33622 Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1703

RIN 0572–AB22

Distance Learning and Telemedicine

Grant Program

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

SUMMARY: The Rural Utilities Service

hereby amends its regulations on the

distance learning and telemedicine

grant program that provides grants for

distance learning and telemedicine

projects benefiting rural areas. The

regulation revises RUS’s method in

which applications will be reviewed by

RUS and scored. This final rule will

make it easier for rural community

facilities to apply for a grant.

DATES: This regulation is effective on

June 27, 1996.

FOR FURTHER INFORMATION CONTACT:

Barbara L. Eddy, Deputy Assistant

Administrator, Telecommunications

Program, Rural Utilities Service, room

4056–S, AG Box 1590, U.S. Department

of Agriculture, Washington, DC 20250,

telephone number (202) 720–9549.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to

be significant and was reviewed by the

Office of Management and Budget

(OMB) under Executive Order 12866.

Executive Order 12778

This final rule has been reviewed

under Executive Order 12778, Civil

Justice Reform. This final rule will not:

(1) Preempt any State or local laws,

regulations, or policies, unless they

present an irreconcilable conflict with

this rule; (2) Have any retroactive effect;

and (3) Require administrative

proceedings before parties may file suit

challenging the provisions of this rule.

Regulatory Flexibility Act Certification

RUS has determined that this final

rule will not have a significant

economic impact on a substantial

number of small entities, as defined in

the Regulatory Flexibility Act (5 U.S.C.

601 et seq.).

Information Collection and

Recordkeeping Requirements

The reporting and recordkeeping

requirements contained in the final rule

have been approved by the Office of

Management and Budget (OMB)

pursuant to the Paperwork Reduction

Act of 1995 (44 U.S.C. Chapter 35, as

amended) under OMB control number

0572–0096. Send questions or

comments regarding this burden or any

other aspect of these collections of

information, including suggestions for

reducing the burden, to: F. Lamont

Heppe, Jr., Director, Program Support

and Regulatory Analysis, Rural Utilities

Service, U.S. Department of Agriculture,

AG Box 1522, Washington, DC 20250.

National Environmental Policy Act

Certification

The Administrator of RUS has

determined that this final rule will not

significantly affect the quality of the

human environment as defined by the

National Environmental Policy Act of

1969 (42 U.S.C. 4321 et seq.). Therefore,

this action does not require an

environmental impact statement or

assessment.

Catalog of Federal Domestic Assistance

The program described by this final

rule is listed in the Catalog of Federal

Domestic Assistance programs under

number 10.855, Distance Learning and

Medical Link Grants. This catalog is

available on a subscription basis from

the Superintendent of Documents, the

United States Government Printing

Office, Washington, DC 20402.

Executive Order 12372

This program is subject to the

provisions of Executive Order 12372

that requires intergovernmental

consultation with State and local

officials.

Unfunded Mandate

This rule contains no Federal

mandates (under the regulatory

provisions of Title II of the Unfunded

Mandate Reform Act of 1995) for State,

local, and tribal governments or the

private sector. Thus, this rule is not

subject to the requirements of sections

202 and 205 of the Unfunded Mandate

Reform Act of 1995.

Background

This final regulation is being

published in whole rather than just

noting where changes were made.

Nearly all the changes concern

obtaining a grant, rather than in

requirements that apply after a grant is

awarded.

The major change is the method in

which applicants will be reviewed by

RUS and scored. Additionally, several

sections of the regulation were moved or

restructed to make it more

understandable.

RUS has incorporated into this final

rule changes in the Distance Learning

and Telemedicine grant program as a

result of the Federal Agriculture

Improvement and Reform Act of 1996;

however, this regulation does not

address the new loan program inasmuch

as funding is not available for a Distance

Learning and Telemedicine loan

program for fiscal year 1996. In

addition, the appeal procedures

outlined in Section 1703.118 are for the

purposes of fiscal year 1996 funding.

