the state and is the sixth 

fastest growing county in North Carolina with a population of around 50,000 people. 

I also serve on NACo’s Rural Action Caucus Steering Committee, Agriculture and 

Rural Affairs Steering Committee and am a Past Vice Chair of NACo’s Rural Development Subcommittee. 

30

My goal today in covering this important topic is to give you some concrete examples from my county and to represent the National Association of Counties. USDA’s 

regularly appropriated funding and Recovery Act funding is making a significant 

difference across rural America during the economic crisis and in my county it has 

been critical to the continuation of vital infrastructure projects. I want to commend 

the Administration especially Secretary Vilsack and Under Secretary Tonsager for 

their deep commitment to rural development and steady leadership of the implementation process. NACo is pleased that USDA leadership is implementing their 

commitment to make rural development a key focus of the agency. 

About the National Association of Counties 

Established in 1935, the National Association of Counties (NACo) is the 

only national organization representing county governments in Washington, D.C. Over 2,000 of the 3,068 counties in the United States are members 

of NACo, representing over 80 percent of the nation’s population. NACo provides an 

extensive line of services including legislative, research, technical and public affairs 

assistance, as well as enterprise services to its members. 

NACo’s membership drives the policymaking process in the association through 

11 policy steering committees that focus on a variety of issues including agriculture 

and rural affairs, human services, health, justice and public safety and transportation. Complementing these committees are two bipartisan caucuses—the Large 

Urban County Caucus and the Rural Action Caucus—to articulate the positions of 

the association. NACo’s Rural Action Caucus (RAC) represents rural county elected 

officials from the nation’s 2,187 non-metropolitan or rural counties. 

In my testimony, Mr. Chairman, I want to express NACo’s overwhelming 

support for the programs and mission of USDA Rural Development and 

offer constructive feedback about the agency’s programs and its implementation of the Recovery Act. NACo and its partners in The Campaign for a Renewed Rural Development fought for recognition of the need to bolster this agency 

in order to revitalize rural America during the farm bill and stimulus debates. The 

Campaign is a collaboration of twenty-eight national organizations with a strong interest in the sustainability and prosperity of small town and rural America and is 

chaired by NACo Past President Colleen Landkamer. The inclusion of significant resources for USDA Rural Development projects in the Recovery Act is an important 

commitment that we urge the Administration and Congress to continue through 

strong appropriations and the development of an even stronger Rural Development 

Title in the next farm bill. 

NACo especially supports increased grant resources for rural infrastructure improvements, renewable and alternative energy development, business and entrepreneurial development, broadband deployment and community facility enhancements. 

In addition, NACo strongly support the goals and concept of the Rural Collaborative 

Investment Program (RCIP), an innovative and forward-thinking rural development 

program authorized in the 2008 Farm Bill but not yet funded or implemented. 

This morning, I would like to make three key points.

• The Recovery Act is making a significant difference in my county and 

in rural communities across the country. However, many challenges 

exist for rural counties in their quest to obtain Recovery Act funds and 

implement new reporting requirements. USDA Rural Development is acting extremely quickly to award projects and the Administration has been open 

and transparent with NACo during its rulemaking processes. However, rural 

counties are struggling to navigate the maze of funding opportunities provided 

throughout Recovery Act and move forward on implementation while many Federal rules and regulations are still in the process of being created.

• Infrastructure development remains one of the most significant roadblocks to economic development and competitiveness in small town and 

rural America. USDA Rural Development is effective at helping communities overcome these roadblocks, but needs to receive additional resources in the coming fiscal years to meet these infrastructure needs.

NACo supports Congress and the Administration’s growing support for rural 

broadband deployment and rural renewable energy development. However, the 

successful expansion of these two opportunities for rural America is dependent 

upon a simultaneous expansion of support for rural infrastructure. Entrepreneurs, small business leaders and private sector industries drive our nation’s 

innovation, competitiveness and job growth. These individuals and entities also 

rely, expect and demand that public entities such as county governments provide and maintain basic public infrastructure services, especially costly water 

31

and sewer systems, that are essential building blocks for economic and community development.

Historically, the bleakest fiscal periods for state and local governments, when 

most capital projects are put on hold, is the first 2 years of an economic recovery. Therefore, local and state funding for infrastructure needs cannot meet demand for the foreseeable future. This fact combined with the aging infrastructure in rural America means that USDA Rural Development’s Water and Environmental Programs and Community Facilities Program will need enhanced 

funding; especially grant funding, if rural America is going to be able to meet 

the infrastructure needs that are necessary for economic development.

• USDA Rural Development’s traditional and newly authorized programs 

are an essential ingredient for rural communities as they seek to enhance their basic infrastructure, as well as employ techniques to promote entrepreneurs and businesses. However, these traditional programs should be bolstered by new and more aggressive incentives to 

promote and reward flexibly funded regional approaches to rural development. This reflects the reality of today’s marketplace where rural counties and communities are not only competing statewide and nationally, but 

more likely, internationally. The newly authorized Rural Collaborative Investment Program (RCIP) is one model that would provide much needed incentives 

and resources for the enrichment of rural development strategies on a regional 

and local basis, as well as flexible program dollars to implement regional and 

local projects and priority initiatives.

First, Mr. Chairman, the Recovery Act is making a significant difference 

in my county and in rural communities across the country. However, many 

challenges exist for rural counties in their quest to obtain Recovery Act 

funds and implement new reporting requirements. USDA Rural Development 

is acting extremely quickly to award the backlog of projects, especially in rural housing, community facilities and water and wastewater disposal. It is still very early 

to comment on implementation of USDA programs as we are still in a beginning 

phase of the process, especially in regards to broadband deployment. NACo looks 

forward to working with the Administration to ensure that counties play a key role 

in helping to ensure full broadband coverage in both unserved and underserved 

areas and understands the need to be patient as this critical funding provision is 

implemented. 

Despite, being in the early stages of implementation, I can provide several positive examples from my county and offer some thoughts about challenges rural counties are facing in general. The Pender County Water Treatment Plant Project is a 

perfect example of the benefits of the Recovery Act. The project was challenged at 

the beginning of this year due in part to the economic downturn making it nearly 

impossible to raise additional revenue through the private sector. The county received $16.5 million in USDA direct loans and a $1 million grant in 2008. The total 

project cost is estimated at $25 million and it is anticipated that Recovery Act funding or regularly appropriated funding that has been freed up by the Recovery Act 

will be available to fill the gap and allow the project to continue. This will create 

jobs in the county and help us continue to attract new businesses by having a plant 

with the capacity to be updated to meet future demand. The project will serve Rocky 

Point Water and Sewer District and Topsail and Scotts Hill Water and Sewer District. This funding is coupled with funding in 2008 for the Town of Atkinson which 

received a loan of $432,000 and grant of $490,000 for a new water system. The 

Town of Burgaw also received a loan of $5 million in 2008 for improvements to their 

wastewater system. 

In addition, Pender EMS, a nonprofit, will receive $2 million in community facilities funding, mostly in the form of a direct loan and a small grant to construct a 

new emergency medical services facility and emergency operations center in the 

Town of Burgaw. The center is a joint venture with the county that was supposed 

to begin construction on January 1, 2009, but was put on hold due to the freezing 

up of the private credit market. The $2 million in USDA funding will keep the 

project on track. The funding may or may not come from the agency’s Recovery Act 

funds, but it is clear that without the Recovery Act, regular appropriations would 

not have been available to keep the project on track. Although, not funded through 

the Recovery Act, USDA’s Rural Housing Programs have also been instrumental in 

helping our community through the downturn, especially the annual funding that 

our county housing department receives to provide rental assistance to eight low income families, including seniors. 

The number of success stories such as this are growing, however, many rural 

counties are struggling to navigate the numerous Recovery Act funding opportuniVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00035 Fmt 6633 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
32

ties and move forward on implementation while rules and regulations are still being 

created. I’ve outlined the feedback NACo is receiving from its members and some 

suggested remedies to help counties cope with these challenges. 

Staff Capacity and Persistent Poverty Counties—USDA Rural Development staff 

at the local, state and national level are well respected across rural America. My 

staff in Pender County and I both agree that USDA Rural Development staff are 

the best to work with of any Federal or state agency. They bend over backwards 

to make projects work and deeply care about the rural communities they serve. Yet, 

the agency is only one piece of the maze of programs and opportunities which rural 

counties are striving to understand. Unfortunately, many rural counties do not have 

the capacity to effectively compete for Federal grants and loans. NACo expects July 

and August to be the peak of open grant announcements. We urge USDA to train 

its field staff to assist rural communities with making the connections to programs 

and resources that are present not only at USDA, but also through other Federal 

and state agencies. Often other programs complement and match USDA programs, 

but are not easily accessible or well know to small communities. 

This Subcommittee should also ensure that USDA does significant outreach to our 

nation’s 398 persistent poverty counties and other rural counties that have not traditionally been successful applying for or receiving USDA Rural Development funding. The Recovery Act requires that at least ten percent of USDA Rural Development funding (excluding the broadband program) be allocated for assistance in persistent poverty counties. The spirit of this provision will not be met by simply funding just enough projects to reach the ten percent threshold. Instead, NACo believes 

that USDA should engage in targeted outreach to these communities to ensure that 

those communities most in need are aware of their opportunities and afforded all 

possible help in successfully applying for funding that they are eligible to obtain. 

Administrative Costs—NACo accepts the Recovery Act’s emphasis on enhanced 

transparency, tracking of project success and oversight. However, this enhanced 

focus on transparency and oversight creates significantly more costs for state and 

local governments to implement Recovery Act projects. 

The White House Office of Management and Budget issued guidance on May 11, 

2009 allowing 0.5 percent of Recovery Act funds to be applied to program administration, in accordance with rules and procedures outlined in the guidance. While the 

guidance refers to states, White House officials have advised NACo that this also 

applies to local governments. NACo has requested that this inclusion of local governments be provided in writing so that Federal agencies uniformly allow local government administrative costs. 

Guidance—The Administration has been open and transparent throughout the 

Recovery Act implementation process. As diligent as they have been in working to 

implement the law, OMB’s delay in releasing guidance on calculating job creation 

and retention is very concerning for counties. Many grant applications require these 

calculations and thus counties have been forced to plan their projects, apply for 

funding and even begin implementation without all of the key guidance documents 

at their disposal. The rules for reporting, estimating job creation and retention and 

deciphering allowable administrative costs are being written as we go along. 

Counties want to ensure that they quickly implement projects that meet the final 

guidelines that will eventually be published. Therefore, we urge the Administration 

to continue to keep in mind that local governments are under the pressure of speedy 

implementation without all of the facts for what comes next. The Administration 

should accept the good faith efforts of counties and allow them ample time to come 

into compliance as rules and regulations are written throughout the process. NACo 

especially urges reporting guidance to be released as soon as possible. The law requires reporting guidance to be released 45 days before the first reporting deadline 

of October 10. The 45 day window is not enough time. Counties will need this guidance released much earlier to ensure adequate time to comply. 

Buy American—Many counties located near our nation’s international borders 

have expressed concern with the implementation of the Recovery Act’s Buy American provisions. NACo asks that all Federal agencies use the flexibility of OMB’s 

April 23, 2009, interim guidance to grant waivers based on nonavailability, unreasonable cost, and inconsistency with the public interest. These waivers should be 

granted as quickly as possible to ensure that counties that rely on foreign suppliers 

are not adversely impacted by extended waiver request review periods. 

Legislative Solution to Regulatory Uncertainty—NACo supports H.R. 1282, which 

is sponsored by Representative Edolphus Towns, and passed the U.S. House of Representatives on May 20. We urge the Senate to quickly pass the companion legislation, S. 1064, sponsored by Senator Joseph Lieberman. The Enhanced Oversight of 

State and Local Economic Recovery Act amends the American Recovery and Reinvestment Act of 2009 to require Federal agencies receiving funds under such Act, 

33

subject to guidance from the Director of the Office of Management and Budget 

(OMB), to reasonably adjust applicable limits on administrative expenditures for 

Federal awards to help award recipients defray costs of data collection, auditing, 

contract and grant planning and management, and investigations of waste, fraud, 

and abuse required under such Act. 

It authorizes state and local governments receiving funds to set aside up to 0.5% 

of such funds, in addition to any funds already allocated to administrative expenditures, to conduct planning and oversight to prevent and detect waste, fraud, and 

abuse. County governments are on the front lines of implementing the Recovery Act 

and this clear set aside for administrative costs will help ensure more effective implementation at the local level. 

The Act also authorizes the Administrator of the General Services Administration 

(GSA) to provide for the use by state and local governments of GSA Federal supply 

schedules for goods or services and requires the OMB Director to issue guidance to 

ensure accurate and consistent reporting of ‘‘jobs created’’ and ‘‘jobs retained’’ as 

those terms are used in such Act. The first provision will allow county governments 

to obtain lower rates for goods and services and the second provision will provide 

certainty on reporting requirement in regards to jobs created and jobs retained. 

Second, Mr. Chairman, infrastructure development remains one of the 

most significant roadblocks to economic development and competitiveness 

in small town and rural America. USDA Rural Development is effective at 

helping communities overcome these roadblocks, but needs to receive additional resources in the coming fiscal years to meet these infrastructure 

needs. NACo strongly supports Congress and the Administration’s growing support 

for rural broadband deployment and rural renewable energy development. However, 

the successful expansion of these two opportunities for rural America is dependent 

upon a simultaneous expansion of support for basic rural infrastructure. The Recovery Act funds the backlog of basic infrastructure projects and is a critical down payment on this need. Yet, the backlog will quickly fill up again if regularly appropriated infrastructure funding is not enhanced. Entrepreneurs, small business leaders and private sector industries drive our nation’s innovation, competitiveness and 

job growth. These individuals and entities also rely, expect and demand that public 

entities such as county governments provide and maintain basic public infrastructure services, especially costly water and sewer systems, that are essential building 

blocks for economic and community development. 

Historically, the bleakest fiscal periods for state and local governments, when capital infrastructure projects are put on hold, is the first 2 years of an economic recovery. Therefore, local and state funding for infrastructure will not meet demand for 

the foreseeable future. This fact combined with the aging infrastructure in rural 

America means that USDA Rural Development’s Water and Environmental Programs and Community Facilities program will need enhanced funding; especially 

grant funding, if rural America is going to be able to meet the infrastructure needs 

that are necessary for economic development. 

Local governments own and maintain 75 percent of public roads, 50 percent of 

bridges and 90 percent of public transit systems. More than 98 percent of the nation’s investment in water infrastructure has been made at the local level and virtually all public schools are owned and operated by local governments. We are not 

asking to be dependent on the Federal Government. I share these stats to let you 

know that local governments stand ready to be a key partner in economic recovery 

and are willing to pay our fair share for infrastructure needs. The stark reality is 

that we will not be able to afford these investments during the downturn and the 

first several years of the recovery without an enhanced Federal partnership. 

While USDA Rural Development is an essential partner for our rural counties and 

communities, we have been alarmed that its infrastructure, housing, broadband and 

community facilities portfolios were increasingly focused on direct loan and loan 

guarantee programs over the past decade. The maintenance of grant levels for key 

infrastructure programs in the President’s FY 2010 Budget is a good first step because it reversed the trend of cuts. However, there remains a need to bolster these 

grant programs from years of cuts in order to help with seed capital and gap financing for our local projects. In Pender County and in communities across North Carolina and the nation we are eager to reverse the trend away from grants. Our persistently distressed communities and all communities recovering from a disaster 

need a higher portion of grant funding for our projects to be economically feasible. 

This need for adequate grant funding applies to rural counties and communities 

struggling to establish new water, sewer, broadband and community services, as 

well as countless counties and communities faced with the daunting task of replacing infrastructure that is often approaching 50 to 100 years old. For distressed and 

underserved rural counties and communities, especially the smaller and more rural 

34

areas, the trend of increased reliance on Federal direct loan and loan guarantee programs puts costly infrastructure improvement projects out of reach. As a result, a 

good portion of our nation’s rural counties and communities will continue be in economic distress, long after a recovery has reached the rest of the nation. 

According to a 2009 report by the American Society of Civil Engineers, the nation’s infrastructure remains in serious need of improvements and increased Federal 

investment. The conditions of the country’s roads, drinking water systems, public 

transit, wastewater disposal, hazardous waste disposal and navigable waterways 

have worsened since the society’s first report card in 2001. The improvement costs 

are now calculated at $2.2 trillion over the next 5 years. While state and local governments, industry and nonprofit organizations are making major contributions to 

our public infrastructure enhancement efforts, this immense job will never be completed without the aggressive leadership, participation and resources of the Federal 

Government. 

In addition to the health and social benefits of this long-term and on-going process, infrastructure development is vital to the nation’s ability to maintain and sustain a world-class economy. This will be particularly critical as the nation works to 

expand the renewable fuels industry. The transport of raw and finished products, 

for example, is already placing new and growing demands on our infrastructure and 

transportation systems. As proven by USDA Rural Development investments over 

the years, the role of basic public infrastructure and facilities are at the core of both 

sustaining existing businesses, nurturing new companies and improving the quality 

of life in rural counties and communities. That is why USDA Rural Development 

is so significant to local efforts to develop water and sewer facilities, technology-related infrastructure, broadband services, housing and other essential community 

projects. These are all fundamental for commerce and improving the quality of life 

in our communities. As stated earlier, the private sector relies, expects and demands 

that counties and local communities provide and maintain these services and infrastructure. 

As the Committee works to evaluate the existing portfolio of USDA Rural Development programs, we also encourage you to help make the application process for 

new and existing programs more user-friendly and streamlined. While technical assistance providers such as our partners at the regional development organizations 

have developed the experience and expertise required to navigate the extensive 

USDA program portfolio and application process, it can still be a very burdensome 

and time consuming endeavor. This is especially important considering that over 

33,000 of the nation’s 39,000 units of local government have populations below 3,000 

and 11,500 employ no full-time professional employees, according to U.S. Census 

Bureau data. Therefore, NACo supports USDA Rural Development’s stated goal of 

putting together a community development component in rural development specifically geared toward smaller communities that don’t have sufficient capacity. One 

way to assist localities with limited resources will be to increase USDA field staff’s 

knowledge about community development—and to provide direct training and assistance to communities. 

Third, Mr. Chairman, USDA Rural Development’s traditional and newly 

authorized programs are an essential ingredient for rural communities as 

they seek to enhance their basic infrastructure, as well as employ techniques to promote entrepreneurs and businesses. However, these traditional programs should be bolstered by new and more aggressive incentives to promote and reward flexibly funded regional approaches to rural 

development. This reflects the reality of today’s marketplace where rural counties 

and communities are not only competing statewide and nationally, but more likely, 

internationally. The newly authorized Rural Collaborative Investment Program 

(RCIP) is one model that would provide much needed incentives and resources for 

the development of rural development strategies on a regional and local basis, as 

well as flexible program dollars to implement regional and local projects and priority 

initiatives. 

As the home to nearly 1⁄3 of the nation’s population, small town and rural America 

is a diverse, complex and constantly evolving place. Rural America compromises 

2,187 of the nation’s 3,066 counties (counties with 50,000 and below population), 75 

percent of all local governments and 83 percent of the nation’s land. Unfortunately, 

current Federal policies and programs often treat rural counties and communities 

differently than their urban counterparts, resulting in a significant policy bias and 

disadvantage for rural regions and counties. 

Current Federal policies are working to simply sustain rural America rather than 

help rural regions and counties pursue new economic and community growth opportunities. Meanwhile, urban areas often have direct control and access to Federal resources for community, human and physical infrastructure improvements that are 

35

essential building blocks for local development and job growth. NACo is a strong advocate for Federal community and economic development support for our urban 

counties and regions, yet we also firmly believe that rural counties and communities 

should have more robust Federal support for their rural development needs. 

New program tools are needed that are more flexible and broad to meet the individual and specific needs of our rural regions and counties, rather than forcing our 

rural leaders to fit and refigure their projects into the existing set of categorical 

USDA Rural Development programs. For example, Pender County, a rapidly growing county, could benefit if USDA allowed the county to expand its current water 

treatment plant project to meet the demands that we know will occur over the next 

5 to 10 years, but instead we are only allowed to design a facility to meet current 

needs. Thus, almost immediately upon completing the project, the county will be required to incur additional costs related to planning, environmental assessments, engineering and design, and so forth for a plant expansion. In this instance and many 

others, local flexibility in planning for projects would allow for more fiscally responsible and effective use of resources at the local, state and national level. 

In addition, USDA should enact performance measurements and implement needs 

assessments for all programs. USDA, stakeholders, Congress and the public at large 

will benefit from more rigorous evaluation tools to assess the effectiveness of programs. Providing a needs assessment for all programs will help Congress appropriately fund all programs. 

NACo believes the weakness of the current programs is their stand alone nature. 

We seek to move rural development beyond just categorical programs to a stronger 

commitment to regional rural development strategies and programs designed by 

local leaders. We must allow effective USDA Rural Development programs to be 

placed within a planning process that gives rural county and community leaders 

flexibility, resources and incentives to leverage their local assets and use Federal 

and state resources for their top local priorities. 

Study after study by Federal agencies and universities have concluded that additional funding for strategic planning, capacity building and technical assistance programs is one of the most pressing needs facing rural governments and communities. 

This stems from the fact that most rural local governments simply do not have the 

financial resources to hire professional economic development practitioners. And, 

presently there are few Federal programs designed specifically for their needs—unlike urban areas that receive millions of dollars in direct funding from HUD and 

Department of Transportation. Programs such as RCIP offer a great opportunity to 

build upon the existing regional and local institutions throughout rural America, 

while also fostering new approaches to developing comprehensive regional strategies, new multi-sector partnerships and new program flexibility to address the 

unique needs and potential of each region. 

All of the nation’s rural regions, counties and local communities must engage in 

an on-going and dynamic strategic planning process, otherwise they will fall prey 

to complacency and world progress. Even local economies that are excelling today 

are subject to sudden or subtle changes in international, national and local markets. 

Loss of local control with the emergence of global companies, consolidation of banks 

and other industries that were once locally owned and controlled and other factors 

will continue to make the task of regional and rural development more challenging. 

Even more importantly, RCIP would offer fully flexible implementation grants for 

regional and local projects that are identified and prioritized in a region’s comprehensive rural development strategy. On a national competitive basis, counties, 

nonprofit organizations, educational institutions and other eligible organizations 

would be eligible to apply for project implementation resources that address a broad 

range of community and economic development needs, including renewable energy, 

broadband deployment, value-added agricultural development, infrastructure improvements, entrepreneurship, business development finance and community facility 

improvements. RCIP investments would not replace the existing USDA Rural Development portfolio, but instead would complement and leverage existing public, private and philanthropic resources. We urge the Subcommittee to work with their colleagues on the Appropriations Committee to fully fund the RCIP program and work 

to ensure that existing USDA Rural Development programs are as flexible as possible to accommodate innovative local and regional planning efforts. 

In conclusion, I would like to reiterate the three key points. First, the Recovery 

Act is making a significant difference in my county and in rural communities across 

the country. However, many challenges exist for rural counties in their quest to obtain Recovery Act funds and implement new reporting requirements. Second, infrastructure development remains one of the most significant roadblocks to economic 

development and competitiveness in small town and rural America. USDA Rural 

Development is effective at helping communities overcome these roadblocks, but 

36

needs to receive additional resources in the coming fiscal years to meet these infrastructure needs. Third, USDA Rural Development’s traditional and newly authorized programs are an essential ingredient for rural communities as they seek to enhance their basic infrastructure, as well as employ techniques to promote entrepreneurs and businesses. However, these traditional programs should be bolstered 

by new and more aggressive incentives to promote and reward flexibly funded regional approaches to rural development. 

Thank you again, Chairman McIntyre, Ranking Member Conaway and Members 

of the Subcommittee for the opportunity to testify this morning on behalf of the National Association of Counties on these critical rural development issues. I appreciate your time and interest. I look forward to answering any questions.

The CHAIRMAN. Thank you, Commissioner Rivenbark. 

Ms. Debra Martin. 

STATEMENT OF DEBRA MARTIN, DIRECTOR, GREAT LAKES 

RURAL COMMUNITY ASSISTANCE PARTNERSHIP, WSOS

COMMUNITY ACTION COMMISSION, FREMONT, OH 

Ms. MARTIN. Good morning. I would like to thank you, Chairman 

McIntyre, Ranking Member Conaway, and Members of the Subcommittee, for the opportunity to be here to talk about Rural Development programs. 

I am the Director of the Great Lakes Rural Community Assistance Program, which is one of the six regional RCAPs across the 

country. RCAP is a nationwide program that helps small communities meet their water, wastewater, and other community development needs. We provide training and technical assistance to build 

the capacity and sustainability of small systems, and to assist them 

with the development of their infrastructure projects. 

Through the course of our work, we deal with Rural Development 

programs and staff on a daily basis. Since our primary focus is on 

infrastructure, we are quite familiar with the water and waste disposal programs. However, as you are well aware, the needs in rural 

communities go well beyond infrastructure, and so in an effort to 

provide comprehensive services, we have dealt with a number of 

other programs as well. 

Rural Development programs are critically important to small 

communities. They provide small communities the opportunity to 

develop projects that protect public health, the environment, and 

assist with the future development of the community. 

In the interest of time, I am going to talk mostly about the Water 

and Waste Disposal Programs today, although I have included 

some information about other programs in my written testimony. 

The infrastructure needs in small communities in this country 

are absolutely staggering. According to the most recent needs surveys conducted by EPA, small systems will need $34 billion for 

drinking water and $69 billion for wastewater over the next 20 

years. For very small communities, developing an infrastructure is 

a major challenge. It is absolutely impossible for them to achieve 

the economies of scale that are found in larger systems and, because of that, rural residents pay on average about three to four 

times more for these services than people in urban areas. 

In our work it is not unusual to see small, impoverished community residents paying over $100 a month for water and sewer services. In addition, there are literally hundreds of small communities 

in my region alone that are unsewered and are currently under 

EPA mandates to develop sewer systems. 

37

When you are looking at a $4 million capital cost for a sewer system, with a hundred households, which is the case in many of 

these areas, you don’t have to be a mathematical genius to know 

that the math just doesn’t work on those, and it is quite an economic struggle for them to try to develop these systems. This is 

why Rural Development funding is so critical. 

For many, many years, Rural Development has served as the 

lender of last resort for these rural areas. 

The SRF programs that are available through EPA are good programs for larger systems, but the longer terms and the grant funding that is available through Rural Development make them an absolutely critical source for these smaller areas. 

Another challenge the small communities face specifically with 

regard to the Economic Recovery Act is that they are the least likely to have shovel-ready projects, and that is because of the significant costs that go into developing a project to the point that it is 

shovel-ready. And so that is a challenge going forward. There is a 

time limit on the funds, and yet bringing small communities to the 

point that their projects are actually shovel-ready is a difficulty. 

In addition, over the past several years, outside of the Economic 

Recovery Act funding, Rural Development has seen its funding decrease steadily over the past several years. Water waste disposal 

programs from 2003 through 2008 were reduced by 25 percent, the 

Community Facilities Program funding was reduced by 28 percent, 

and housing programs by 33 percent. 

In addition to that, the grant funds that are appropriated to the 

programs have declined significantly over the years. In 2003, the 

average percentage of grant funding that was allocated was about 

39 percent, and it is about 26 percent today. Without the grant portion of the funding, it is nearly impossible for the smallest systems 

to be able to develop their projects. 

And we realize that in terms of budget authority the loan dollars 

can be stretched further and allow them to serve more projects; 

however, at some point if that trend continues, then the program 

will cease to be a viable option for the communities that it was intended to serve. 

Another issue or challenge that we see is that the administrative 

portion of Rural Development funding that pays for staffing, and 

so forth, for Rural Development has been reduced over the years, 

and this is particularly a challenge with the Economic Recovery Act 

funding adding to the number of projects that need to be served. 

And I will just stop right there since I am out of time, and I 

thank you again for the opportunity to talk about the programs 

and welcome your questions. 

[The prepared statement of Ms. Martin follows:]

PREPARED STATEMENT OF DEBRA MARTIN, DIRECTOR, GREAT LAKES RURAL

COMMUNITY ASSISTANCE PARTNERSHIP, WSOS COMMUNITY ACTION COMMISSION, 

FREMONT, OH 

Thank you, Chairman McIntyre and Ranking Member Conaway, for the opportunity to address the Committee. The role of the Federal Government’s USDA Rural 

Development programs in rural America is critical, and we applaud the Committee’s 

efforts to ensure that these programs are working as intended and having a positive 

impact, particularly in today’s economically challenging times. 

38

My name is Debra Martin, and I am the Director of the Great Lakes Rural Community Assistance Program (RCAP), based in Ohio and serving the States of Illinois, 

Indiana, Kentucky, Michigan, Ohio, West Virginia, and Wisconsin. The Great Lakes 

RCAP is part of the national RCAP network, whose regional service providers help 

small, typically low-income, rural communities address water, wastewater, and 

other community development needs. The RCAP network provides training and 

technical assistance to build the capacity and sustainability of small systems, and 

to assist small communities with the development of needed water and wastewater 

facilities. The RCAP network serves over 800 communities every year through funding provided by USDA’s Technical Assistance and Training Grant Program under 

its Water and Waste Disposal Program. 

Working with rural communities nationwide, we deal with Rural Development 

programs and staff on a daily basis. Our primary focus is on infrastructure, so we 

are intimately familiar with the Water and Waste Disposal program. However, 

needs in rural communities go well beyond infrastructure, and in an effort to provide more comprehensive programming, our organizations have made extensive use 

of other Rural Development programs such as Community Facilities, housing programs, the Rural Community Development Initiative program, the Intermediary Relending Program, and others. 

The infrastructure needs alone in this country are staggering. The most recent 

needs surveys by EPA estimate the funding needs in small systems and rural areas 

at $34 billion for drinking water and nearly $69 billion for wastewater over the next 

20 years. 

Small systems nationwide comprise approximately 83% of all public drinking 

water systems and 70% of public wastewater facilities, though they account for a 

much smaller share of the total population served. Small communities face unique 

challenges in developing, upgrading, and operating their water and wastewater facilities. For example, small utilities must spread their capital and operating costs 

among fewer customers—including large commercial, industrial, and institutional 

users—making it impossible to achieve economies of scale found in larger systems. 

Customers in small systems pay, on average, three to four times more than their 

urban counterparts for water and wastewater services, according to EPA data. To 

cite one example, the Appalachian community of Corning, Ohio, with a population 

of 593 and a median income of $27,868, recently developed a new sewer system. Despite utilizing RCAP assistance to obtain every available source of Federal and state 

grant funding, village residents are paying $65 per month for their sewer service. 

Coupled with a $45 per month average water bill, community residents are paying 

nearly 5% of their income for these utilities. The situation in Corning is hardly 

unique. In fact, it mirrors what is happening in small communities all over the 

country. 

RCAP is committed to educating local officials about the importance of maintaining infrastructure investments, encouraging local responsibility, and ensuring that 

residents are paying their fair share for these services. RCAP offers training to utility boards and managers on topics such as financial management, budgeting, asset 

management and rate-setting. However, there is a point at which the cost of projects 

is simply not affordable to rural residents. Assistance from the Federal Government 

is vital to small communities in developing needed infrastructure. Without Federal 

grants and subsidized long-term loan funds, the vast majority of projects in rural 

America, many of which are only marginally affordable even with these funds, are 

simply not feasible. 

The current credit crisis puts small communities at a more pronounced disadvantage. With credit tightening and state and local government revenues shrinking, infrastructure funding is more competitive. Some state agencies have had difficulty 

marketing and selling bonds used to capitalize various state funding programs, even 

those that carry AAA ratings. In such an environment, it can be very difficult for 

small communities to compete with larger cities, particularly when they are far less 

likely to have shovel-ready projects. 

For many years, USDA Rural Development has served as the ‘‘lender of last resort’’ for rural communities. The USDA’s Water and Waste Disposal Loan and Grant 

Program is one of the few infrastructure programs available exclusively for small 

communities. Rural Development is also the lead Federal agency for improving 

housing, community facilities, and providing economic opportunity in rural areas. 

Rural Development programs must be adequately funded if small communities are 

going to have the opportunity to develop projects that are critical to public health, 

the environment, and their future development. 

39

Issues and Challenges in Current Rural Development Programming 

In recent years, Rural Development has seen funding for its programs steadily decrease. Since 2003, funding has been reduced by 25% for water and sewer, 28% for 

rural community facilities, and 33% for rural housing loans and grants (excluding 

funds made available recently through the ARRA). 

In addition, grant funding for water and sewer projects, as a percentage of the 

overall allocation, declined from 39% in 2003 to 26% as of 2006. As previously noted, 

grant funds are critical to help defray the enormous costs of infrastructure development. If the trend of reducing the grant-to-loan ratio continues, the program will 

cease to be a viable option for most small communities, especially those serving lowincome populations. 

The ARRA funding is critical to meet current needs. However, it presents many 

challenges, both to communities utilizing the programs and to the agency, in expending the funds in a timely manner. 

Rural Development’s administrative budget has stagnated in recent years, so the 

agency has fewer field staff to process loan and grant applications, a particular 

problem in handling the time-sensitive ARRA funding. From 2007–2008, Ohio’s 

Rural Development office experienced a 73% increase in demand for its housing programs, and a 170% increase in its business programs. 

Moreover, the ARRA imposes additional requirements that add to the cost of 

projects for communities and the administrative time required to track and report 

on those provisions. 

The challenges for small communities in meeting the compressed timelines imposed by ARRA are great. There are numerous time-consuming and labor-intensive 

steps to the application process, which typically can take communities 2 years or 

more to complete. An engineering report and an environmental review are required 

before the agency begins processing an application. These reports can cost $30,000–

$50,000—a substantial portion of their annual budget. Since there is no guarantee 

that funding will be available, many communities are reluctant to take this risk. 

In addition, completing an environmental report at this stage slows the process considerably; it typically takes 3–6 months to complete a review. 

There are many more tasks to be completed before funds can be obligated. Once 

obligation occurs, several additional time-consuming steps must be completed before 

construction can begin, such as submission of user agreements and plans for connection of customers, securing rights-of-way and easements, completion of engineering 

design and a review by Rural Development, securing required permits, development 

of an annual budget. 

The RCAP program and the technical assistance it provides serve as a bridge between the agency and communities. RCAP staff have a detailed working knowledge 

of Rural Development goals, processes, and priorities and can help meet them while 

serving the needs of small communities. For instance, last week the RCAP program 

in Ohio, in conjunction with Rural Development, conducted a workshop to reach out 

to communities and make them aware of additional funding available through the 

agency and how to access it. This workshop was attended by over 100 people. RCAP 

assists not only with the applications and every phase of the project development 

process, but also provides training and technical assistance to projects after construction is complete, helping small systems understand how to properly manage 

and operate the system in a financially sustainable manner. 

Examples of additional issues with Rural Development programs that need to be 

corrected in order to maximize their effectiveness include the following:

• The IRS ruling that communities cannot utilize tax-exempt bonds when securing loan guarantees under the Water and Waste Disposal and Community Facilities programs. This negates the favorable interest rate they receive through 

the program and renders the program ineffective.

• Intermediary Relending Program (IRP) funding, which makes loans to nonprofits that re-lend the funds to local businesses, has declined in recent years, 

despite the program’s proven record of job creation and significant leveraging 

without a single default.

• The Rural Business Opportunity Grant (RBOG) is funded at such a low level 

outside its earmarked funds that it wastes the resources of agency staff and the 

communities that complete the 100+ page application, since 99% of applications 

go unfunded. This program should either be funded at a higher level or discontinued.

• The Value-Added Producer Grant and the Rural Energy for America Program 

are available to farmers, but applications are only accepted once per year, generally during the busy spring planting season. Program funding should be anVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00043 Fmt 6633 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
40

nounced early in the fiscal year so that producers could work on the application 

during the winter months. The timing of annual appropriations is typically 

blamed for the delay. 

Recommendations To Assist Rural America and Improve RD Programs 

Solving the problems facing rural communities requires a multi-pronged approach 

that includes adequate funding, along with steps to ensure that grant funding is 

available only to the most needy communities, that there is sufficient technical assistance available to ensure that the funds are distributed where they are most 

needed, and that alternative approaches are considered. Specifically, RCAP offers 

the following recommendations:

(1) Annual appropriations for Rural Development programs need to increase. 

While it may be unrealistic to expect programs to be funded at ARRA levels, 

programs should have funding restored to the highest feasible levels. (This includes the IRP and RBOG programs mentioned above.)

(2) Improve the grant-to-loan ratio in the Water and Waste Disposal Program. 

The farm bill authorized lower interest rates, which will help make projects 

more affordable for communities. However, the additional loan subsidy further 

reduces available grant funding, and many low-income communities simply cannot develop feasible projects without grants.

(3) Eliminate the ‘‘similar systems rule’’ in the Water and Waste Disposal Program. Rural Development awards grant funding to systems to subsidize user 

rates to a ‘‘reasonable’’ level. This generally is based on user rates as a percentage of median household income. However, the similar systems rule is essentially a loophole that allows consideration of the rates paid by systems in the 

same geographic area, regardless of income. This permits some systems to receive grant funding and maintain rates that are too low, when a low-interest 

loan would have been affordable. Establishing rates as a percentage of median 

income is equitable and should be the sole means of determining grant funding.

(4) Strengthen provisions that require communities to consider regionalization/

collaboration. Too often, these options are given a cursory examination and dismissed because of a lack of support by the community. In order to maximize 

limited resources, communities need to realistically examine whether operating 

their own facilities is cost effective. Many Rural Development offices have not 

forced communities to consider these alternatives because they are not politically popular. Therefore, such a requirement should be part of the law. While 

there may be legitimate reasons for communities not to choose regionalization, 

the burden of proof should be on the community.

(5) Increase technical assistance funding that will allow RCAP and other providers to keep pace with growing demand. Currently, in Ohio and other Great 

Lakes RCAP states, there is far more demand for assistance, particularly with 

new sewer projects, than can be met with existing technical assistance funding. 

These projects tend to be very time and labor-intensive, as they are typically 

the smallest and, hence, the most difficult to fund, communities.

In addition to technical assistance for water and wastewater, a broader technical assistance program to help rural communities access funds for community 

facilities, community planning, and economic development should be created. 

During the course of our water and wastewater work, we are frequently approached by rural communities to provide these other services because they lack 

full-time staff or expertise to access funds that might be available to them. In 

the last 2 years, we have received over 60 requests for such assistance in the 

Great Lakes region.

(6) Delay the environmental assessment requirement until after the initial application is submitted. As long as the assessment is completed prior to the start 

of construction, it will meet the requirements of the National Environmental 

Policy Act. This would allow the assessment to be completed simultaneously 

with other requirements—including final engineering design—and would speed 

the processing of applications.

(7) Provide a legislative remedy to the IRS ruling on loan guarantees.

(8) Make programs directed to farmers available at appropriate times of the 

year, or consider moving to a year-round application period.

We thank the Committee for considering our testimony on these issues and thank 

you for your commitment to meeting the needs of rural America’s communities.

DEBRA MARTIN, Director,

Great Lakes RCAP, 

41

WSOS Community Action Commission, 

Fremont, OH.

The CHAIRMAN. Thank you very much. I am sure there will be 

an opportunity through questions and available additional testimony if you would like to provide that in writing. 