On April 16, 1996, RUS published

proposed rule 7 CFR 1703, Distance

Learning and Telemedicine Grant

Program in the Federal Register and

requested comment from interested

parties regarding the proposed rule by

May 16, 1996. The comments received

were considered in this final rule. A list

of the comenters and comment

summaries and responses follows.

1. Alamo Navajo School Board, Inc.,

Magdalena, NM

2. Joint Comments Submitted by:

Mississippi Band of Choctaw Indians,

Philadelphia, MS

Rock Point Community School, Rock Point,

AZ

Black Mesa School, Chinle, AZ

Northwest Portland Indian Health Board,

Portland, OR

Three Affiliated Tribes, New Town, ND

Skokomish Indian Tribe, Shelton, WA

United Tribes Technical College, Bismark,

ND

3. Deubrook Area Schools District No. 5–6,

White, SD

4. Gershowitz Grant & Evaluation Services,

Des Moines IA

5. Rural Economic Development Initiative,

Tallahassee, FL

6. Florida State Rural Development Council,

Tallahassee, FL

7. Republic County Unified School District

No. 427, Belleville, KS

8. Winnebago Cooperative Telephone

Association, Lake Mills, IA

9. Brookings School District No. 5–1,

Brookings, SD

10. Congressman Pat Roberts, Kansas

11. North Central Kansas Educational Service

Center, Concordia, KS

12. Lancaster and Associates, Washington,

DC

13. Randy Baines, NHPF, Washington, DC

14. Office of the Inspector General,

Washington, DC

Comment Summary

(§ 1703.101(b)(Policy). One commenter

stated that the second sentence of

§ 1703.101(b), which discusses

leveraging, seems a little out of place

following after a discussion of rural

areas and greatest need. It was suggested

that this idea be moved to the scoring

criteria discussion § 1703.117, which

awards points for non-federal

supplemental funds and local

involvement in the project.

Response. RUS believes this is an

important statement of policy and

should remain in the policy section. The
Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations 33623

methods and mechanisms for evaluating

the leveraging of grant funds are

discussed in detail in § 1703.117.

Comment Summary (§ 1703.101(c)

Policy.). The rules provide for the use of

technology that would incidentally

allow other providers of developers to

purchase the elemental functions or

access to those functions so other users,

in addition to educational and medical

users, many benefit from any

transmission facilities receiving funding

under this subpart. The regulations

should define who the other users are

and the criteria for determining their

eligibility for accessing the technology.

Response. The primary focus of this

paragraph was to indicate that RUS

policy is technology neutral. The

statement relating to using technology

that would allow others to utilize some

of the excess capacity of the

transmission facilities reflects the

current practices in the

telecommunications industry. For

example, a fiber optic cable may have

the capacity to serve hundreds of users

without affecting service to any one

individual or group of individuals. This

allows each subscriber to share in the

costs of the facilities.

Comment Summary (§ 1703.101(d)

Policy.). One commenter suggested that

paragraph (d) of § 1703.101 be deleted

and that the regulation consistently

reference the six major criteria in

§ 1703.117 rather than add other factors

throughout the regulation. The

commenter believes that including

paragraph (d) causes confusion as to

what RUS will use to select the

application and that applicants may not

know the basis for RUS’ selection:

whether the scoring criteria are the key

or other factors mentioned throughout

are the key to a successful application.

It was therefore suggested that RUS be

clear in adhering only to its existing six

scoring criteria in § 1703.117 and not

have other factors mentioned elsewhere

in the regulation. Additionally, since

there is an appeal process, clarification

may remove any issues for contention.

Response. The requirements in

§ 1703.101(d) state the what, where,

how, and why of the application and

must be supplied for the application to

be complete. Section 1703.117 lists the

scoring criteria used to rank

applications. All of the scoring criteria

need not be addressed, however, the

more points earned, the more likely an

applicant will be successful in obtaining

a grant.