I will now call Governor Sanchez. 

STATEMENT OF HON. CHANDLER SANCHEZ, GOVERNOR, 

PUEBLO OF ACOMA, ACOMA, NM; ON BEHALF OF NATIONAL 

CONGRESS OF AMERICAN INDIANS 

Governor SANCHEZ. Chairman McIntyre, Ranking Member 

Conaway and Members of the Committee, my name is Chandler 

Sanchez, and I am the Governor of Pueblo of Acoma. On behalf of 

Pueblo of Acoma and the National Congress of American Indians, 

the oldest and largest national organization representing tribal 

governments, thank you for providing Indian Country with this opportunity to testify. 

Indian Country is America’s most rural population, 60 percent of 

Native Americans live in rural America compared to the national 

average of 30 percent. Tragically nine out of ten poorest counties 

in America contain Indian reservations. Our infrastructure deficiencies are Third World-like. For example, 30 percent of Natives 

do not have basic telephone access, and 90 to 95 percent do not 

have high-speed Internet service. Thirteen percent of us don’t have 

access to clean water, and 14 percent of us don’t have electricity. 

Sixty-five percent of our roads are dirt and gravel. And while the 

U.S. unemployment rate has risen to nine percent, many of our 

communities struggle with an unemployment rate as high as 90 

percent. 

Although we are the most rural, we are dramatically underserved by the USDA. For example, we lack access to water at the 

rate of 20 times greater than anyone else. And yet of the 250 economic stimulus water projects announced by the USDA, we could 

only find one that was clearly tribal. While USDA does have great 

tribal liaisons, and many are very dedicated employees, there continues to be a major impediment blocking Indian Country access to 

USDA’s programs. 

In preparation of this testimonial, NCAI asked tribal leaders how 

USDA applications were going. The most common answers we received were that they had never heard of the program, or that they 

didn’t have the resources to apply. 

We recommend first that USDA conduct full government-to-government consultation with Indian Nations to facilitate implementations of the Recovery Act; ten percent set-aside for persistent poverty counties. No such consultation has yet taken place. 

Second, that there should be a more substantial set-aside for Indian Country in rural water and water disposal programs, and that 

the programs predominantly provide grants for poorer communities. Over 13 percent of tribal homes lack basic access to safe 

drinking water and/or basic sanitation compared to the nationwide 

average of one percent. 

Lack of inadequate and safe water is not only a health hazard, 

but also a major barrier to economic development. For example, the 

Cheyenne River Sioux Tribe has imposed a ban on new construcVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00045 Fmt 6633 Sfmt 6601 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
42

tion because of an inadequate water system that is at a 99 percent 

capacity. A new water intake system would cost approximately $80 

million. Last year Congress appropriated $60 million for all tribes 

in rural water accounts, with a USDA cap of no more than $1 million per tribe. 

Third, we recommend that the Community Facilities Program 

should have a trouble—specific set-asides appropriate to the needs 

in Indian Country, and that the program should permanently provide grants for poorer communities. My own tribe applied for this 

last year for a community facility loan/grant package for the construction of $14 million community center and wellness facility. 

This center, which is 100 percent shovel-ready, would serve our 

reservation and the entire surrounding rural community, a total of 

10,000 people. 

USDA worked with us closely; however, we were stunned when we received a draft loan/grant letter that provided for $14 million 

in loan and loan guarantees and absolutely no money in the form 

of a grant. USDA’s officials have explained that the Community 

Facilities Program does not have sufficient grant funding, and that 

we need to come to Congress. So here I am. 

Let me close with a list of some of the other recommendations 

that we have detailed information on each of them in my written 

testimonial. Congress and the USDA should fund the Administration’s request for USDA’s tribal office and evaluate the current office for an Assistant Secretary for Tribal Affairs; establish an Indian Country office in Rural Development; provide Indian reservations with the same access to USDA as given to every community 

in America; create tribal set-asides in all Rural Development programs proportionate to the needs; ensure that the grants rather 

than loans are actually available for the poorest counties and communities; better tailor the application process for tribal governments; distribute some funds based on need formulae rather than 

competitive grants. 

And finally, while we recognize it isn’t the focus of today’s hearing, we hope Indian Country is invited back to talk about many 

concerns we have about telecom and the USDA. 

Thank you so much for having me here to speak today. The 

tribes at NCAI look forward to working closely with the Committee 

on these issues. Thank you. 

[The prepared statement of Governor Sanchez follows:]

PREPARED STATEMENT OF HON. CHANDLER SANCHEZ, GOVERNOR, PUEBLO OF ACOMA, ACOMA, NM; ON BEHALF OF NATIONAL CONGRESS OF AMERICAN INDIANS

Chairman McIntyre, Ranking Member Conaway, and the Members of the Committee, thank you for having me here today. My name is Chandler Sanchez and I 

am the Governor of the Pueblo of Acoma. On behalf of the Pueblo of Acoma and 

the National Congress of American Indians (NCAI), the oldest and largest national 

organization representing tribal governments, I am delighted to be here. Thank you 

so much for ensuring that a Native voice was heard today. 

As you know, the USDA in general and the Rural Development Office specifically 

is extremely important to Native people, yet we continue to be dramatically underserved. Indian Country is America’s most rural population. While only 30% of America lives in rural areas, nearly 60% of Natives still live in rural America. And we 

are probably the rural population most in need of rural development. Nine of the 

ten poorest counties in America are not in the South or in West Virginia, they are 

counties with Indian reservations. And while only 1% or less of the general U.S. 

population doesn’t have access to a phone, or to electricity, or to clean water—30% 

43

of Natives do not have basic telephone access, 14% of us still don’t have electricity, 

and over 13% of us don’t even have access to clean water. And while the U.S. is 

concerned with the unemployment rate rising to 9%, many of our communities have 

been struggling with 90% unemployment. There is perhaps no area more desperately in need of the USDA Rural Development services than Indian Country. 

Despite this desperate need, Indian Country is not getting served well by the 

USDA. For example, of the 250 economic stimulus water projects just announced by 

the USDA, I could only find one that was Tribal. Yet we lack access to water at 

a rate 20 times greater than anyone else. 

It is not news that the USDA is bureaucratic and inflexible. But there are a number of systemic issues built into the USDA requirements structure that perpetuate 

this problem in Indian Country. I will go into more detail, but one example is the 

USDA and Congressional preference for loans over grants. We understand and respect this from a business point of view, but many of our communities have no resources for loans, and no way of getting resources to pay back loans until we have 

basic infrastructure in place. It’s a vicious cycle. Another example is the USDA’s 

preference for ‘‘incumbents’’ in their funding. If the current companies, the incumbents, were serving Indian Country well, we wouldn’t have this dramatic lack of 

service. 

I don’t mean to infer the USDA has done nothing. They have a very good tribal 

liaison in the Rural Development office that is working very hard, a number of very 

dedicated state employees, and they have done some calls and webinars for Indian 

Country on the economic stimulus, both with NCAI and with the White House. 

However, there continue to be major systemic impediments, and the overall USDA 

effort has been insufficient. I think most telling is that in preparation for this testimony, we sent out a notice throughout Indian Country asking for stories on how 

these programs were working. Unfortunately, rather than being given a list of how 

the applications were going and how any funds were being spent, the most common 

answer we received was that they had either never heard of the programs or they 

didn’t have the resources to apply. Something is inherently broken when the resources are not getting to those who need them most. 

The Need for USDA Rural Development in Indian Country 

This Committee, perhaps better than any other, understands the importance of 

the USDA and its rural development programs for Indian people. While only 30% 

of America lives in rural areas, nearly 60% of Natives still live in rural America. 

And not only are our areas just rural, they are often very remote and isolated. For 

example, most of the villages in Alaska still have no road access at all and all travel 

is only available a few months of the year by plane. Throughout all of Indian Country, 65% of our roads are dirt and gravel, treacherous throughout the year and impassable during bad weather. 

Not only can we not travel well, we cannot communicate well, with 30% of us not 

having basic telephone service and 90–95% of us not having high speed Internet access. Last year NCAI took a delegation to Indian Country, and the while there the 

White House staff were very surprised to find that even their high tech international phones would not get a signal in Indian Country. Without the basic skeletal infrastructure of roads, water, and communications in place, economic development continues to elude us. Despite the well known successes of a few of our Tribes 

located in more populated settings, nationally we continue to have a poverty rate 

twice that of the rest of America (25%). 

The Poorest Counties in America Are Indian Country. A census statistic, in 

which we take no pride, is that nine of the ten poorest Counties in the U.S. are Native American reservations and communities, six of them alone are in North and 

South Dakota. By and large these are rural and often isolated counties, which are 

in desperate need of a better relationship with USDA and Rural Development.

County Tribe/Reservation 

1 Buffalo County, South Dakota Crow Creek 

2 Shannon County, South Dakota Pine Ridge 

3 Starr County, Texas ——

4 Ziebach County, South Dakota Cheyenne River 

5 Todd County, South Dakota Pine Ridge 

6 Sioux County, North Dakota Standing Rock 

7 Corson County, South Dakota Standing Rock 

8 Wade Hampton, Alaska Several Native Villages/92% Native 

9 Maverick County, Texas Kickapoo Traditional Tribe of Texas 

10 Apache County, Arizona Navajo and White Mountain Apache 

44

i United States General Accountability Office, ‘‘Alaska Native Villages, Most Are Affected by 

Flooding and Erosion but Few Qualify for Federal Assistance,’’ GAO–04–142 (December 2003). 

USDA Rural Development and Indian Country 

ARRA and ‘‘Persistent Poverty Counties’’

The Recovery Act provides a 10% set-aside to persistent poverty counties for the 

billions of dollars provided to USDA Rural Development programs for water and infrastructure, business and investment, community facilities, and rural housing. To 

date however we do not know how USDA intends to reach out to these another persistent poverty counties, especially since, as was just discussed, nine of ten of the 

poorest are actually Tribal counties and it is the Tribes, not the County government, 

that provide most of the services. To the best of our knowledge, the USDA has not 

reached out to consult with the Tribal governments themselves within these counties or to discuss and plan implementation of this provision. 

‘‘Persistent Poverty County’’ Recommendation:

• NCAI and the Tribes would be pleased to be invited to be part of the solution. 

We very much look forward to hearing from USDA on approaches being considered and any progress that may have already been made in the dispensation 

of funding to persistent poverty counties and the Tribes within those counties. 

Rural Water and Waste Disposal 

13% of Tribal Homes No Water Access. Currently over 13% of tribal homes 

lack basic access to safe drinking water and/or basic sanitation (living conditions 

often associated only with the developing world). The statistic for the rest of America is less than one percent nationwide, 0.6%. With the proportion of Native people 

lacking access to safe drinking water at over 20 times the national average, one 

would think that the proportion of Federal funding would at least approximate this 

dramatic difference. However, just using the USDA’s own press announcements regarding over 250 water projects water and waste water projects funded under ARRA 

(April 28 and May 28), we counted only one of which we could identify as Tribal, 

or 0.4% of the projects recently funded. 

Alaskan Example. In rural Alaska residents of many Alaska Native Villages 

must still use external ‘‘honey-buckets’’ and then have their waste transported by 

all-terrain vehicles to untreated sewage lagoons nearby. To compound this problem, 

many of these lagoons often overflow (as according to a 2003 Government Accountability Office report, 184 out of 213 Alaskan villages are subject to flooding, melting 

permafrost, and erosion due to warming temperatures),i leading to a variety of additional health issues. 

South Dakota Example. The water need for economic development is so great 

in our Nations it is almost overwhelming to discuss. For example, in South Dakota, 

the Cheyenne River Sioux Tribe’s, economic development has been completely halted 

due to lack of water. The antiquated water system is at 99% capacity, and there 

is a complete ban on new construction. While the housing need is enormous, there 

is absolutely no housing available, and 750 requested homes wait in the queue to 

be built. This bars economic development, as the Tribe cannot hire new employees 

or teachers, or attract any new business, as there is nowhere for them to live or 

build. The lack of water and housing is also a public safety issue. Unfortunately Indian Country has some of the highest rates of violence against women, but there 

is no housing for our women and children to move into, if they need to get out of 

their home environment into safety. 

The new water intake system for Cheyenne River will cost approximately $80 million. Last year Congress appropriated $16 million for all tribes in the rural water 

account, with a USDA cap of no more than $1 million per tribe. Clearly this rate 

of Congressional and USDA investment will never pull Indian Country out of its 

third world water conditions. 

Water Recommendations:

• Increase Set-Aside Authorization. This is not just an appropriations issue, 

this is an authorization issue. We need this Committee to commit to a more 

substantial set-aside for Indian Country in the Water account. If our need is 

20 times that of the general population, a 20% or more set-aside in the rural 

water account for this area is necessary and humane until this dramatic gap 

begins to close.

» We recognize that the Alaska water account has had Federal implementation 

issues over the last few years and we look forward to that being worked out, 

and that program finally being effectively distributed within Alaska.

45

• Focus on Grants Rather Than Loans. Additionally, this account needs to be 

available predominantly in grant funds to these poorer communities. If these 

Tribes had the resources to build out with loans, they would have already done 

so. While the USDA policy is that up to 75% of the project cost can be provided 

in loans, in reality that caps at around 25%. This ratio needs to be addressed 

for these poorest counties and areas. The problems with the loan issue are compounded by the fact that many of these Tribes have treaty right access to these 

waters, and many of the water access issues were caused by the Federal Government itself, including the national damming projects.

• Interagency Coordination on Indian Water Projects. Several agencies 

such as the USDA, Indian Health Service, Environmental Protection Agency 

and Housing and Urban Development, provide some aspect of water infrastructure funding for Indian Country. However, each agency has different engineering standards, reporting requirements, and grant cycles among other things 

that make it extremely difficult for Tribes to be able to access these resources. 

One good example of cooperation is the USDA–IHS Memorandum of Understanding (MOU) to designate a lead agency to manage all of the major aspects 

of a project, such as project management, funding, and engineering standards. 

That MOU resulted in MOAs between IHS and USDA in the States of Washington and Mississippi. Such interagency cooperation on Indian water projects 

should be replicated across more of the programs and the agencies, and in state 

to create efficiencies that result in water infrastructure in rural America, including Indian Country. 

Rural Community Facilities 

The Rural Community Facilities program is one which Tribes are very excited 

about, as with much of rural America, our needs for essential community facilities 

such as fire houses, ambulance services, tribal court buildings, etc. are great. For 

example, our education buildings alone are, on average, at least 60 years old; while, 

40 years is the average for non-Indian schools. 

In particular, we are grateful for the Tribal college facilities program under this 

account for our land-grant institutions. The Tribal Colleges are a one of the biggest 

facilitators for educational and economic growth in our communities. However, there 

are no set asides in this program for tribal governments and Indian Country. Additionally, as with the water program the loan amounts available are dramatically 

greater than grant amounts. Many of our communities, especially those in the most 

impoverished areas, are not able to adequately participate in a loan program. 

My own tribe, the Pueblo of Acoma, applied this year for a Rural Development 

loan/grant package for the construction of a $14 million community center and 

wellness facility. This center, which is 100% shovel-ready, would not only serve our 

reservation, with a population of about 4,000, but also surrounding communities 

with an additional rural population of 6,000. It would house a gymnasium and other 

wellness facilities to help us address diabetes and other community health issues. 

The state USDA office has worked with us closely and we have great respect for 

these Federal employees. They care about Indian Country. However, we were 

stunned when we received from them a draft community facilities loan/grant letter 

that provided for $14 million in loan and loan guarantees and absolutely no money

in the form of a grant. We were told that as a matter of policy USDA does not provide significant grant funding for community facilities. 

With all of the economic stimulus funding that has been made available for shovel-ready projects, it is hard to believe that USDA could not come up with any grant 

funds. We thought that we might see something like 30–40% of the project funded 

by grants—not zero percent. It is clear to us that USDA Rural Development is not 

mobilized to get out ARRA funds where they are most needed, as was intended by 

the Congress. 

Since then, USDA officials have said that they might be able to provide $200,000 

in the form of a grant. But this is still barely more than 1% of the total cost. This 

facility is important to our community. Acoma is willing to borrow many millions 

towards construction of this facility, but we need USDA grant support. This is just 

one of many examples where many of the resources are not getting down to those 

communities that need it most. 

Rural Community Facilities Recommendation:

• Create a Set-Aside Authorization. Unlike many of the other USDA programs, there is no Tribal specific set-aside in the Rural Facilities program. A 

set-aside proportionate to the need would dramatically help with the extensive 

facilities needs in Indian Country.

46

• Focus on Grants Rather Than Loans. Additionally, this account needs to be 

available predominantly in grant funds to these poorer communities. If these 

Tribes had the resources to build out with loans, they would have already done 

so. While the USDA policy is that up to 75% of the project cost can be provided 

in loans, in reality that caps at around 25%. This ratio needs to be addressed 

for these poorest counties and areas. 

Rural Business 

Unfortunately, we are unable to adequately address the Rural Business program 

in this testimony as we could only identify one Tribe that was in the process of applying for these economic stimulus funds. 

Rural Business Recommendation:

• While we are hopeful there are a number more individual Native and Tribal 

governments participating, we believe there needs to be much more education 

and outreach to our communities about these programs. 

Telecommunications 

We recognize telecommunications is not the focus on this particular hearing, so 

we will not go in to much depth, but with only 5–8% high speed Internet penetration rate, and 32% of our population still with no telephone service at all, we are 

hopeful that a witness from Indian Country will be called to testify at any future 

telecom specific hearings. Quickly I just want to mention one area of concern and 

offer some additional concrete recommendations. First, the current non-Tribal providers being funded by USDA are not serving Indian Country well. If they were, we 

would not have such access issues. But USDA’s system is set up to perpetuate this 

lack of access, by favoring current providers or ‘‘incumbents.’’ We advocate for preference for Tribal providers, regardless of whether there is another provider nearby 

in the service area. 

Telecom Recommendations:

• Create a Tribal Spectrum Loan Program with FCC for Tribes to purchase spectrum and develop spectrum services in Tribal communities.

• Ensure all authorizations and appropriations are designed to be reflective of the 

disproportionate lack of access in Indian Country.

• Ensure the USDA is properly implementing the ‘‘Substantially Underserved 

Trust Area’’ (SUTA) discretionary program Congress created in the farm bill.

» Ensure the USDA is reaching out to Tribal governments to encourage them 

to serve as their own providers.

» Ensure USDA is using the discretion granted under the program to waive 

nonduplication restrictions and matching funds requirements, and to give the 

highest funding priority to designated projects in SUTAs.

• Change broadband authorization to not continue to prioritize non-Tribally 

owned incumbent providers when the service area includes Tribal lands.

• Create a telecom set-aside for Tribal areas consistent with the level they are 

under-serviced compared to the rest of the U.S.

• Use criteria for funding projects and service in rural and Tribal areas and assessment of funding achievement which measures ‘‘increased connection’’ to 

public infrastructure and public access points.

• Authorize and provide grants and loans to conduct telecommunications engineering and financial feasibility studies. 

Additional Recommendations 

Improve Outreach and Consultation 

• Establish Indian Country Office in USDA Rural Development. The USDA 

state structure does not work particularly well for Indian Country. It does not 

take into account the broader national deficiency for Natives. The Rural Development does have an Indian liaison, Ted Buelow, and he is terrific. But he is 

one person for over 560 Tribes, the areas with the very greatest need it is an 

impossible task for just one person. USDA Rural Development should have a 

completely staffed Indian office at Headquarters reporting directly to the Under 

Secretary, with at least one tribal liaison for each major office within Rural Development.