Comment Summary (§ 1703.101(g)

Policy.). The rule states that applicants

must consult with the Rural

Development State Director, USDA,

before submitting the application to the

RUS in order to explore any funding

sources that may be available at the

State or local level. The regulations

should explicitly describe what the

State Director is suppose to do and how

it should be documented.

Response. Instructions for State

Directors are internal operating

procedures that do not affect the

application process and could confuse

applicants if included in this rule. The

instructions will be prepared in the

form of a USDA Staff Instruction to the

State Directors.

Comment Summary (§ 1703.103(a)(1)

Applicant eligibility.). The Indian

Nations and Indian organizations

requested that the organization

requirement for meeting applicant

eligibility in § 1703.101 be modified to

include Indian tribes and tribal

organizations as defined in 25 U.S.C.

450b (b) and (c).

Response. RUS intended to extend

applicant eligibility to Indian

organizations. This section has been

revised to clarify that Indian Nations

and Tribal Organizations are eligible to

apply.

Comment Summary (§ 1703.103(a)(1)

Applicant eligibility). One commenter

stated that the rule, in defining a state

government to be an eligible applicant,

should be clarified to specify which

state government-operated rural

facilities are eligible to participate in the

program.

Response. Section 1703.103(a)(1)

states a state government, other than a

state government entity that operates a

rural community facility, is not

considered an eligible applicant. Rural

community facility is defined in

§ 1703.102. Therefore, any state

government that does operate a rural

community facility, as defined in

§ 1703.102, may be eligible.

Comment Summary (§ 1703.104(a)

Allowable grant funding percentage,

grant purposes, and in-kind matching

provisions). One commenter

recommended deleting the use of 42.85

percent to discuss the match funding

required, stating that this wording may

be confusing to applicants.

Response. As stated in the rule, 42.85

percent is 30 percent of the maximum

funding percentage provided by RUS, or

the minimum amount the applicant

must match. RUS believes the use of

42.85 percent is appropriate and that the

parenthetical reference in paragraph (a)

further clarifies the minimum match

funding required.

Comment Summary (§ 1703.104(f)

Allowable grant funding percentage,

grant purposes, and in-kind matching

provisions). One commenter, stating that

the rule provides that in kind

contributions shall not consist of

eligible equipment which has been

subject to depreciation, suggested that

this wording be changed to clarify that

the equipment must be new, as

described in paragraph (c).

Response. This paragraph has been

revised to clarify that the eligible

equipment must not be used and must

have market value.

Comment Summary (§ 1703.106

Maximum and minimum sizes of a

grant). One commenter stated that the

regulation establishes the maximum

grant amount as a percentage of the total

grant funds instead of a maximum set at

a specific dollar limit. To assist the

applicant in planning, the regulations

should explain how an applicant can

obtain the maximum amount for its

grant request.

Response. Annual maximum grant

amounts will be published in the

Federal Register Notice indicating

deadlines for application submissions

and the amount of grant funds available,

as stated in § 1703.113.

Comment Summary (§ 1703.107 The

grant application). One commenter

believed that in this section, § 1703.107,

there appears to be many selection

factors mentioned that an applicant

should consider rather than simply

asking the applicant to address the

factors that are listed as the scoring

criteria. These appear primarily in the

‘‘Executive summary’’ section. Placing

additional factors in the form of areas

the applicant must address or detail

does not clarify the process. Rather than

use new factors or a different method of

phrasing an idea, RUS should refer to

the language used in discussing the

scoring criteria. The commenter

suggested that the regulation would be

both clearer and simpler if

§ 1703.107(c)(2) (i) through (iv) were

removed, and perhaps even paragraph

(c)(6), and instead use the ‘‘Executive

summary’’ for addressing the criteria in

§ 1703.117. Additionally, for the

executive summary, paragraph (c)(3)

should only address the economic and

demographic description and types of

services offered, information not

requested elsewhere, because the

benefits will be addressed under

criterion § 1703.117(d), the ‘‘need for

services.’’ As proposed, the applicant

has to discuss very similar issues

described in different phraseology, once

in the executive summary and then later

under § 1703.107(d). It would seem

preferable to require a discussion of

these issues in an executive summary by

a simple and straightforward reference

that he applicant must summarize each

criterion in the scoring criteria

§ 1703.117.
33624 Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations

Response. Section 1703.107 describes

for the applicant all of the information

needed in support of their application.