• Fund the Administration’s Request for USDA Department-wide Office 

of Tribal Liaison. While today we are just focusing on Rural Development, all 

of USDA has a dramatic impact in Indian Country. For example, agriculture is 

the second largest industry in Indian Country, many tribes depend on an array 

47

of additional USDA programs, such as in telecommunications, electricity generation, extension programs, and FDPIR. In addition, many of our most sacred 

lands and places are located on U.S. Forest Service land. We are disappointed 

that the new Administration let go of our Tribal liaison. But we are hopeful 

that they intend to fill that position again very quickly, and expand that office 

as they requested $1 million to fund a Tribal Governmental office for USDA. 

We respectfully ask that the Committee not only support the Appropriations 

Committee in funding this request, but also permanently authorize this office.

• Provide Indian Reservations with the Same USDA Access Given Every 

County in America. Congress mandates and funds research and extension 

services in every county in the nation except on Indian reservations. The Extension Indian Reservation Program (EIRP) must be expanded to provide access, 

education and training to Tribes, including Alaska Native Villages, and Tribal 

colleges. This program provides the only Federal source of funding to cover the 

cost of placing extension agents on Indian reservations. Only 27 reservations 

have EIRP programs, which is only 5% of all Tribes. The new farm bill directs 

extension agents to be placed in areas ‘‘where there has been a need demonstrated.’’ I hope we have sufficiently demonstrated ‘‘need’’ today and respectfully request the Committee to ask the USDA about the progress on EIRP expansion.

• Encourage USDA To Implement its New Tribal Consultation Policy. Perhaps 

more than any other agency, significant progress needs to be made in USDA’s 

understanding of the nation to nation relationship that exists between Tribes 

and the Federal Government. Rather than viewing the Federal Government as 

a partner, especially regarding decisions that directly affect Tribes, the USDA 

has largely treated Tribes as either an afterthought or an impediment. USDA 

had established an agency directive that closely follows the Executive Order on 

Collaboration and Consultation with Indian Tribal Governments (E.O. 13175), 

but we do not yet believe it has been implemented. We look forward to working 

with USDA to educate and advise USDA decision makers and staff to ensure 

that tribal consultation is understood, appreciated, and implemented. We look 

forward to forming a much needed partnership. 

Directly Address the Disproportionate Need 

• Create Tribal Set-Asides Proportionate to the Need. As discussed throughout the testimony, in many areas Tribal lands have a clearly disproportionate 

need for many of the USDA’s Rural Development programs. Yet none of these 

programs allocates funds proportionate to that need, and only a handful of these 

programs have set-asides for Tribes. Set asides in dozens of other Federal programs range anywhere from 3–20%, depending upon the need, and many agencies have Tribal-only programs in areas in which the need is so disproportionately great.

• Grants Rather than Loans for the Poorest Counties and Communities.

For many of our communities, there are no viable loan repayment options. 

While technically USDA can fund up 75% of the project cost with grants, practically speaking no one really receives much more than 25%. This ratio needs 

to be addressed for these poorest counties and areas. 

Remove Barriers to Access

• Better Tailor Application Process for Governments. Many Tribes whom I 

spoke to in preparation for this testimony outlined the difficulty they had with 

the USDA in the application process regarding Tribal financials. The USDA application process is not designed to take into account the complexities of a Tribal government and its financials; they often require too much onerous irrelevant 

information. We strongly recommend USDA reach out to other agencies, like 

IHS and Bureau of Indian Affairs who more regularly provide grants to Tribal 

governments, to design a less intrusive and more effective application process.

• Distribute Some Funds Based on Need Formulas Rather Than Competitive Grants. It is well known within Indian Country that our communities 

most in need do not often have the grant writing capabilities to effectively vie 

for competitive grant programs. So while communities may have the greatest 

need, it is precisely this reason that they are often unable to allocate any free 

resources to effective grant writing. We encourage Congress and the USDA to 

look into more formula based programs where funds are distributed to areas 

with the greatest rural development need.

• Better Interagency Coordination on Indian Projects. Several agencies 

such as the Indian Health Service, Environmental Protection Agency and HousVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00051 Fmt 6633 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
48

ing and Urban Development, provide some aspect of funding for Indian Country 

that they share with USDA. However, each agency has different standards, reporting requirements, and grant cycles among other things that make it extremely difficult for Tribes to be able to access these resources.

The CHAIRMAN. Thank you. Thank you very much for your testimony. 

Mr. Anderton. 

STATEMENT OF DOUG ANDERTON, GENERAL MANAGER, DADE 

COUNTY WATER AND SEWER AUTHORITY; VICE PRESIDENT, 

NATIONAL RURAL WATER ASSOCIATION; PRESIDENT,

GEORGIA RURAL WATER ASSOCIATION, TRENTON, GA 

Mr. ANDERTON. Thank you, Chairman McIntyre and Ranking 

Member Conaway, for inviting me to testify today. It is a great 

honor to be asked to represent the small, low- and moderate-income communities across the nation who depend on rural water to 

provide the most basic of needs. As the Vice President of the National Rural Water Association, and the sitting President of the 

Georgia Rural Water Association, I hear daily from rural communities in need of assistance. Water is the essential ingredient of 

life, and the work of this Committee and its counterpart in the 

United States Senate, along with the USDA, to restore and improve the public health, environmental and sustainability of these 

small communities—in other words, to level the playing field with 

our urban counterparts—is essential so individual small communities can prosper in this global competitive environment. 

I speak to you on behalf of the National Rural Water Association, 

and NRWA is a nonprofit federation of state rural water associations who represent the nation’s largest utility membership. Our 

mission is to provide support services for our state associations, 

who have more than 26,696 water and wastewater system members. 

I have come here today to discuss the American Recovery and 

Reinvestment Act and its impact thus far. I would like to first 

thank the Chairman and Ranking Member and other Members of 

this Committee for their foresight with this legislation, and would 

be remiss if I did not mention that it was Chairman McIntyre who 

held a briefing in January to ensure rural America was not left behind. 

With billions in rural water projects waiting for funding through 

the USDA Rural Utilities Service’s Water and Wastewater Grant 

Program, the need for these communities was apparent. As you 

know, this Committee and your Senate counterparts provided 

Rural Utilities Service with $135 million to address the backlog of 

projects in the Water and Wastewater Loan Program during the 

consideration of the 2008 Farm Bill. Using this allocation, RUS 

was able to distribute money directly to the rural communities 

within 90 days. USDA was also able to target these funds to lowand moderate-income rural communities. 

Compared to other Federal assistance, this program speaks directly to the needs of rural America. These rural communities often 

have extreme difficulties in competing with their urban counterparts for funding with other Federal and state agencies that may 

49

lack an understanding of the unique circumstances rural residents 

face. 

It was for these reasons that funding of $1.38 billion in budget authority, enough for $3.78 billion in program level, was included 

in this bill. This represents the largest single infusion in the USDA 

Water and Wastewater Program’s history, enough funds to completely eliminate the backlog of existing projects and address those 

new project applications which communities have been waiting to 

submit. 

The amount of the ARRA funding released by the Department of 

Agriculture to small and rural water systems has increased over 

the past months with announcements of $132 million and $635 million. This has somewhat trailed the level of funding distributed by 

the EPA-State Revolving Loan Fund, where most of the money is 

already allocated on projects. We anticipate that USDA spending 

rate will increase over the next several months to meet the number 

of applications received. 

There are several factors which may be contributing to this slower distribution. The first is the current lack of guidance from the 

Department on the Buy American and the Davis-Bacon provisions 

in the bill. While other departments have issued guidance on these 

provisions to allow communities to tailor applications and develop 

proposals, the USDA has yet to do so. 

A second concern is the fact that ARRA did not provide the Secretary any flexibility or waiver authority in administering these 

funds to local communities. We have heard numerous situations 

where a small community is not eligible because they slightly exceed the population or median income limit, or needed to have a 

higher grant-to-loan ratio for affordability purposes. 

The ability to use grant dollars for very low-income communities 

is critical as well. Previous legislation for disaster and stimulus 

purposes provided the Secretary with limited authority to assist 

these communities that otherwise meet the Congressional intent 

for assistance. We would ask that the Committee explore and provide the Secretary this authority. 

Mr. Chairman and Members of the Committee, we believe, at 

National Rural Water, that Rural Development has the field structure and the proven experience to handle this huge task. And we 

at National Rural Water Authority are willing to assist in any way 

that we can. 

I sincerely thank you for the work that you have done on behalf 

of rural America. Your efforts are appreciated. And I look forward 

to any questions you may have for me. Thank you. 

[The prepared statement of Mr. Anderton follows:]

PREPARED STATEMENT OF DOUG ANDERTON, GENERAL MANAGER, DADE COUNTY

WATER AND SEWER AUTHORITY; VICE PRESIDENT, NATIONAL RURAL WATER

ASSOCIATION; PRESIDENT, GEORGIA RURAL WATER ASSOCIATION, TRENTON, GA 

I would first like to thank Chairman McIntyre and Ranking Member Conaway for 

inviting me to testify today. It is a great honor to be asked to represent small, low 

and moderate income communities across this nation who depend on rural water 

systems to provide the most basic of needs. As the Vice President of the National 

Rural Water Association and sitting President of the Georgia Rural Water Association, I hear daily from rural communities in need of assistance, whether it is to design or construct a new system, repair an existing system or respond to a pending 

emergency, we are always there. Some of these communities would not be in existVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00053 Fmt 6633 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
50

ence without the USDA programs we discuss today. Water is the essential ingredient to life, and the work of this Committee and its counterpart in the United 

States Senate, along with that of USDA to restore and improve the public health, 

environment and sustainability of these small communities, or in other words, to 

level the playing field with our urban counterparts so individualism small communities can prosper in this globally competitive environment. Many lack the capacity 

or resource base to make these changes without the direct assistance of these programs. 

I speak to you today on behalf of the National Rural Water Association (NRWA). 

The NRWA is a nonprofit federation of State Rural Water Associations which represent the nation’s largest utility membership. Our mission is to provide support 

services to our state associations who have more than 26,696 water and wastewater 

systems as members. 

Member state associations are supported by their water and wastewater utility 

membership and offer a variety of state specific programs, services, and member 

benefits. Additionally, each state association provides training programs and on-site 

assistance in areas of operation, maintenance, finance, and governance. Whether a 

rural system needs help developing a new rate schedule, setting up proper testing 

methods, maintaining or upgrading their operator license, or even understanding 

those ever-changing and complex governmental regulations, state rural water associations and NRWA are the first and best source for assistance to these systems. 

NRWA’s support for a clean and healthy environment is second to none. Our state 

associations have historically trained over 40,000 water and wastewater system personnel a year for over 2 decades and provided over 60,000 on-site technical assistance visits a year. Over 2,600 ground water protection plans have been adopted by 

local communities, and another 2,300 are in the process of being adopted. NRWA 

and its state associations are on the front lines everyday ensuring water is safe and 

available each time someone in rural America turns on the tap. 

I’ve come here today to discuss the recently passed American Reinvestment and 

Recovery Act (ARRA) and its impact thus far. I would first like to thank the Chairman, Ranking Member and the other Members of the Committee for their foresight 

with this legislation. I would be remiss if I did not mention that is was the Chairman of this Committee that held a briefing on January 9 of this year to make sure 

Rural America wasn’t left behind and with this historic appropriation level, enough 

to fund the entire backlog, of water and wastewater requests—you have achieved 

that goal. On behalf of the thousands of rural communities throughout this nation, 

I want to personally thank you. 

As Congress reviewed the current needs of communities nationwide for the development of a stimulus measure earlier this year, rural areas became a central point 

of discussion. With billions in rural water projects waiting for funding through the 

USDA Rural Utility Services’ (RUS) Water and Wastewater Grant and Loan Program, the need in these communities was apparent. While Congress had attempted 

to address these needs in both annual appropriations and supplemental farm bill 

funding, the need had far exceeded the available funds. To this end, NRWA supported the inclusion of funds to address this need in the ARRA, and pointed to the 

success the Department of Agriculture had at delivering these funds in a swift manner in the past. Unlike other programs where funds are divided amongst the states 

then given to local and state governments to distribute, the USDA Water and 

Wastewater Grant and Loan program directly funds projects and has been able to 

distribute these funds in a manner unmatched by other Federal agencies. 

The primary issue that confronts us today is how we can assist USDA in getting 

the funding out the door of the Department, and into the hands of the communities 

who so desperately need it. We also need to continue to help these communities not 

only access these funds, but help to ensure that these funds are used efficiently to 

protect the community and government’s investment. These investments are important to job creation and economic recovery in many of the nation’s smallest and 

hardest hits communities. 

As you know, this Committee and your Senate counterparts provided the Rural 

Utilities Service with $135 million to address the backlog of projects in the Water 

and Wastewater loan program during consideration of the 2008 Farm Bill. Using 

this allocation, RUS was able to distribute the money directly to rural communities 

within 90 days. This distribution of funds was unique in its efficiency. In getting 

the funding out the door in a timely fashion through projects which were already 

in the pipeline, the Department did an outstanding job. However, historically additional funding means additional applications. Communities learn of the opportunity 

for additional funding and the number of applications increase, further increasing 

the backlog. 

51

USDA was also able to target these funds to low and moderate-income rural communities under 10,000 in population which are not able to obtain affordable commercial credit. Compared to other Federal assistance, this program speaks directly 

to the needs of rural America. These rural communities often have extreme difficulty in competing with their urban counterparts for funding in other Federal and 

state agencies that may lack an understanding of the unique circumstances rural 

residents face. 

The need for additional funding and the outstanding track record of distribution 

of funds, made the RUS Water and Wastewater Grant and Loan Program a prime 

candidate for funding under the ARRA. It was for these reasons that funding of 

$1.38 billion in budget authority, enough for $3.778 billion in program level was included in the bill. This represented the largest single infusion in the USDA Water 

and Wastewater Program’s history, enough funds to completely eliminate the backlog of existing projects and address those new project applications which communities had been waiting to submit. 

The amount of ARRA funding released by the Department of Agriculture to small 

and rural water systems has increased over the past months with announcements 

of $132 million and $635 million. This has somewhat trailed the level of funding 

distributed by the Environmental Protection Agency-State Revolving Loan Fund 

(SRF), where most of the money is already allocated to projects. We anticipate that 

the USDA spending rate will increase over the several months to meet the number 

of applications received. 

There are several factors which may be contributing to this slower distribution. 

The first is the current lack of guidance from the Department on the Buy American 

and Davis-Bacon provisions in the bill. While other Departments have issued guidance on these provisions to allow communities to tailor applications and develop proposals, USDA has yet to do so. For example, in April the EPA released guidance 

outlining the procedures to comply with the Buy American provisions, their interpretation, and documentation which would be needed. This direction greatly assisted communities in working towards project starts and receiving their funding. 

A second concern is the fact that the ARRA didn’t provide the Secretary any flexibility or waiver authority in administering these funds to local communities. We 

have heard numerous situations where a small community is not eligible because 

the slightly exceeded the population or median income limit or needed to have a 

high grant to loan ratio for affordability purposes. For example, the state of Arkansas has a very low median income level which must be met by a community in order 

to qualify for funding under this program. Conversely, an identical town in Missouri, located just across the border, would actually qualify for funding with a median income level that is much higher, thus putting the Arkansas community at an 

extreme disadvantage. The ability to use grant dollars for the very low income communities is critical as well. The credit elsewhere clause has also slowed down the 

process. Previous legislation for disaster and stimulus purposes provided the Secretary with very limited authority to assist these communities that otherwise meet 

the Congressional intent for assistance. USDA has also always used any waiver authority very conservatively. We would like to ask the Committee to explore providing the Secretary this authority. 

Mr. Chairman and Members of the Committee, I sincerely thank you again for 

the work you have done on behalf of rural America and for taking the time to not 

just throw funding at an issue, but truly work to solve the problem. Your efforts 

are appreciated and I look forward to any questions you may have for me.

The CHAIRMAN. Thank you, sir. Thank you for your kind words 

as well. 

Mr. Tommy Duck. 

Mr. DUCK. Good morning. 

The CHAIRMAN. Good to have you. 

STATEMENT OF TOM DUCK, EXECUTIVE DIRECTOR, TEXAS 

RURAL WATER ASSOCIATION, AUSTIN, TX 

Mr. DUCK. Chairman McIntyre, Ranking Member Conaway and 

Members of the Subcommittee, for the record my name is Tom 

Duck, and I am the Executive Director of Texas Rural Water Association. TRWA is a statewide trade association. We are based in 

Austin, Texas. We represent over 751 water utilities in our state 

who supply water to some 21⁄2 million customers, primarily in rural 

52

communities. Our association helps water and wastewater systems 

supply Texans with safe and affordable water and wastewater service. 

TRWA also provides other services, including a very valuable 

Technical Assistance Program that I am proud to say is funded by 

a grant from the USDA. It is called our Circuit Rider Program. We 

also provide assistance to water utilities in the form of operator 

certification training as well as board member training. It is very 

critical that you have those components in place if you are going 

to be an effective water utility provider. 

As you know, Rural Utilities Service’s Water and Waste Program 

began in the 1960s and has been a critical component to Rural Development ever since. Today RUS has a $9.9 billion portfolio, with 

over 17,000 loans nationwide. According to USDA, they estimate 

that for every $1 billion that is spent in the Water and Wastewater 

Program, it produces 23,000 jobs. These are green jobs, such as 

building or improving a wastewater or water treatment plant, 

building water storage, or laying distribution or collection lines 

that bring water to people, or clean up wastewater and improve the 

environment and public health. Currently in Texas there are 

roughly 70 projects totaling just over $200 million that are currently pending in the application process. 

I want to salute this Committee for their hard work in addressing the water infrastructure needs nationwide, as well as in our 

state, and providing funding in the stimulus package. This should 

do away with the backlog of applications. However, for the funding 

to be effective, it first has to reach the communities which are in 

desperate need of getting these funds, and that is kind of at the 

heart of my concern today. 

Historically, the USDA in Texas has done an excellent job in distributing these funds when it has become available from Congress. 

For example, in 2002, when additional funding was provided by 

this Committee in the farm bill, the funding was distributed in 90 

days. The speed by which the Department acted is to be commended. While I realize that the current stimulus package imposed 

additional requirements at an unprecedented program level, I 

would hope the Department could move forward with the same 

haste. This speed has not been apparent at this point in the process. 

It should be noted while our urban counterparts in the state 

have received guidance on how the stimulus applications should 

address issues that were addressed earlier, as the Buy American 

provision and Davis-Bacon labor requirements, we have not heard 

similar direction from RUS. This silence has raised questions for 

many of our rural constituents. Some type of guidance is needed 

from the Department. It is desperately needed. 

As you know, the RUS Water and Waste Program targets lowand moderate-income people in areas with population of less than 

10,000 people that are not able to obtain commercial credit elsewhere. That being said, communities who cannot meet those 

thresholds have similar infrastructure needs and are unable to 

apply. 

Our circuit riders, through our Technical Assistance Program, 

often visit rural communities, which, due to a slightly higher popuVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00056 Fmt 6633 Sfmt 6601 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
53

lation or their proximity to an urban area where income is higher, 

are disqualified from participating in the regular RUS programs. It 

would seem allowing those communities to apply, then granting the 

Secretary of Agriculture or his designee the ability to review these 

on a case-by-case basis, could be very beneficial. The spirit of this 

program, started in the 1960s, is to assist rural communities in 

need. A population of slightly over 10,000 should not exclude a 

rural community from participating if the Department feels there 

is need. 

The last two areas I have mentioned for improvement are the 

limited grant authority in the program and the environmental requirements. 

The limited grant authority poses a significant problem for many 

low-income areas in our state, such as the Colonias, that may require waiting years for significant grant funds before they are 

available. Raising the amount of grant available to these communities would significantly improve low-income families getting 

water and waste services more quickly. 