This section sets forth the items which

comprise the required material that

must be submitted to RUS for a grant

request. It does not, as does § 1703.117

(Criteria for scoring applications),

describe the methods used by RUS in

evaluating grant applications. RUS does

not believe these two sections are

redundant, nor ambiguous, and

therefore has not made the

recommended change.

Comment Summary (§ 1703.107(e)(2)

Financial information). One commenter

suggested this section could be made

more specific and more precise by

combining two sentences as follows: ‘‘A

pro-forma income and expense

statement for each participating hub and

end user site for the project covered by

the application. The pro-forma

statements must cover a minimum of 5

years after completion of the project and

provide that the income and expense

statements reflect sufficient income to

pay cash operating expenses including

telecommunications access and/or toll

charges, system maintenance, salaries,

training, and any other general

operating expenses; . . .’’.

Response. RUS has reworded this

paragraph for clarity.

Comment Summary (§ 1703.107(e) (1),

(2), (3), and (4) Financial information).

Several respondents commented that

the proposed rule includes a new

requirement that applicant submit (1) a

current balance sheet for each member

of the consortium; (2) a pro forma

income and expense statement for each

participating hub and end user site

covering a minimum of five years after

completion of the project; (3) evidence

of sources of revenue for each hub and

end-user site; and (4) an explanation of

the economic analysis justifying the rate

structure. The commenters objected to

the change in the financial reporting

regulations stating it would be difficult

and expensive to fulfill. Commenters

understood the legitimacy of RUS’

concern that grant recipients be

financially stable and that projects be

sustainable, but they also did not

believe that the proposed financial

information requirements are the best

way to determine this, especially for

educational applicants. The health care

field has been in a state of flux as the

result of the trend toward managed care.

Therefore, requiring detailed financial

information from these applicants is

prudent. However, local education is far

more stable and does not present the

same concern. Moreover, the costs of

assembling the required information

may deter some needy applicants from

proceeding with their grant proposals. It

was suggested that school districts be

allowed to submit an audit statement as

in the past (or State approved audit

report) or at least provide an exclusion

for public school districts so that they

are not required to comply with

financial accounting procedures which

are not otherwise appropriate for those

school districts. It was also suggested

that educational applicants be permitted

to substantiate claims of sustainability

in the main narrative using evidence of

their own selection.

One commenter also recommended

that, if the reporting requirements are

not reduced, RUS should extend the

application deadline to at least October

15, 1996; this would allow schools a few

weeks during a period when they are

fully staffed to respond.

Response. RUS agrees that the

financial reporting requirements,

particularly for educational institutions,

may prove burdensome as it was stated

in the proposed rule. RUS has therefore

made audited financial statements

optional instead of compulsory. With

regard to delaying awards, RUS has

committed to its customers that it will

award the FY 1996 grants in FY 1996

and will not delay its FY 1996

obligations.

Comment Summary (§ 1703.107(e)(1)

Financial information). One commenter

stated that the regulations should

require applicants to provide audited or

certified financial information to

support requests for grant funds to

provide added assurance that the

information is accurate.

Response. RUS believes that requiring

audited or certified financial statements

during the application phase would be

unnecessarily burdensome on the

applicants. RUS is confident that the

financial information obtained after

grant selections are made is sufficient

assurance of financial stability.