The second issue is environmental reviews and compliance issues 

for the use of the funds. Often the environmental review process 

takes longer for a project than the engineering or construction 

phase. For this funding to be a true stimulus, the funding should 

be distributed quickly and used by these communities in a timely 

and efficient manner. 

In conclusion, thank you for giving me the opportunity to appear 

before this Committee today. It is an honor to be here, and I will 

stand for any questions that you might have. 

[The prepared statement of Mr. Duck follows:]

PREPARED STATEMENT OF TOM DUCK, EXECUTIVE DIRECTOR, TEXAS RURAL WATER

ASSOCIATION, AUSTIN, TX 

Thank you, Chairman McIntyre and Ranking Member Conaway, for inviting me 

to discuss Rural Texas’ need for water and wastewater and the impact of the American Recovery and Reinvestment Act (ARRA) funding. I appreciate the opportunity 

and am glad to see two Texans, Rep, Cuellar and Rep. Conaway, continuing the tradition of great Members on the Committee in the footsteps of former Reps. Stenholm 

and Combest. Today I will discuss how this substantial investment in Rural Texas 

has brought hope that the USDA Rural Utility Service Water and Waste Disposal 

Loan and Grant Program can produce jobs and use products made in the U.S. while 

outlining a couple of concerns which have arisen with the funding to this point. 

I speak to you today on behalf of the Texas Rural Water Association (TRWA) and 

our members. The TRWA is a statewide nonprofit educational and trade association 

dedicated to the improvement of water quality and supply. Founded in 1969, TRWA 

represents a full spectrum of the drinking water community including: Nonprofit 

Water Supply and Sewer Service Corporations, Special Utility Districts, Municipal 

Utility Districts, WCIDs, Small Municipal Utilities and Privately-Owned Water 

Utilities. Membership includes more than 700 water utilities in Texas who supply 

water to some 2.5 million people. 

Our mission at TRWA is to help water and wastewater systems supply Texans 

with safe and affordable water and wastewater services by providing technical assistance, educational and informational programs, publications, member support 

services, and representation of our members in the legislative and regulatory processes. TRWA conducts comprehensive technical training programs for water and 

wastewater operators, managers and board members. Participants in TRWA conferences and workshops can earn credits for water operator certification renewal, 

and TRWA’s newest program, Operator Certification, provides training to industry 

personnel in pursuit of obtaining or renewing water and wastewater operator certification in Texas. TRWA also employs field representatives who provide water and 

wastewater training and on-site technical assistance to rural communities throughout the state. When a rural utility seeks assistance, one of these experts is disVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00057 Fmt 6633 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
54

patched, free of charge, to help resolve the problem. Field representatives are 

trained to provide advice on such items as preventative maintenance, leak detection, 

water audits, rate analysis, budgeting, personnel policies, and complete system 

overviews. 

While spending the last 23 years working for the Texas Rural Water Association 

(TRWA) I have seen the need for water and wastewater funding increase continually. While some feel that this funding may be better spent in other areas, I challenge them to take the time to ride with our circuit riders and see firsthand the 

aging and crumbling water infrastructure in our rural communities and walk away 

without changing their minds. Worse yet are those areas which have never had running water and continue to suffer substandard service and living conditions for lack 

of funding for infrastructure. In Texas we have personnel in the field everyday addressing these issues whether in the Colonias of the South and West Texas or the 

aging systems of the eastern part of the state. 

The only program in the Federal Government that can address the needs of these 

small, low-income rural communities for water and wastewater infrastructure is the 

RUS Water and Wastewater Grant and Loan Program. As you know, the Rural Utility Services’ Water and Waste Program began in the 1960’s and has a $9.9 billion 

portfolio with over 17,866 loans. The USDA estimates that for every $1 billion that 

is spent in the Water and Waste Program produces 23,000 jobs. These are green 

jobs such as building or improving a wastewater or water treatment plant, building 

water storage, or laying distribution or collection lines that bring water to people 

or clean up wastewater and improve the environment and public health. The majority of products for these improvements are made in the U.S. In my state there are 

roughly 70 projects totaling just over $200 million in funding currently in the application process. Another point I would like to make is the successful repayments 

which this program can claim. The Office of Management and Budget rates the RUS 

Water and Waste Disposal Program as one of the highest rated loan programs in 

the Federal Government. The loan delinquency rate is 0.53%. In other words, 

99.47% of those receiving loans are current on their payments—higher than any 

government program. I think this speaks directly to the character of Rural Water 

Systems and that of Rural America in general. We pay our bills and expect others 

to as well. When rural communities came to Congress looking for funding for this 

program, it was not for a hand-out, but a hand-up. 

I salute this Committee for their hard work in addressing this need and providing 

funding that should do away with the backlog for my state. The funding provided 

should not only cover those applications currently in the system, but also address 

the increase we know will come from communities waiting to apply. However, for 

the funding to be effective, it first has to reach the communities which so desperately need it, and getting it there is where I find my concerns. 

The USDA in Texas has done an excellent job in the past with direction from the 

Washington office in distributing funding when it has become available. For example, in 2002 when additional funding was provided by this Committee in the farm 

bill, the funding was distributed in 90 days. The speed with which the Department 

acted was to be commended. While I realize that here are additional requirements 

and an unprecedented program level, I would hope the Department could move with 

that same haste. This speed has not been apparent at this point in the process. 

While our urban counterparts in the state have received guidance on how applications should address issues such as the ‘‘Buy American’’ provision and Davis-Bacon 

labor requirements for funding sources more focused to them, we have not heard 

similar direction from RUS. This silence has not only raised questions for applications which are being held to file until guidance is received, but has left communities with pending applications scrambling to see what additional information or 

compliance is needed. Some type of guidance from the Department is desperately 

needed. RUS has possibly the best employees and record of service in the Federal 

Government as is seen by their past performance. I hope this record can be built 

upon by quick action on the task this Committee has charged them to complete. 

As mentioned before, the Water and Waste Program targets low and moderate income people in areas with population lower than 10,000 people that are not able 

to obtain commercial credit elsewhere. That being said, communities who cannot 

meet those thresholds have similar needs and are unable to apply. Our circuit riders 

often visit rural communities, which due to a slightly higher population or their 

proximity to an urban area where income is higher, are disqualified from participating in the RUS programs. It would seem allowing these communities to apply 

then granting the Secretary of Agriculture or his designee the ability to review these 

applications on a case-by-case basis would be very beneficial. The spirit of the program is assistance to communities in need in rural areas, and a population of slightVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00058 Fmt 6633 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
55

ly over 10,000 should not exclude a rural community from participating if the Department feels there is a need. 

The last two areas I would mention for improvement is the limited grant authority in the program and environmental requirements. The limited grant authority 

poses a significant problem for many low-income areas that may require waiting 

years before significant grant funds are available. Raising the amount of grant 

available to their communities would significant improve low-income families getting water more quickly. The second issue is that frequently the environmental reviews and compliance issues for the use of funds. Often the environmental review 

process takes longer for a project than the engineering or construction. For this 

funding to be a true stimulus, the funding should be distributed quickly and used 

by these communities, and both of these factors slow that process. 

In conclusion I would like to again thank the Committee for their time and the 

invitation to speak to you today. Thank you on behalf of those Texans who benefit 

from the assistance you continue to provide. By standing up for these priorities and 

ensuring they are treated as equals with their urban counterparts, you make a difference in their daily lives.

The CHAIRMAN. Thank you very much for your heartfelt comments. 

We are closing in quickly on time to get ready to go to vote, so 

we will try to run through these questions and hopefully can conclude before the call for votes. 

Mr. Rivenbark, you mentioned the excellent relationship you 

have with the USDA Rural Development staff. We know there is 

a limited number of staff, and that many times rural communities 

do not feel that they have sufficient access to the expertise they 

may need to help them navigate through the process. 

Can you tell us how you would suggest that USDA Rural Development can do a better job helping these communities who are in 

the need of most assistance? In other words, what would you recommend to help improve USDA outreach, given the circumstances? 

Mr. RIVENBARK. As an example, we frequently hire local engineers to help us move forward with our projects as we are working 

to develop the water and sewer plants that I referred to. Having 

that outside engineer was crucial; that county does not have an engineer on staff. And I would say that flexibility in all of it is important to us. 

The CHAIRMAN. Can you tell us, you mention in your testimony 

about the need for greater performance measurements in needs assessments for Rural Development programs. Tell us how rural communities can do a better job of measuring performance, and how 

rural programs can do a better job of determining which of those 

projects are worthy of Federal investment. 

Mr. RIVENBARK. Well, developing criteria to evaluate the project’s 

success, develop criteria to evaluate needs in areas that are not 

being served sufficiently by USDA. They should make all the information available to the public so that future funding decisions are 

made with this information available. 

The CHAIRMAN. If I may, Governor Sanchez, thank you for your 

very important remarks. I know the Under Secretary stayed for a 

while and was present as you were testifying. I know he had another commitment. He had to leave shortly after you finished testifying. But I have instructed staff, and I want to make sure before 

you leave today, and some of the Rural Development staff is still 

here, that this problem you have of them not responding to you or 

your offer to be part of the solution—let us let you all hook up 

today and find out who it is you need to talk with. Let them know 

56

how they can get back in touch with you so that this concern you 

have of the tribes not being part of the solution, or not being allowed to give input, can be resolved. The last thing we want to 

have is poor contact or communication problems. At minimum we 

can provide that, I hope, today before you leave. 

Governor SANCHEZ. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. Thank you for your testimony. 

Also I want to make sure that the Colonias that you mentioned, 

Mr. Duck, you are talking about are down near McAdenville and 

across the border from Reynosa, Mexico? 

Mr. DUCK. Yes, sir. 

The CHAIRMAN. Both of my sons, my wife, and my father have 

been down there and worked in those Colonias, and we thank you 

for your commitment and concern for that area. I know my colleagues from Texas may have further comments about that in a 

moment. 

In the interest of time now, I will call on Mr. Conaway, our 

Ranking Member, for any further questions. 

Mr. CONAWAY. Thank you for coming to testify. 

If you talk to anybody about the issue of the FIFO funding on 

this, has that impacted—or does it impact new emerging issues 

that might be suitable for funding under any of this broad array 

of money that is being provided? Does it give you any concern; 

should I be concerned about that; should we be concerned about it? 

And then under—kind of specifically under the Buy American 

Program, counties along both the northern border and southern 

border have long-standing supply contracts in place that may not 

fit the Buy American requirement that comes with the strings attached to it. Can you, Tommy or Mr. Rivenbark, either one, speak 

to those issues? 

Mr. RIVENBARK. The Buy American part is important, but there 

are times when it interferes with navigating the paperwork, and if 

something can be done to help eliminate that. 

Mr. CONAWAY. Eliminate the paperwork or—I am not sure what 

you are making reference to. 

Mr. RIVENBARK. I think sometimes the paperwork is a little 

stringent. Not eliminating the paperwork, though. 

Mr. CONAWAY. Okay. Mr. Duck? 

Mr. DUCK. Yes. We support, obviously, Buy American. And I 

think that the issue that rural communities have is they are very 

patriotic, very supportive, obviously, of Buy American, but there 

needs to be some guidance from the USDA. I think that what we 

are suggesting is in order to expedite these processes, let us clarify 

some of the issues. There has been lack of guidance, and that is 

really——

Mr. CONAWAY. What guidance would you——

Mr. DUCK. Let me give you an example. The EPA programs that 

a lot of our urban communities get through the stimulus package 

through the SRF, through the State Revolving Fund, there are very 

clear guidance documents on Buy American, and very clear documents on the Davis-Bacon requirements, and how you process that 

paperwork and those applications. That is what I think is needed 

in the rural communities. 

57

The rural communities, you have an operator who is also the 

manager, maybe the meter reader, and does everything. So they 

don’t have time to read the Federal Register. They don’t have time 

to do some of the things that maybe our urban counterparts might 

do. So if you could streamline the package, the application package, 

explain the terminology and what is going on, why it is important, 

why we need this, and how you get to the end product. 

Mr. CONAWAY. So far that has not been done? 

Mr. DUCK. No, sir. 

Mr. CONAWAY. Is there any kind of coordinator, ombudsman that 

USDA should provide that would allow the broad array of issues 

such as water, wastewater, broadband facilities, whatever it might 

be, that these small communities who don’t have the resources that 

you just made reference to could call a one-stop shopping kind of 

thing at USDA, to at least start the process, help them navigate? 

Do they have that? Would that be helpful? 

Mr. DUCK. It would be very helpful. I am not aware if that exists. 

Mr. CONAWAY. Okay. One of the things we are hearing back 

home is just frustration of not knowing who to call, when to call. 

And they start with Tinker, to Evers, to Chance, and it is almost 

as if that is done intentionally so that only the really serious people 

make their way through it. But we will try to pass on that idea 

to our new Under Secretary, because I do think he understands. He 

has been in your role, similar roles, and he understands the frustration. 

I yield back, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Mr. Kissell. 

Mr. KISSELL. Thank you, Mr. Chairman, and thank you, panel, 

for being here today and sharing with us. Mr. Rivenbark, especially 

to you as a fellow North Carolinian from up in Montgomery County 

saying hello down to yourself in Willard, North Carolina, it is good 

to have you here today. 

Mr. Chairman, I really don’t have any questions. I think that 

their concerns that they expressed today are a summary of what 

I am hearing when I go in the district, what I am hearing from 

rural America, the infrastructure needs. 

I have two communities in my area, a district that they talk 

about sewage running in the ditches, where children come in and 

have to wipe their feet to get the sewage off before they go in their 

house; houses that are being vacated because they don’t have sewage facilities. And it is not just one or two communities, it is just 

a repeated pattern in all of our counties. So, the communication 

has been talked about, the need to inform. These are things we 

need to work on and just constantly look for ways to help rural 

America. 

So thank you, Mr. Chairman. 

Thank you all for being here. 

The CHAIRMAN. Thank you, Mr. Kissell. 

Mr. Cassidy. 

Mr. CASSIDY. Ms. Martin, as you were speaking, I am saying, 

wow, this woman has wisdom. It just seems like when I go to my 

rural areas, they have the poorest tax base, and they are supposed 

to have an engineering crew on retainer who has everything 

58

worked out, so when you say you have to submit in 30 days, boom, 

they have it. It seems like a conspiracy of the man to hold down 

the rural area. 

Now, that said, I am trying to think of the solutions, because 

each of you seem to sing from the same songbook. That is why it 

has been so good for me, because it wasn’t just my imagination. 

When I used to do my taxes before my wife took it over, I used 

to use TurboTax. There was kind of an on-line way where I could 

plug in my numbers, and if there was a question, I hit the little 

question mark, and, boom, it took me. Would that be practical? 

Could you say to rural communities, here is your version of 

TurboTax, and it is a little skimmed down because you don’t 

itemize, and maybe the big urban areas do, but we will cut you a 

little slack on some of details, et cetera, et cetera. Would that work? 

Ms. MARTIN. That is a great idea. I am not sure whether the programs could be simplified to that level, and frankly, in a lot of 

rural communities, we deal with the smallest and most rural communities, don’t have computers in terms of their offices. 

I think that certainly would be a possibility, but in our experience being out there providing technical assistance, what we typically find, and particularly in the smallest communities, there are 

no full-time staff people. And so when you have part-time people 

who are doing this in addition to their regular job, and their families and all of the other commitments that they have, what we find 

is they just need a lot of hand holding, they need someone to sort 

of walk them through the process. Frequently what we find is that 

they are overwhelmed, frankly. If you hand them a guidance document that is 40 or 50 pages long, it is fairly overwhelming. And so 

we tend to take them through the process step by step. We start 

with, ‘‘These are the things that you need to do in the next 30 days. 

When they have gotten through that, now in the next 30 days, you 

need to do this piece.’’ They find it a little less overwhelming that 

way. 

Mr. CASSIDY. It seems like death by paperwork. 

What is the possibility that—Mr. McIntyre, that we could get 

some sort of working group where you guys and maybe some of 

these people could actually develop something like this? We clearly 

need tools to lower the cost of developing these applications on the 

part of the folks who are relatively unskilled; fair statement? 

Ms. MARTIN. Yes. 

Mr. CASSIDY. So my question is how do we develop those tools? 

I am asking you and any of you, because you are the ones in the 

field, to give us insight on this. 

Ms. MARTIN. We would welcome being a part of any group that 

wants to look at how to simplify the process. I mean, the process 

is complex, as is any project development process. And there are 

things that are part of the process that can’t be avoided. It is just 

inherent in the nature of developing a project. 

With that being said, there are certainly ways that the process 

might be simplified. One of the things that we recently did is we 

developed a publication written to, what we think is a simple, understandable level on how to develop a project, what are the pitfalls, what are the things you need to avoid and those kinds of 

things. So, anything like that that can help simplify the process 

59

would be wonderful, and we would certainly welcome being a part 

of that. 

Mr. CASSIDY. I have a minute left. Do any of you have a comment? 

Mr. Rivenbark. 

Mr. RIVENBARK. In listening to the conversation, I think that the 

IT people at the lowest level at our county would be ideal to involve 

in trying to create something as you suggest. 

Mr. CASSIDY. I think the solution should come from you all if the 

problem has come from above, so to speak. Things roll downhill. 

Anyone else? 

Mr. ANDERTON. I might add that the National Rural Water Association has been in partnership with the USDA for almost 30 years 

now in providing on-the-ground technical support and assistance to 

the very communities that have been mentioned here. And we 

stand ready through our circuit riders and technical people to assist USDA in any way that we can and working face to face and 

leading these people through the application process. 

Mr. CASSIDY. I yield back. Thank you. 

The CHAIRMAN. Thank you very much. An excellent idea, Mr. 

Cassidy, and we would encourage each of you to go back, and if you 

had a wish list of ten ways to improve access to Rural Development 

programs and funding, we would like you to submit that to our 

Committee, especially within the next 10 calendar days while the 

record of today’s hearing remains open, that would be a great 

homework assignment. It would be a great assignment to help us 

as we look forward in a most serious matter of how to improve. 

We have a new Under Secretary. You heard him say in his own 

testimony he is getting acquainted with his job and wants to learn 

more about ways in which to make things more efficient. So let us 

do it, let him know, because you have a fresh start, and there is 

no reason not to take advantage of that fresh start in the most 

positive way, especially with American taxpayer dollars to be used 

in the most expeditious and efficient way. 

Mr. Cuellar was here, but I believe he stepped out. 

Is there any general question that our panel would like to ask 

of our witnesses here today? If not, I would like to thank all of you 

for your attendance today. We have done well on our timing. Thank 

you for coming to this hearing. 

Under the rules of the Committee, the record of today’s hearing 

will remain open for 10 additional calendar days to receive additional material and any supplementary written responses, which 

we now especially requested from the witnesses, to any question 

posed or requested by the Members or the Chairman. 

This hearing of the Subcommittee on Rural Development, Biotechnology, Specialty Crops, and Foreign Agriculture is now adjourned. May God bless you, and may you travel safely. Thank you. 

[Whereupon, at 11:40 a.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

60

61

SUBMITTED LETTER FROM DAVID R. HOELMER, SENIOR VICE PRESIDENT AND

GENERAL COUNSEL, AGSTAR FINANCIAL SERVICES, ACA 

June 18, 2009

Hon. MIKE MCINTYRE, Chairman;

Hon. K. MICHAEL CONAWAY, Ranking Minority Member;

Members;

Subcommittee on Rural Development, Biotechnology, Specialty Crops, and Foreign 

Agriculture, 

Committee on Agriculture, 

Washington, D.C.

Dear Chairman McIntyre, Ranking Minority Member Conaway and Members of 

the Subcommittee:

My name is David Hoelmer and I am Senior Vice President and General Counsel 

of AgStar Financial Services, ACA headquartered in Mankato, Minnesota. AgStar 

is a Farm Credit System institution which was given the mission by Congress to 

provide credit to agriculture and rural areas. AgStar has and continues to provide 

credit to agricultural producers, agribusinesses, rural residents, and rural communities in general. 

Rural America is facing a serious slowdown in economic investment activity. However, there is no shortage of feasible business plans and green technologies looking 

for capital. A number of healthcare, bio-based and renewable energy projects critical 

to the vitality and survival of rural communities are in need of debt and equity investments. 

Unfortunately, many lenders are facing serious capital constraints. Also, few lenders are willing to take risks in new technology, start-up businesses, and construction 

of facilities. Yet these are the projects that will likely create the most job opportunities across these communities. Rural businesses, essential community organizations 

(especially aging healthcare related facilities) and bio-based businesses are facing 

serious challenges in finding equity to invest in their projects. Although significant 

increases in funds will flow to USDA Rural Development, few will find access to 

these funds without rule changes that address access to equity and loan guarantees. 

This is an historic challenge which can not be viewed through a traditional regulatory lens. 

AgStar applauds the Biorefinery Assistance Program included in the 2008 Farm 

Bill which provides loan guarantees through USDA for the development, construction and retrofitting of commercial scale biorefineries as was mentioned by Under 

Secretary Dallas Tonsager in his testimony before the Subcommittee on June 10, 

2009. However, few biorefineries were able to take advantage of these guarantee 

funds. 

We propose the following modifications to USDA programs to enhance and expand 

the use of USDA Rural Development stimulus funds to provide more immediate and 

broader impact to rural America:

(1) Loan guarantees for construction on all eligible community facility, business 

and industry, and biorefinery facilities,

(2) Loan guarantees for refinancing all eligible community facility, business and 

industry, and biorefinery facilities,

(3) Loan guarantees for eligible community facility, business and industry, and 

biorefinery rural loans financed within the last 24 months, and

(4) Loan guarantees for annual operating lines of credit for community facility, 

business and industry, and biorefinery operations.

The benefits of these proposed rule changes are significant. These changes would 

reduce risk for lenders, increase the number of projects that could be financed, free 

up capital for lenders upon approval of the loan guarantees, (resulting in an Asset 

Relief Program, without the Trouble), reduce interest rates and fees for clients, and 

subsequently, reduce necessary equity requirements to obtain financing. Most importantly, these proposed rule changes would result in a substantial increase in job creation across Rural America. 

Numerous green jobs could result from these projects. Without a rule change in 

accessing loan guarantees, many, if not most of these projects, will, however, be unrealistic. Lenders will be unwilling to finance startup technologies and projects that 

face higher risks in an uncertain market. Lenders are looking for lower risk venVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00065 Fmt 6621 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
62

tures which provide more certainty. Assuming these projects are feasible and there 

is an identified market demand, the proposed loan guarantee rule changes would 

significantly improve the prospects and timelines for all of these projects. Many of 

these project timelines could be improved by 12–24 months in many cases. 

AgStar appreciates your support of these recommendations and requests adoption 

of the proposed USDA Rural Development rule changes. 

Sincerely,

DAVID R. HOELMER,

Sr. VP and General Counsel, 

AgStar Financial Services, ACA. 

SUPPLMENTAL MATERIAL SUBMITTED BY RURAL COMMUNITY ASSISTANCE

PARTNERSHIP

The RCAP network appreciates the invitation to submit additional recommendations for improving Rural Development programs. USDA Rural Development makes 

critical investments in rural America, and we applaud the Committee’s efforts to ensure that these programs achieve maximum effectiveness, particularly in today’s 

economically challenging times. 

The national RCAP network’s six regional service providers help small, typically 

low-income, rural communities address water, wastewater, and other community development needs. We provide training and technical assistance to build the capacity 

and sustainability of small systems and to assist with the development of needed 

facilities. The RCAP network serves 800 communities each year through funding 

provided by Rural Development’s Technical Assistance and Training Grant Program 

under its Water and Waste Disposal Program. However, in an effort to provide more 

comprehensive assistance, our organizations have made extensive use of programs 

such as Community Facilities, housing programs, the Rural Community Development Initiative, the Intermediary Relending Program, and others. 

RCAP offers the following recommendations to improve access to rural development programs and provide information on these programs to communities. 

1. Improve consistency in program implementation across the country. 

While Rural Development programs operate under the same set of regulations in 

each state, there are often variances in how those regulations are interpreted, and 

hence, how programs are implemented. For example, the first test for grant eligibility and the most favorable loan terms for the water and waste disposal program 

is the median household income of the area. Some states allow income surveys to 

be conducted by third parties if the community believes that the census data is no 

longer reflective of conditions in the community, while others allow no surveys, and 

still others allow surveys only under specific circumstances with prior permission 

of the state office. In the same vein, states have different ways of determining affordability thresholds for water and sewer systems. Most states utilize a specific 

percentage of median household income (which seems to vary by state), while others 

have set dollar thresholds that a community must meet regardless of how low their 

median income might be. In yet another example, some states will contribute the 

maximum grant funds allowable by law to particularly needy projects, while other 

states will rarely, if ever, allocate more grant funds to any one particular project 

than the loan/grant ratio received by the state. These inconsistencies make the program more difficult to market and use in some states that have more stringent requirements than are necessary in the regulations governing the program. To the extent possible, the process should be standardized and staff should be retrained 

where necessary. 

2. Require utility board training for borrowers. 

Rural Development should require its small community system owners (town 

councils, utility boards) to receive training as one of the conditions of receiving funding. Too often, these officials come into their jobs with no training and no knowledge 

of protecting their investment. Consequently, they often think of their jobs as being 

nothing more than holding down utility rates, even at the expense of not having 

adequate funds to maintain their system. Many technical assistance providers, including RCAP, offer training to these officials that helps to educate them about their 

responsibilities as system owners, and we are seeing positive results from this training. If we are to have any hope of stemming the tide of massive funds necessary 

for infrastructure replacement, we must teach responsible system ownership. 


11118001
63

3. With particular regard to ARRA funding, delay environmental assessments until after initial application. 

Currently, a community must complete both a preliminary engineering report and 

an environmental assessment before USDA begins processing an application. These 

reports can be expensive—often a significant portion of a small utility’s annual 

budget. Since there is no guarantee that funding will be available, many communities are reluctant to take this risk. In addition, preparing an environmental report 

at this stage slows the process considerably, as it typically takes several months to 

complete. In some instances, the report may need to be redone at the time of final 

engineering design. A number of years ago, only a cursory environmental review 

was required at time of initial application. Returning to this timeline would save 

communities significant upfront costs. As long as the assessment is completed prior 

project bidding and construction, the requirements of the National Environmental 

Policy Act are satisfied. This would allow the assessment to be completed simultaneously with other requirements, and would speed the processing of applications. In 

addition, since the environmental review would be completed after Rural Development’s initial review of the project, the community would have greater assurance 

that the project could be funded before incurring this expense. 

4. Post guidance on RUS website for specific provisions related to ARRA 

funding. 

There are certain provisions related to ARRA funding that are not typically required for communities that seek Rural Development funding, such as Davis-Bacon 

wage requirements, Buy American provisions, and others. The national RUS office 

should develop guidance for small communities and their engineers on meeting 

these requirements and have it prominently posted on their website, as well as publicizing it through their state and local offices. To the extent that it is possible to 

develop a standard bid package that would incorporate these provisions, this would 

help small systems tremendously in dealing with the new requirements. 

5. Restore Rural Development Program Funding Levels 

In recent years, Rural Development program funding has declined significantly. 

Since 2003, funding has been reduced by 25% for water and sewer, 28% for rural 

community facilities, and 33% for rural housing (excluding ARRA funds). The Rural 

Business Opportunity Grant Program is funded at such a low level that 99% of the 

100+ page applications submitted go unfunded, a waste of the resources of the communities preparing them and agency staff reviewing them. 

Rural water infrastructure investment needs alone in this country are staggering. 

The most recent needs surveys by EPA estimate that small systems and rural areas 

will require $34 billion for drinking water and $69 billion for wastewater over the 

next 20 years. Increasing Rural Development funding at least to previous levels is 

critical to meeting this need. 

6. Increase the grant-to-loan ratio for the Water and Waste Disposal Program 

Grant funding for water and sewer projects, as a percentage of the overall allocation, declined from 39% in 2003 to 26% in 2006. Grant funds are critical to defray 

the enormous costs of infrastructure development, especially in the smallest low-income communities. These utilities lack economies of scale found in larger systems, 

so their customers pay, on average, up to four times more than their urban counterparts, according to the EPA. It is not uncommon for rural residents to pay 5% of 

their income for these utilities after a major project is completed. Therefore, the 

trend toward reducing the grant-to-loan ratio renders the program non-viable for 

many of the communities it was designed to serve. 

7. Increase the Salaries and Administration Budget 

Rural Development’s administrative budget has stagnated in recent years, so the 

agency has fewer staff to process funding applications, which have increased dramatically. For example, from 2007–2008, Ohio’s Rural Development office experienced a 73% increase in demand for its housing programs, and a 170% increase in 

its business programs. Moreover, the farm bill, ARRA, and regular appropriations 

will result in thousands of new loans in the agency’s portfolio in a short time period. 

Area and state offices will be busier than ever collecting year-end reports and helping address problem areas. 

8. Increase Technical Assistance Funding 

The Rural Development Water and Waste Disposal application process is time 

and labor intensive and requires a great deal of paperwork. Even once an application is approved, a community must finish a nine-page list of requirements known 

64

as the USDA–RUS Loan Letter of Conditions Provisions before funds are obligated 

and construction begins. Many small communities have only part-time or volunteer 

staff and are ill-equipped to address these requirements, so they need assistance to 

navigate the process. As previously noted, Rural Development does not have the 

staff to complete this work and, instead, relies heavily on nonprofit technical assistance providers. However, funding for technical assistance has not increased in recent years (excluding short-term ARRA funding). As a result, hundreds of communities around the country go unserved each year. 

In addition, technical assistance funding should be provided to help communities 

access Rural Business and Cooperative Service Programs, because of similar complexities of those programs. During the course of our water and wastewater work, 

we are frequently asked by rural communities to provide these other services, because they lack full-time staff or expertise to access funds that might be available 

to them. 

9. Focus Grant Funds on the Neediest Systems 

Rural Development awards its limited grant funding to systems to subsidize user 

rates to a ‘‘reasonable’’ level. Generally, this is based on user rates as a percentage 

of median household income, but can take into account additional factors. Establishing rates as a percentage of median household income is equitable and should 

be the primary—if not the sole—means of determining grant funding. 

10. Require Communities to Seriously Consider Regionalization 

Too often, options that involve regionalization or collaboration are given a cursory 

examination and dismissed because of a lack of support by the community. In order 

to maximize limited resources, communities need to realistically examine whether 

operating their own facilities is cost effective. Rural Development offices have not 

forced communities to consider these alternatives because they are not politically 

popular. Therefore, such a requirement should be part of the law. While there may 

be legitimate reasons not to choose regionalization, the burden of proof should be 

on the community. 

11. Require State Offices to Coordinate Funding With Other Agencies 

Rural Development’s Water and Waste Disposal Program does not operate in a 

vacuum. Infrastructure financing is also available through State Revolving Fund 

programs, the Economic Development Administration, and, to varying degrees, 

through state Community Development Block Grant Programs and state-funded 

programs. A system that coordinates these funding sources to maximize the impact 

and effectiveness of each is highly desirable. In a majority of the states, agencies 

communicate on some level to compare projects. Formalizing these networks to simplify application procedures and coordinate funding would remove significant administrative and financial burdens for small communities, by limiting the number of applications and environmental reviews prepared, and the time delays that come from 

awaiting funding decisions from various agencies. 

12. Provide a Legislative Remedy to the IRS Ruling on Loan Guarantees 

The IRS has ruled that communities cannot utilize tax-exempt bonds when securing loan guarantees under the Water and Waste Disposal and Community Facilities 

programs, because it is considered ‘‘double dipping.’’ However, this negates the favorable interest rate communities receive under the programs and renders them ineffective. As a result, the loan guarantee programs are generally under-subscribed. 

If Congress continues to advance loan guarantees as a financing option, it should 

eliminate this barrier to their use. 

13. Adjust Application Schedules for Some Programs 

The Value Added Producer Grant Program and the Rural Energy for America Program are important resources available to farmers, but applications are only accepted once per year, generally during the busy spring planting season. (The timing of 

annual appropriations is typically blamed for the situation.) Program funding 

should be announced early in the fiscal year so that producers could prepare applications during the winter months. 

65

SUBMITTED QUESTIONS

Response from Hon. Dallas P. Tonsager, Under Secretary for Rural Development, U.S. Department of Agriculture 

Questions Submitted By Hon. Mike McIntyre, a Representative in Congress from 

North Carolina 

Question 1. Rural Development (RD) makes loans and grants in rural areas. What 

impact do you see the downturn in the economy having on rural communities and 

rural businesses? Has RD seen an increase in late payments and delinquencies on 

loans? How do you address these issues within the programs? Who should communities or entities at risk for delinquency contact to assist them? 

Answer. Rural America has experienced a number of effects from the current recession: a loss of rural jobs, higher unemployment, a decrease in some areas in local 

tax revenues, lower demand for many rural products, lower farm income, and lower 

commodity and land prices. These effects vary greatly from one community to another. USDA Rural Development administers more than 40 programs, and these 

also have been affected by the recession with the impacts varying widely by program. 

In the aggregate, however, the Rural Development loan portfolio has performed 

remarkably well in a difficult economic environment. This is a tribute to the agency’s high underwriting standards and the professionalism and diligence of our program staff.

1. RD Loan Portfolio 

(Rural Business, Rural Housing and Rural Utilities) 

Guaranteed and Direct Loans 

Delinquency Summary 

Principal Balance Delinquent Principal Balance % Principal Delinquent 

FY Ending Sept ($Millions) 30 Days > 1 Year 30 Days > 1 Year 

FY 2008 $106,474.8 $5,787.4 $1,024.4 5.44% 0.96%

FY 2009 Q1 $109,745.9 $6,664.6 $1,081.5 6.07% 0.99%

Jan-09 $110,755.3 $6,747.7 $1,097.8 6.09% 0.99%

Feb-09 $111,312.1 $6,010.3 $1,103.3 5.40% 0.99%

Mar-09 $112,951.8 $6,003.8 $1,128.9 5.32% 1.00%

Apr-09 $114,096.0 $6,361.0 $1,140.0 5.58% 1.00%

The aggregate figures mask significant differences. The Rural Development Utilities Programs have not experienced a material change in delinquencies, with an aggregate delinquency rate (% of principal delinquent for more than 1 year) of just 

0.14 percent. The 1 year delinquency rate for the Business and Industry Guaranteed 

Loan program, 5.36 percent at the close of Fiscal Year (FY) 2008, improved to 5.25 

percent by April 30, 2009, although we anticipate a recession-driven increase by the 

close of FY 2009. The 1 year delinquency rate for the Single Family Housing Direct 

Loan program increased from 3.29 percent at the end of FY 2008 to 3.45 percent 

as of April 30, 2009; for the SFH Guaranteed Loan program, the increase was 0.47 

to 0.53 percent. The corresponding increases for the Multi-Family Housing program 

and the Community Facilities program were 0.70 percent to 0.75 percent and 1.64 

percent to 1.92 percent respectively. 

For the Rural Development portfolio as a whole, the delinquency rate increased 

from 0.96 percent to 1.00 percent in that same time period. Delinquency trends are 

monitored closely by all program areas, and we attempt to engage troubled borrowers and develop appropriate counseling and loss prevention strategies. We encourage borrowers who anticipate difficulty in repayment to contact their loan officer or Rural Development State Office to initiate remedial action as early as possible.

Question 2. What is the timeline and plan for implementation of the Rural Microentrepreneur Assistance Program authorized and funded in the 2008 Food Conservation and Energy Act? 

Answer. Rural Development (RD) plans to proceed with publication of a proposed 

rule with a final rule to follow. The final rule will be published in sufficient time 

for funding to be awarded in FY 2010.

Question 3. Governor Sanchez’s testimony cites a lack of outreach from USDA 

Rural Development to Native and persistent poverty counties. Do you plan to reach 

out to these specific communities? If so, how? 

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Answer. In the remaining months of Fiscal Year 2009, USDA Rural Development 

plans to conduct a two-pronged outreach strategy focused on rural American Indian 

and Alaska Native (AI/AN) customers. The plan includes a series of six (6) regionally focused webinars, followed by six (6) regional application fairs. This combined 

effort will not only raise awareness of the programmatic resources available to AI/

AN customers through USDA Rural Development but will also provide forums to 

begin the application process under the appropriate programs. 

These future events will augment past efforts that included participation on a 

White House Office of Intergovernmental Affairs ARRA Teleconference (April 7, 

2009), conducting a USDA Rural Development ARRA specific Webinar for the National Congress of American Indians (April 30, 2009) and hosting breakout sessions 

covering USDA Rural Development’s programs, including ARRA resources, at the 

Department of Health and Human Services’ Administration on Aging National Title 

VI Training and Technical Assistance Forum (Rockville, MD—April 28, 2009) and 

the National American Indian Housing Convention (New Orleans, LA, May 13, 

2009). 

With regard to persistent poverty areas, as required in the Recovery Act, Rural 

Development allocated 10% of available loan and grant dollars in the Housing, Community Facilities, Business and Industry and the Water and Waste Disposal Programs for assistance in persistent poverty counties as defined in the Act. In our Single-Family Housing Direct Program, our state offices have also been instructed that 

40% of the allocated funds be made available to very-low income applicants. In addition, Rural Development State Offices are conducting outreach to areas in need of 

funding, including persistent poverty counties. 

Questions Submitted By Hon. K. Michael Conaway, a Representative in Congress 

from Texas 

Question 1. When responding to how funding is allocated among eligible projects 

under the Stimulus, you said it was based on first-in, first-out (FIFO) and that 

projects were approved solely on the basis of when applications were submitted. Can 

you please explain in greater detail how this arbitrary approach in any way 

prioritizes communities most in need of funding? 

Answer. Rural Development programs are designed to ensure that funds are 

awarded to applicants with the greatest need. Most of our Recovery Act funds are 

being implemented through existing programs, which have regulations regarding review and ranking of requests for funding. In general, applications are selected for 

processing on a first-come, first served basis, unless funding is limited. As part of 

the review process, applications are awarded priority points based on a number of 

factors. Although there are program-specific criteria, the highest number of priority 

points are typically assigned to the smallest, most needy communities and applicants. When funds are limited, these points are used to rank applications to be used 

to determine which applications are to be funded. 

In addition, Section 3 of the Recovery Act requires agencies to expend the funds 

made available as quickly as possible consistent with prudent management. As a 

result, readiness to proceed does factor into our selections for funding. In many program areas, such as Single Family Housing, Community Facilities and Water and 

Waste, Disposal, backlogs of applications seeking funding exist. These projects have 

been reviewed and scored and are more likely to be ready to proceed to implementation quickly. 

General Priority Point Criteria 

Business and Industry Guaranteed Loans—Priority points are assigned to applications based on population, long-term population decline, persistent poverty levels, 

types of jobs that will be created, underserved/underrepresented areas and groups, 

impact of natural disasters, loan features, and the impact and offerings of the business proposed. 

Community Facilities—Priority points are assigned to applications based on population, income levels, health and public safety priorities and other factors at the discretion of the state director, such as unforeseen exigencies or emergencies. 

The Rural Business Enterprise Grant Program—Priority points are assigned to 

applications based on population, unemployment, income levels, underserved/underrepresented areas and groups, outmigration areas, persistent poverty areas, applicant experience, evidence of small business development, leveraging of other funds 

and other criteria. 