Comment summary (§ 1703.107(o)

Supplemental information). One

commenter believed that paragraph (o)

of this section was unclear as to whether

the applicant has to prepare the

Technical Questionnaire (RUS Form

479–A) and to what extent it was

considered in determining the selection.

The proposed rule indicates that it is

desired, will be used, and implies that

it may increase an applicant’s chance of

selection. It was therefore suggested that

the Technical Questionnaire should be

made a part of the application

requirement.

Response. RUS Form 479–A will only

be required from recipients of grant

funding. This section has been amended

and the requirement to submit RUS

Form 479–A has been addressed in

§ 1703.122, Further processing of

selected applications.

Comment Summary (§ 1703.109

Determining what is rural). Two

commenters expressed concern with the

use of counties as a determining factor

for rural. They noted that rural areas

that contain high levels of

unemployment and extreme levels of

people on public assistance are

sometimes located in urban counties.

These rural areas would benefit greatly

from the availability of telemedicine

and distance learning technology. Yet,

because of a rurality score of the county,

which is a two or urban, these areas of

need are effectively prevented from

competing for these programs. The

commenters suggested RUS use the

same definition utilized by the USDA’s

infrastructure and business programs.

These programs define rural to include

unincorporated areas, open county, and

cities and towns with populations up to

10,000 or 50,000 depending on the

particular program.

Response. RUS believes that

§ 1703.109 fairly accomplishes a rural

test and meets the intent of providing

assistance in predominately rural areas.

In addition, paragraph (d) of this section

allows an applicant to appeal a ruling

made under this section which results

in a denial of an application.

Comment Summary (§ 1703.117(d)(1)

Financial consideration of a project).

Commenters believe that awarding

increasing numbers of bonus points for

matches up to 300% defeats RUS’

intention to direct funding toward the

least affluent communities. It was

suggested that the rules regarding

matching funds remain the same, or

consider truncating the bonus points at

a dollar for dollar match, rather than a

300% match, or that the bonus point

schedule have an upper limit of 100%

rather than 300%.

Response. The intent of paragraph

(d)(1) is to maximize the benefits of a

limited source of grant finding by

encouraging applicants to seek

additional sources (whether local or not)

of funding to leverage their proposed

projects. Paragraph (d)(2) further

rewards applicants with a limited

number of bonus points for local

community funding. And in paragraph

(c), the financial needs of a community

are assessed on a per capita income

basis, awarding more points for poorer

communities. RUS believes that all

communities, including least affluent,

are represented fairly when being scored

based on financial consideration of a

project and that awarding higher points

for non-Federal matching up to 300

percent does not disadvantage one

community over another.
Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations 33625

Comment Summary (§ 1703.117(d)(2)

Criteria for scoring applications). One

commenter stated that RUS should

reconsider extra priority given to local

funding sources because the Farm Bill

revision mentions the portion of total

funds provided by applicants and nonfederal sources, with no mention of

local financing.

Response. Paragraph (d)(2) awards

bonus points applicants for a given level

of local community involvement. While

the maximum number of bonus points

possible is relatively small, RUS

believes that local community

involvement in the funding process is

an important indicator of community

strength and may increase the overall

benefits of the project to the

community’s residents.

Comment Summary (§ 1703.117(e)

The Comparative Rurality of the

Proposed Project Service Area). Several

commenters stated that under the

previous rule, rurality was calculated

according to the number of end user

sites and that the proposed rule

substitutes the number of end users

rather than the number of sites. The

commenters believe that this approach

defeats the objective of giving greater

priority to the most rural areas, and also

lends itself to manipulation of data.

Enrollments in the most rural

communities are likely to be smaller

than elsewhere, therefore the proposed

method of calculation penalizes them

for their low enrollments. In addition,

using individuals rather than sites as the

basis of calculations may encourage

applicants to manipulate data in selfserving ways. The commenters

suggested this section be changed or

returned to the prior method of

calculating.