Single Family Housing Direct Loan Applications—Priority points are not assigned 

to Single Family Housing Direct applications, however, funds are allocated to the 

states in accordance with the allocation formula found in Rural Development Instruction 1940–l. Typically applications are selected for processing on a first come—

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* The document entitled, USDA Rural Development Consolidated ARRA Obligations (as of 

June 17, 2009), has been retained in Committee files. 

first served basis. Recovery Act funds have initially been utilized to help clean up 

the large backlog of applications that existed. States have also been instructed that 

40% of the allocated funds be made available to very-low income applicants. 

Water and Waste—Priority points are assigned to applications based on population, health priorities, income levels and whether an applicant is a pubic body or 

Indian Tribe. Points are also assigned to application that will merge ownership, 

management, and operation of smaller facilities providing for more efficient management and economical service; enlarge, extend, or otherwise modify existing facilities 

to provide service to additional rural areas; or serve an area that has an unreliable 

quality or supply of drinking water. 

Broadband Program—Broadband Program—Implementation of the Broadband 

Initiatives Program (BIP) under the Recovery Act will necessitate a competitive 

grant, loan, and loan/grant combination process. This process is still under development, and will include application rating and ranking criteria.

Question 2. USDA has emphasized their dedication to transparency in administering funds, yet many sources of information as to where funding is actually supposed to go do not add up. Could you provide to the Committee a list of funding 

by state, town, and project of all the Stimulus funding across all Federal agencies? 

Answer. President Obama is committed to implementing the Recovery Act with 

an unprecedented level of transparency and accountability. This is frankly a work 

in progress; the reporting protocols and web-based public access tools continue to 

evolve. I have appended * a detailed state/town/project list of all USDA Rural Development Recovery Act investments. Similar data is available on request from other 

agencies. In addition, detailed project information in various formats is available on 

www.USASpending.gov, www.Recovery.gov, and on other Federal agency websites. 

I would especially direct your attention to the geospatial mapping tool found on the 

USDA website at http://www.usda.gov/recovery/map/. These tools will continue to 

be improved in the months ahead. 

Question Submitted By Hon. Bill Cassidy, a Representative in Congress from Louisiana 

Question. The Davis-Bacon provisions will increase costs for rural communities 

and require them to commit a greater local match for a Rural Development loan. 

You suggested that in order to mitigate this cost increase, a different mix of grants 

and loans could be provided to the local community. Please elaborate on what adjustments would be made to alleviate the cost increases caused by the Davis-Bacon 

requirements. Also, how would these adjustments affect the availability of grant and 

loan funding to other communities, as well as the total number of projects that 

could be funded by Rural Development programs? 

Answer. The Rural Development programs impacted by the application of DavisBacon Requirements are typically needs-based programs where loans and grants are 

offered based on an applicant’s ability to assume and repay debt. Our Community 

Facilities and Water and Waste Disposal Programs are two such programs. Agency 

funding offers will be adjusted in consideration of increased project costs associated 

with implementation of the Davis-Bacon provision of the Recovery Act. Whether the 

additional funding is provided will be loan or grant will be based upon the applicant’s eligibility and financial situation. 

We do anticipate that implementing Davis-Bacon will likely result in higher 

project costs for construction funded through the Recovery Act. Early estimates are 

that impacted projects could experience costs that are 10–20% higher than under 

our existing programs. This will impact the number of projects that we will ultimately be able to fund. 

Rural Development has significant responsibilities related to the Recovery Act. 

The Agency has been charged with deploying $4.36 billion in recovery funds, that 

when implemented will deliver more than $20 billion in loans and grants to improve 

economic opportunity and the quality of life in rural America. Rural Development 

intends to fund a significant number of loans and grants across all of its programs, 

including an estimated 9600 essential community facilities, approximately 8,000 direct home loans and 90,000 home loan guarantees, hundreds of new rural businesses, and 1,400 new or improved rural water and waste systems. 

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Response from Hon. Phyllis K. Fong, Inspector General, Office of Inspector 

General, U.S. Department of Agriculture 

Questions Submitted By Hon. Mike McIntyre, a Representative in Congress from 

North Carolina 

Question 1. The Office of the Inspector General was provided with $22.5 million 

in the Recovery Act for oversight and audit. How is this funding broken down by 

mission area? Are you able to increase staffing numbers to the required level given 

that this is just one-time funding? 

Answer. The monies received by the Office of Inspector General (OIG) for oversight work related to the American Recovery and Reinvestment Act of 2009 (Recovery Act) were not broken down by mission area, although the Appropriations Committees advised that $7.5 million of the amount was for oversight of Forest Service 

Recovery Act programs. We nevertheless plan to perform audit work in each USDA 

program and activity that received Recovery Act funding through the 33 audits 

planned for this year or in subsequent fiscal years. This work will be performed internally or through contractors except for audit work related to Rural Development’s 

Broadband Program. Given the release of our current report in March 2009, we are 

coordinating with the Government Accountability Office since it is taking the lead 

in this area related to Recovery Act funding. As of June 19, 2009, two audit reports 

and seven flash reports (quick-turnaround reviews that identify issues that should 

be addressed by USDA program officials before Recovery Act funds are expended) 

have been issued and 23 audits are in process (see Attachment 1). Reports are posted on our website www.usda.gov/oig. To date, OIG’s investigative work has focused 

on conducting fraud awareness briefings in the various agencies of USDA receiving 

Recovery Act funding, dissemination of oversight best practices, and performing reviews of several procurement actions referred to OIG by the Recovery Accountability 

and Transparency Board. 

We believe we are able to increase staffing to levels needed for us to do the additional oversight work required of OIG. We have been able to manage the process 

by hiring at the lower grades (leaving the natural attrition that occurs at the higher 

levels to offset future staffing levels), using contractors where possible to supplement our workforce, and using temporary hiring authorities (like hiring retired annuitants).

Question 2. Are the staff that you are hiring now experienced enough to evaluate 

the often complex projects (including broadband deployment) that will be funded 

through the stimulus? 

Answer. On the Audit side of our operations, we are hiring primarily entry-level 

auditors. In addition, we are hiring several experienced senior audit managers that 

recently retired from our agency. Both managers have years of experience in auditing the programs and operations of USDA. These managers will assist teams in developing the scope and approach to various audit assignments resulting from the 

Recovery Act. The audit work we will perform as a result of the Recovery Act will 

include basic data collection and analysis to evaluate such issues as whether participants are eligible for the programs and whether they comply with program requirements. The entry-level auditors will be used to perform these tasks and assist our 

more experienced auditors who will be leading the overall audit. Over time, these 

entry-level auditors will receive structured and on-the-job training that will allow 

them to progress to the journeyman level. This career progression for a staff auditor 

generally encompasses a 4 year period, at which time the auditors we are currently 

bringing on board should be ready to replace the staff we will lose to attrition and 

retirements. 

On the Investigations side, we are currently in the process of hiring criminal investigators. The majority of these positions are GS–9, entry-level. Once hired, the 

investigators must successfully graduate from the Basic Criminal Investigator 

Training Program at the Federal Law Enforcement Training Center, in Glynco, 

Georgia; and attend a 3 week Inspector General Basic Training Course at the IG 

Academy. Once these have been successfully completed, the newly hired criminal investigators will be fully authorized to conduct investigations relating to the programs and operations of the U.S. Department of Agriculture, including executing arrest and search warrants, and carrying firearms. These newly trained criminal investigators will initially be assigned to work with a senior level criminal investigator, who will mentor and train them in conducting investigations of USDA programs. As they gain experience and complete additional training courses, they will 

conduct investigations independently.

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Attachment 1

USDA–OIG Assignments Funded Under ARRA for FY 2009

(current as of June 10, 2009) 

American Recovery and Reinvestment Act of 2009 (P.L. 111–5) 

Agency Acro Assign

l

Nbr Form 1 Plan Page Nbr Title 

Completed

FS 08703–1–HQ 09HQ006 Existing Risk to Forest Service’s Economic Recovery Program (Issued 04/03/09) RD 85703–1–HQ 09HQ006 Existing Risk to Rural Development’s Economic Recovery Program (Issued 04/03/09)

Ongoing

FSA 03703–1–Ch 09CH018 Controls over Aquaculture Grant Recovery Act Funds (Phase I) 

Flash Report: 03703–1–Ch(1) (Issued 05/08/09)Flash Report: 03703–1–Ch(2) (Issued 06/03/09, response pending)

FSA 03703–1–Te 09TE024 ARRA—Direct Farm Operating Loans—Phase I RHS 04703–1–Ch 09CH022 Controls Over Eligibility Determinations for Single-Family Housing Guaranteed Loan Stimulus Funds (Phase I) 

Flash Report: 04703–1–Ch(1) (Issued 05/11/09) Flash Report: 04703–1–Ch(2) (Issued 05/14/09) Flash Report: 04703–1–Ch(3) (Issued 05/22/09) Flash Report: 04703–1–Ch(4) (Issued 05/22/09) Flash Report: 04703–1–Ch(5) (Issued 06/10/09, response pending) 

FAS 07703–1–HQ 09HQ006 ARRA Trade Adjustment Assistance for Farmers (TAAF) Program—Monitoring Implementation RHS 04703–1–Hy 09HY021 Controls Over Eligibility Determinations for Rural Community Facilities Program Direct Loan and Grants Stimulus Funds 

(Phase I) 

RHS 04703–1–KC 09KC033 Single-Family Housing Direct Loans Stimulus Controls FS 08703–1–At 09AT027 Forest Service’s Use of ARRA Funds for Hazardous Fuels Reduction FS 08703–1–Hy 09HY013 (ARRA) Oversight and Control of Forest Service Activities FS 08703–1–SF 09SF023 Administration of Biomass Grants Funded Under ARRA, Phase I FS 08703–2–SF 09SF025 FS Capital Improvement and Maintenance (Phase 1) RUS 09601–1–At 09AT002 RUS Controls Over Water and Waste Disposal Loan and Grant Programs NRCS 10703–1–KC 09KC037 Emergency Watershed Protection Program Floodplain Easements NRCS 10703–2–KC 09KC036 Watershed Protection and Flood Prevention Operations Program OCFO 11703–1–HQ 09HQ006 ARRA Reporting Oversight FNS 27099–71–Hy 09HY004 Summary of Nationwide Electronic Benefits Transfer (EBT) System Operations FNS 27703–1–At 09AT021 The Emergency Food Assistance Program (TEFAP) FNS 27703–1–Hy 09HY020 ARRA—FNS Management Oversight of the Supplemental Nutrition Assistance Program (SNAP) FNS 27703–1–KC 09KC035 Supplemental Nutrition Assistance Program Increased Benefits From Stimulus Funds FNS 27703–2–At 09AT015 Recovery Act Impacts on SNAP—Phase One FNS 27703–2–Hy 09HY001 State Fraud Detection Efforts for SNAP RBS 34703–1–KC 09KC032 Rural Business Enterprise Grants 

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Attachment 1—Continued

USDA–OIG Assignments Funded Under ARRA for FY 2009

(current as of June 10, 2009) 

American Recovery and Reinvestment Act of 2009 (P.L. 111–5) 

Agency Acro Assign

l

Nbr Form 1 Plan Page Nbr Title 

RBS 34703–1–Te 09TE025 ARRA—Rural Business and Industry Guaranteed Loan Program MULTI 50703–1–HQ 09HQ006 ARRA Contract Oversight and Activities

Planned

FNS 09FM025 ARRA Spending for WIC Management Information System FNS 09CH014 Vendor Monitoring in the WIC Program FS 09SF024 Wildland Fire Management FSA 09FM026 ARRA Spending for FSA IT Issues FSA 09KC003 Supplemental Agricultural Disaster Assistance Programs and ARRA Transition Assistance RHS 09CH021 Controls Over Eligibility Determinations for Single-Family Housing Guaranteed Loan Stimulus Funds (Phase II) RHS 09HY022 Controls Over Eligibility Determinations for Rural Community Facilities Program Direct Loan and Grants Stimulus Funds 

(Phase II) 

RHS 09KC034 Single Family Housing Administrative Expenses for Stimulus Spending

33 stimulus assignments planned 

23 initiated 

12 completed 

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Response from Doug Anderton, General Manager, Dade County Water and 

Sewer Authority; Vice President, National Rural Water Association; 

President, Georgia Rural Water Association 

Questions Submitted By Hon. Mike McIntyre, a Representative in Congress from 

North Carolina 

Question 1. Please provide additional recommendations you would make to improve access to rural development programs and provide information on these programs to communities. 

Answer. The current water and waste disposal grant and loan program operated 

by the Rural Utilities Service has a great long successful history of providing critical 

infrastructure assistance to meet one of the most basic needs in rural America—providing safe and affordable water and waste water assistance to low and moderateincome communities. Rural Development also has the unique advantage over other 

Federal agencies by having a diverse field structure with community development 

expertise scattered throughout small town rural America. 

Without this assistance, many of these communities could not survive or compete 

in this global economy. With the economic downturn, many of these small communities are also faced with the additional burden of reduced tax revenues that impact 

their ability of providing critical services on a larger scale that their urban counterparts. 

• Recommendations 

In order to assist Rural Development to increase their ability to help these communities in need, we would like to recommend that this Committee explore the option of providing the Secretary of Agriculture limited waiver authority for these programs. This authority has been granted to the Secretary in previous disaster related 

bills and the Department has been very conservative in its use. This Committee 

could also require a written notification prior to the Department issuing a waiver 

to continue to conduct the proper oversight and ensure the waiver is consistent with 

the Congressional intent. 

This authority, while small in scope, would provide large direct benefits to communities in need. For example, a community which has a population of ten thousand two hundred people does not qualify for assistance when a community of nine 

thousand nine hundred would, regardless of the need. At this point, the community 

over ten thousand would be unable to even apply for assistance. It would seem that 

allowing this community to apply while giving the Secretary the authority to review 

these applications on a case-by-case basis would be beneficial. Not only would a 

waiver of this type be beneficial to address issues related to population, but for income and matching requirements as well. Many small, rural, lower-income communities, including the Colonias and some federally-recognized Native American 

Tribes, cannot assume the mandatory 25 percent loan or matching requirement for 

the total development costs as currently required by law. This requirement hits 

those with the lowest of incomes the hardest as they are the ones unable to debt 

service or provide matching funds at any significant level. 

There is no silver bullet which will guarantee access to the RUS programs by all 

rural communities, and that was not the purpose of the program. However, giving 

the RUS the flexibility to work with some of those communities which fall slightly 

out of their current reach, but within the original intent of Congress for the program, would be extremely beneficial.

Question 2. How are rural water systems able to take advantage of economies of 

scale to spread out fixed costs and better serve rural citizens in small systems? Are 

you able to merge systems to keep them economically viable? How do communities 

collaborate on systems? 

Answer. Small and rural water systems are able to take advantage of economies 

of scale to improve service, expand service, and realize economic efficiency. This is 

currently happening and the trend is accelerating due to growth, financial assistance, and increased regulatory burden. The main forms that of greater economies 

of scale include: physical consolidation or regionalization of water supply distinction 

and/or treatment systems, management/governance consolidation (which may not required physical interconnection of service), interconnection with retail suppliers 

with available supply and treatment facilities, and satellite management of small 

communities too far apart to regionalize, etc.

Regionalization or consolidation can work (and is working) in some situations, but 

only for the portion of small systems and only when the systems are in close proximity and the economics make sense. Rural Water is the lead proponent of consolidation when it makes sense (when it results in better service for the consumer) and 

we have consolidated numerous communities in all the states. Consolidation and reVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00075 Fmt 6621 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
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gionalization that is in the consumers’ best interest will happen naturally at the 

local level. Federal policy that favors consolidation over the locally preferred solution is a step in the wrong direction for consumers. 

The trend toward consolidation/regionalization in the country’s water supply is 

empirically reflected in the decrease in the number of community water systems 

(CWS). According to EPA, in 1993 there were 57,561 community water systems in 

the U.S. That number has decreased to 51,988 in 2008. Additionally, there are 8,860 

community water systems which purchase some, or all, of the water from neighboring water supplies. 

Currently, USDA encourages multi-system and regional approaches when ranking 

applications for funding by favoring projects that will merge ownership, management and operation of smaller facilities for more efficient management and economical service. 

In Kentucky, in the last 30 years, the number of public water systems has decreased by 70% in the state—from 1,700 public water systems to 400 today. The key 

ingredient in Kentucky trend was state financial aide and local support. 

Kentucky Rural Water Association has assisted most of these communities (their 

members) through the process to ensure the consolidation will be workable and beneficial to all the communities in the mix. In the rare cases where the government 

pressured apprehensive communities to consolidate, the new consolidated system 

still has problems long into the future. 

Rural Water has led or assisted in more communities consolidating their water 

supplies than any program, policy or organization. Again, when communities believe 

consolidation will benefit then, they eagerly agree. However, if communities are coerced to consolidate, one can almost guarantee future controversy. 

Response from Tom Duck, Executive Director, Texas Rural Water Association 

Questions Submitted By Hon. Mike McIntyre, a Representative in Congress from 

North Carolina 

Question 1. Please provide additional recommendations you would make to improve access to rural development programs and provide information on these programs to communities. 

Answer. I think that providing additional grant funding would be a key to improvement. In working with the lowest income communities, they sometimes find it 

hard to access the program because they have no way of raising the funding to pay 

for the loan portion of projects funded by USDA. 

As I mentioned in my testimony, allowing the Secretary to waive any or all requirements on communities as long as they fall under the Congressional intent of 

the program would be beneficial as well. Communities are barely ineligible for funding for a handful of reasons and do not qualify for funding. 

Improving the environmental review process is also of the utmost importance in 

improving access to these funds. Many projects spend more time on this work than 

they do on the actual planning and construction.

Question 2. Do your rural water systems serve any Native American Tribes? What 

particular challenges do you find in these rural water systems with how the Federal 

program is designed? 

Answer. Texas Rural Water does provide assistance to rural water systems which 

serve Native American Tribes throughout the State of Texas. These communities 

have very specialized needs and tend to be extremely low income. These communities have an extremely difficult time in meeting the matching funding requirements of the program. With low tax bases and high poverty, there is no way for 

these communities to service debt. These communities need specialized technical assistance and I would suggest the establishment of a program of circuit riders specially trained in issues related to these communities as one way to increase outreach 

and ensure greater participation by and assistance to these underserved areas.

Question 3. Do Colonias and other resource limited communities have the ability 

to apply for the Water and Waste Disposal programs? Does TRWA or NRWA provide technical assistance to communities in putting together applications or in managing their systems? 

Answer. Colonias and other resource limited communities often fall into many of 

the same categories as Native American Tribes. While many are eligible, they either 

don’t know of the programs, or an unable to participate. Few truly understand the 

conditions present in these communities. Most of these communities not only lack 

running water, but wastewater systems as well. Many utilize cesspools and septic 

systems which are very susceptible to flooding and overflow. Colonias often are so 

remote and inaccessible that merging with other systems in not an option. Another 

73

difficult issue is related to the actual location of the Colonias in Texas. They are 

located very close to the Rio Grande River. The Colonias are often constructed in 

the floodplains of the river and this contributes to the flooding of the systems that 

are present. These communities lack a tax base able to sustain any loan so many 

go without accessing the USDA programs due to the limit on grant funds available. 

That being said, USDA Rural Development has done a good job of getting out and 

working in these communities. While the limitations and poverty are important factors, culture is a major factor as well. In the Colonias of Texas and the rest of the 

border region, organizations must be a trusted part of the communities to have success. Texas Rural Water has great relationships in these communities and has built 

a trust in the border region second to none. We currently operate both Water and 

Wastewater circuit riders in the Colonias and would like to see a program specifically dedicated to this work. The issues we face in these communities are common 

throughout the border and a program specifically tailored to those needs would be 

beneficial. 

TRWA, through NRWA, provides technical assistance to these communities in 

both managing these systems and developing applications for assistance. Many of 

these communities lack the very basics needed to operate water systems and apply 

for funding. A fax machine or computer is considered a luxury when many communities don’t have water or electricity. However, circuit riders assist these communities in every aspect of system operation as well as the process for applying for 

Federal funds. 

Response from Hon. Franklin D. Rivenbark, Commissioner, Pender County, 

North Carolina; Member, Agriculture and Rural Affairs Steering Committee, Rural Action Caucus Steering Committee, National Association 

of Counties (NACo); Past Vice Chairman, Rural Development Subcommittee, NACo 

Questions Submitted By Hon. Mike McIntyre, a Representative in Congress from 

North Carolina 

Question 1. Given the competition for Federal funds, would you suggest that funds 

be devoted to traditional infrastructure development in rural areas or to local and 

regional planning initiatives such as the new Rural Collaborative Investment Program? 

Answer. Both types of funding are critical. Basic infrastructure is fundamental to 

rural development. However, only funding basic infrastructure is not sufficient to 

help communities thrive and get past impediments to rural development. Programs 

such as RCIP, incentivize regional planning and fund local strategies, including traditional infrastructure. In my community, we really could use local flexibility to 

allow our water and wastewater planning to accommodate new businesses. We 

would also benefit from a program like RCIP that would fund our innovative local 

priorities, including water infrastructure that will meet future demands and other 

projects that don’t fit in the regular USDA boxes and rules. We support both basic 

infrastructure and any program or model that puts the prioritization of local and 

regional priorities first, above making communities apply for whatever particular 

‘‘rural development’’ funding stream is available at the time. RCIP is one excellent 

model, but NACo is open to other suggestions.

Question 2. You mentioned that rural counties are struggling to navigate the 

maze of funding opportunities. Has information provided by the department been 

sufficient for communities interested in these funds? What have been the greatest 

obstacles to communities interested in applying for these funds? 

Answer. USDA Rural Development staff members at the local, state and national 

level are well respected across rural America. My staff in Pender County and I both 

agree that USDA Rural Development staff are the best to work with of any Federal 

or state agency. They bend over backwards to make projects work and deeply care 

about the rural communities they serve. So yes the department has communicated 

sufficiently with my county, but many counties, especially our nation’s persistently 

poor counties are in need of greater outreach by the agency. 

The greatest obstacle to communities applying for USDA Rural Development 

funding is the lack of local staff capacity in our nation’s most rural communities. 

These communities need greater outreach and technical assistance. USDA is only 

one piece of the maze of programs and opportunities which rural counties are striving to understand. Therefore, many rural counties do not have the capacity to effectively compete for Federal grants and loans. We urge USDA to train its field staff 

to assist rural communities with making the connections to programs and resources 

that are present not only at USDA, but also through other Federal and state agenVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00077 Fmt 6621 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
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cies. Often other programs complement and match USDA programs, but are not easily accessible or well know to small communities.

Question 3. Please provide additional recommendations you would make to improve access to rural development programs and provide information on these programs to communities. 

Answer. USDA should undertake significant outreach to our nation’s 398 persistent poverty counties and other rural counties that have not traditionally been 

successful applying for or receiving USDA Rural Development funding. The Recovery Act requires that at least ten percent of USDA Rural Development funding (excluding the broadband program) be allocated for assistance in persistent poverty 

counties. The spirit of this provision will not be met by simply funding just enough 

projects to reach the ten percent threshold. Instead, NACo believes that USDA 

should engage in targeted outreach to these communities to ensure that those communities most in need are aware of their opportunities and afforded all possible 

help in successfully applying for funding that they are eligible to obtain. 

The agency can also improve access by including rural county leaders in their outreach and planning efforts. The new state directors should work very closely with 

the state associations of counties to learn the best ways to communicate with and 

receive feedback from county leaders in their state. 

USDA should also map and identify those communities that are not receiving 

rural development funding and reach out to those communities. They should also 

help connect these communities with technical assistance providers that can help 

them effectively identify needs and apply for funding. 

Response from Hon. Chandler Sanchez, Governor, Pueblo of Acoma, New 

Mexico; on Behalf of National Congress of American Indians 

Questions Submitted By Hon. Mike McIntyre, a Representative in Congress from 

North Carolina 

Overall Response 

The National Congress of American Indians wishes to thank the Subcommittee 

for the opportunity to provide advice on improving the implementation of the persistent poverty counties provision of the Recovery Act, and other recommendations 

to improve tribal access to rural development programs. 

One overarching theme in NCAI’s response to these questions is relationship 

building between USDA and tribes through a proactive departmental outreach to 

tribal leaders, agencies, communities and individuals that result in sustained dialogue, collaboration and programmatic implementation. The difference is in the timing. The recommendations relating to Question 1—the implementation of the persistent poverty counties provision of the Recovery Act—are based upon a short time 

frame that acknowledges that they are feasibly implemented only through existing 

departmental and tribal resources. Recommendations relating to Question 2 look 

further into the future and envision structural changes within USDA that would enhance USDA-tribal partnerships across the full range of Rural Development programs. A second overarching theme relates to building the tribal capacity to implementation of USDA Rural Development programs. Specific recommendations on how 

to implement these themes across the relevant programs are provided. 

Question 1. What would be your advice to the department as to the approach it 

should take to implement the provisions requiring a set-aside for persistent poverty 

counties? 

Answer.

1. Develop an administrative or statutory fix that allows Sec. 105 to be 

applied on a reservation-by-reservation basis for qualifying tribes.

Sec. 105 of the Recovery Act states that at least ten percent of the amounts appropriated to the ‘Rural Housing Service, Rural Community Facilities Program Account’, ($130,000,000) the ‘Rural Business-Cooperative Service, Rural Business Program Account’, ($150,000,000) and the ‘‘Rural Utilities Service, Rural Water and 

Waste Disposal Program Account ($1,380,000,000) shall be allocated for assistance 

in the form of loans and grants to persistent poverty counties.’’ Overall, 

$166,000,000 is set-aside under the Recovery Act to assist persistent poverty counties. 

Many Indian tribes are in, or contain persistent poverty counties. According to the 

2000 Census, eight of the ten poorest counties in America (based on per capita income). Unemployment among Native people has consistently been twice the national 

average. According to the 2000 Census, the unemployment rate on tribal reservations was 22 percent—comparable to the national unemployment rate of 25 percent 

during the Great Depression. The poorest counties in which tribal land are conVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00078 Fmt 6621 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
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1http://www.ers.usda.gov/publications/aib710/aib710co.htm.

tained in whole or part are listed by overall national rank below and briefly described in a manner to demonstrate some of the inherently challenges in implementing the persistent poverty counties provision on a county wide versus reservation wide basis.

• (1) Buffalo County, South Dakota is predominantly part of the Crow Creek Indian Reservation. The Reservation itself is in all or part of four counties. (Population: 2,032 Per Capita Income: $5,213)

• (2) Shannon County, South Dakota is entirely within the Pine Ridge Reservation. The reservation itself spans across four counties. (Population: 12,466 Per 

Capita Income: $6,286)

• (4) Ziebach County, South Dakota lies almost entirely within the Cheyenne 

River Indian Reservation, which itself is in all or part of five other counties. 

The balance of the county lies within the Standing Rock Indian Reservation, 

which is in all or part of four counties. (Population 2,519: Per Capita Income: 

$7,463)

• (5) Todd County South Dakota lies entirely within the Rosebud Indian Reservation. The reservation lies in whole in or part, in four counties. (Population: 

9,050 Per Capita Income: $7,714)

• (6) Sioux County, North Dakota lies entirely within the Standing Rock Indian 

Reservation and forms the northernmost 30 percent of the reservation. The balance of the reservation is in South Dakota. (Population: 4,044 Per Capita Income: $7,731)

• (7) Corson County, South Dakota lies entirely within the Standing Rock Indian 

Reservation. (Population: 4,181 Per Capita Income: $8,615)

• (8) Wade Hampton Census Area in Alaska is part of the unorganized borough. 

As of the 2000 census, the population is 92.53% is Native American. (Population: 7,028 Per Capita Income: $8,717)

• (10) Apache County contains parts of the Navajo Indian Reservation, the Fort 

Apache Indian Reservation, and Petrified Forest National Park. (Population: 

69,423 Per Capita Income: $8,986)

Many of these counties are only a part of a reservation. Some counties contain 

two or more reservations. Most tribes above are in more than one county, and in 

is in two states. There is perhaps only one tribe in United States—the Menominee 

Tribe in Wisconsin—where the reservation’s boundaries are conterminous with 

county boundaries. However, Tribal governments, and not county governments, are 

the predominant governing entities on reservations and their members. 

Thus, reservation areas that experience persistent poverty but are only part of a 

county, might not qualify for Sec. 105 funding based on a county-by-county implementation, if the economic circumstances in the non-reservation area of the county 

are not similar. A reservation that fully contains a persistent poverty county, likely 

experiences this condition reservation wide, yet Sec. 105 funding might not extend 

throughout the reservation. These scenarios demonstrate the difficulties and paradoxes in implementing Sec. 105 on a county by county basis for tribes that experience persistent poverty. If the primary intent of this provision is to address persistent poverty on a governmental level, then the provision should account for the 

inherent practicality of working on reservation by reservation basis with the tribal 

government. A legislative and/or administrative fix must be developed to allow 

USDA to work on a tribe-by-tribe basis, with the tribal government as the central 

point of contact, to implement Sec. 105. The section should be renamed and operated either de facto or de jure as a set aside for Persistent Poverty Counties and 

Indian Tribes.

2. Building and supporting the foundation for implementation

The applicable rural programs of Sec. 105—Community Facilities, Business Programs, and Water and Waste Disposal—are designed to put buildings, businesses, 

and water infrastructure into place. However, the foundation for successful programmatic implementation is built upon sufficient organizational infrastructure, 

human capital, and strategic planning. USDA’s Economic Research Service recommends improvements in ‘‘the competitiveness of rural firms by enhancing the 

core skills of both management and labor. Competitiveness in today’s market increasingly depends on the ability to obtain and use information, technology, and 

new management techniques.’’ 1 This foundation is often lacking in areas of perVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00079 Fmt 6621 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
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sistent poverty, and therefore requires as much if not more support before, or as 

the funds from these programs are distributed. 

a. Sustained USDA outreach, collaboration, and consultation with Indian tribes

Fundamentally, this requires a commitment from the highest levels of USDA to 

the state offices, to reach out and dialogue with tribal governments and Federal 

partners on a regular basis and throughout the organizational levels, to design strategic plans on a reservation by reservation basis that address capacity and ensure 

proper implementation of the programs. USDA should ensure that its directive on 

tribal consultation—DR 1350–001—is followed in the offices within states that have 

Indian nations within their boundaries.

b. Programmatic Support to Build the Foundations

Programs and funds that can support the development of these foundations—

whether found in the three programs or elsewhere—should be a necessary complement to the implementation of these programs. For example, the Rural Business 

Enterprise Grant (RBEG) program provides grants to fund technical assistance 

needs and to establish and fund revolving loan programs. Federal programs to empower rural communities and tribes and design strategic plans such as USDA’s Empowerment Zones and Enterprise Communities (EZEC) should be revitalized. Three 

tribes working together—the Menominee Indian Tribe, Sokaogon Mole Lake Chippewa Community and Lac du Flambeau Chippewa Community—through its joint 

enterprise, the Northwoods NiiJii Enterprise Community, have demonstrated the 

success of the EZEC program. 

Similarly, operation and maintenance of buildings, water infrastructure and waste 

disposal facilities are critical to the sustainability and cost-effectiveness of this physical infrastructure. Some tribes experience the premature decline and inoperability 

of such facilities for lack of sufficient training, funding and staff. Turnover of operators of drinking water facilities in some tribal areas is high because tribal governments simply lack the funds to provide adequate salaries. With this turnover also 

goes the investment and knowledge in training and expertise to manage the systems. In the area of water infrastructure, USDA can work closely with its partner 

Federal agencies EPA and the Indian Health Service, to ensure sustained operation 

and maintenance of such facilities.

c. Lower loan: grant ratios

Recovery Act funding for the three programs in Sec. 105 is in the form of loans 

and grants. State Directors have the discretion to determine how funding is allocated, resulting in a great variance in how Indian tribes are treated. If a state director prefers to issue loans instead of grants to an applicant, it could be a make or 

break decision. For a tribe in a persistently poverty county, this often means 

‘‘break.’’ This dynamic is one reason why available USDA funding to tribes to build 

water infrastructure, perennially often goes unspent, despite the fact that over 13% 

of tribal homes lack fundamental access to safe drinking water and basic sanitation—a percentage well over 20 times the national average. Therefore, we request 

that that loans: grants ratio of funds provided to persistent poverty counties and 

tribes be lower than the ratio provided to other eligible applicants.

3. Specific Programmatic Recommendations

a. Business Development and Community Facilities

Two economic development opportunities may exist for many reservations of persistent poverty—traditional foods and renewable energy—that can be supported by 

Sec. 105 funding. These opportunities can and should be combined with other USDA 

and Federal programs. The need for strategic planning between USDA and the 

tribe, as mentioned above, is critical to tailoring the program on a reservation specific basis. 

For example, using a hypothetical tribe in the Great Plains (as many of the poorest counties in the nation are part of or wholly on tribal reservations in South Dakota), Sec. 105 funding for business development and community facilities can be 

used to implement Sec. 4211 of the 2008 Farm Bill. That section allows for the purchase of bison meat from Native American bison producers and producer-owned cooperatives of bison ranchers; and establishes a ‘‘Traditional and Locally Grown Food 

Fund’’ that allows the purchase of foods designated ‘‘traditional’’ or locally grown, 

and supports the procurement of the foods by Native American farmers and ranchers up to 50% where practicable. Sec. 105 funding can support the economic developVerDate 0ct 09 2002 14:56 Oct 08, 2009 Jkt 041481 PO 00000 Frm 00080 Fmt 6621 Sfmt 6621 I:\DOCS\111-18\52649.TXT AGR1 PsN: BRIAN
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ment of Native American bison producers and help build the facilities necessary for 

their operations. 

Similarly, many of these tribes have significant wind energy potential, and many 

of their homes and building can benefit from energy efficiency measures. Tribes in 

the Great Plains are in an area that some view as ‘‘the Saudi Arabia of Wind.’’ Sec. 

105 business development and community facilities funding can help these tribes 

develop renewable energy enterprises and small businesses for weatherization in 

partnership with USDA, DOE, DOI and HUD and others, and in anticipation of 

even more support in future clean energy legislation.

b. Water infrastructure and waste disposal facilities

An interagency group (which includes USDA) was established in 2007 with the 

goal of reducing by 50% the number of tribal homes lacking fundamental access to 

safe drinking water and basic sanitation has identified many barriers and solutions 

to the reality that over 13% of tribal homes experience these conditions. As mentioned above, USDA funding for water infrastructure on tribal lands is not fully 

accessed, in part because it offered in the form of loans. A greater percentage of Sec. 

105 funding for water infrastructure funding should be provided to qualifying tribes 

in the form of grants. 

Second, multi-agency efforts to build a water infrastructure project on a reservation somewhat predictably, is often laden with numerous and often overlapping and 

contradictory administrative requirements. Designation of a lead Federal agency 

that consolidates all aspects of the project—including design, funding and construction—is an effective common-sense solution. USDA state offices in Oregon and Mississippi have already implemented that solution which should replicated across all 

other USDA state offices addressing water infrastructure issues on tribal lands. 

These state offices have signed and implemented MOUs with their IHS regional office counterparts to designate a lead agency for each water infrastructure project. 

This model can also be replicated with EPA and IHS in the distribution of Sec. 105 

funding for waste disposal facilities.

Question 2. Please provide additional recommendations you would make to improve access to rural development programs and provide information on these programs to communities. 

Answer.

1. USDA commitment to staffing and training on tribal issues

Tribal access to rural development programs can be improved by increasing the 

number of USDA employees dedicated to tribal issues. At present, USDA has designed one FTE at the headquarters office to advise the Secretary on tribal policy 

across the full panoply of USDA programs. USDA Rural Development has one Native American liaison. Tribal governments are becoming increasingly aware of the 

great diversity and value of RD programs, including housing, business and investment, water infrastructure, renewable energy, electrification, and community facilities. But without sufficient staffing, department knowledge of tribal issues, consultation with tribal governments, and tribal involvement in RD programs, can suffer. 

The staffing issue and agency outreach to tribes can also be illustrated by way 

of comparison to other Federal agencies with missions that are not tribally specific. 

EPA has the equivalent of over 180 FTEs dedicated to tribal environmental issues, 

including a headquarters office of approximately 15 FTEs, and regional tribal offices 

in each EPA region that has tribes. HUD has an Office of Native American Programs (ONAP) at headquarters with 22 FTEs, and five ONAP offices in their regions. Both agencies have regular dialogues with tribal leaders and representatives. 

We recommend that the USDA headquarters office and Rural Development establish and staff tribal offices, that USDA encourage the state directors with tribes in 

their states, to dedicate staffing to tribal issues, and that tribal advisory groups be 

established to dialogue on a regular basis with the department. 

All departmental personnel with programs that impact tribal governments and 

communities should have training on tribal issues. The previous Administration developed a Federal ‘‘Working Effectively with Tribal Governments’’ training that has 

yet to be fully implemented, but can be accessed with minimal effort. As mentioned 

above, these staff should also be educated in the USDA directive on tribal consultation (DR–1350–001).

2. Extending Extension Programs to Indian Reservations

Tribal awareness of rural development programs can also be bolstered by a steady 

USDA presence on tribal lands. This can be done relatively cheaply via USDA’s extension programs. Extension programs also support activities in agriculture, leadership development, natural resources, family and consumer science, and community 

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2http://www.ers.usda.gov/publications/aib710/aib710co.htm.

3http://www.gao.gov/new.items/d06513t.pdf.

and economic development. Clearly this is an avenue through which USDA can be 

a meaningful presence for so many tribal members living on reservations. For example, when one thinks of rural America, one of USDA’s Extension Programs—the 4–

H program comes to mind. The 4–H logo programs emblematic of America’s rural 

identity, and for good reason. It has been funded by USDA’s extension programs 

since 1914, and currently over 97% of America’s counties comprising over 3,100 extension offices have robust extension programs. 

Though Congress mandates research and extension services in every county in the 

nation, this reality does not extend to Indian Country. The Federally Recognized 

Tribal Extension Program (FRTEP) currently consists of 30 extension agents on Indian reservations. Less than 4% of tribal members living on their reservations have 

access to these programs. Current funding is $3 million. NCAI and our coalition allies ask initially for a mere $10m annually for FRTEP, to create up to 85 new offices, as a first step towards more significant and sustained funding for FRTEP into 

the future.

3. Addressing Poverty through Telecommunications

USDA’s Economic Research Service finds that one way of addressing persistent 

poverty is ‘‘to improve the connections between rural and urban areas by improving 

infrastructure and the dissemination of information and the ability to use it. Advanced telecommunications, for example, while not a panacea, afford rural communities more economic opportunities by providing them with better access to information, markets, and services such as business and technical assistance, medical care, 

and educational opportunities.’’ 2

A GAO report in 2006 finds that 32.1% of tribal homes lack telephone service.3

The national effort to expand broadband across the country, including Recovery Act 

funding of $2.5 billion in competitive grants and loans through USDA’s Rural Utilities Service, can go a long way in addressing this situation. This Federal support 

in the Recovery Act, along with support for distance learning and telemedicine, 

speak directly to USDA’s ERS’s recommendation, and will help implement the solutions identified in the GAO report, and in turn improving economic opportunities 

for tribes experiencing persistent poverty. 

For more information, please contact Jose Aguto, Policy Advisor, National Congress 

of American Indians.

Æ