Response. RUS agrees that there may

be room for some manipulation under

the calculation for rurality as contained

in the proposed rule. This section has

been amended by reinstating the rurality

calculation as it was described in the

original rule and Appendix B has been

removed.

Comment Summary (§ 1703.117(f)(2)

Criteria for scoring applications). One

commenter suggested this section be

revised slightly. Paragraph (f)(2)(ii),

which discusses the ‘‘desires’’ of rural

residents is not only different from the

language of the law but appears to

express the same thought as (f)(2)(i) in

different terms. Needs and desires seem

to be the same idea within the context

of this program. ‘‘Needs’’ that are not

‘‘desired’’ by the beneficiaries cannot be

considered needs. In addition,

‘‘willingness to pay’’ discussed in

(f)(2)(ii) extends beyond the language

and overall ideas expressed in the

language of the revised law. Paragraph

(iii) should be retained because it is

consistent with the language of the

revised law. Paragraph (iv) should be

deleted because outcomes are really

benefits and these are already discussed

under (f)(2)(i). Paragraph (f)(2)(v) should

be retained since it is obviously a

priority factor in the revised law.

Response. RUS does not agree.

Paragraph (ii) describes, from the

community standpoint, the willingness

of its residents to participate and use the

proposed services if they were available.

In paragraph (i), the applicant is

providing justification for specific types

of services to be provided, without

regard, necessarily, to usership, but

rather based on the needs of the

community as a whole. With regard to

paragraph (iv), RUS believes that

obtaining information regarding a

projects expected outcomes, or end

results, is necessary in order to

complete the picture of the project

under evaluation.

Comment Summary (§ 1703.117

Criteria for scoring applications). One

commenter stated that where only a

portion of the scoring criteria is

satisfied, the regulations should

establish a minimum cutoff score for

funding applications.

Response. At this time, RUS does not

believe a minimum scoring level is

needed or desirable.

Comment Summary (§ 1703.118 Other

application selection and appeals

provisions). One commenter suggested

that applicants be able to appeal denial

of their application for any reason rather

than just an appeal of the numerical

scoring. Further, the regulation should

provide for appeals to be made to a

party outside of RUS, since RUS would

be reviewing its own decision. The

commenter suggested that the applicant

be allowed to review RUS’ comments

made in support of the score of the

application received or the

determination for denial for other

reasons. In addition, the commenter

suggests that time frames set forth for

the appeals process is too short,

particularly if funding authorization for

FY 1996 does not expire at the end of

FY 1996.

Response. All applications, submitted

in accordance with the application and

eligibility provisions of the rule, will be

scored by RUS. Denial of an eligible

application will be based on the

applications score, hence appeal of the

score is appropriate. With regard to

appeals made to persons outside of

RUS, appeals are made to the Secretary

of Agriculture, not RUS agency

personnel. And because the RUS has

committed to award FY 1996 grants in

FY 1996, RUS is unable to lengthen the

appeals time frames past the end of the

fiscal year and individual responses to

applicants which appeal in FY 1996

would not be feasible given the time

frame that RUS must work with for

approving grants this fiscal year.

Comment Summary (§ 1703.118(b)

Other application selection and appeal

provisions). One commenter suggested

that paragraph (b) be revised and

condensed for clarity. In particular, by

adapting language found later in

§ 1703.118(c) and replacing (b) (1)

through (3) with the following: ‘‘The

Administrator will not approve a grant

application if he/she determines that the

applicant’s proposal does not show

financial feasibility in accordance with

§ 1703.107(e) or cannot meet the

program purposes in § 1703.100.’’

Response. RUS believes that the

length and detail of this section is

necessary to adequately inform the

public of the rights reserved by the

Administrator for application selection

and the rights reserved for the

applicants to appeal the selection

process.

Comment Summary (§ 1703.118(a)

Other application selection and appeal

provisions). One commenter noted that

the regulations permit the Administrator

to defer funding an eligible higher

scoring application in favor of funding

for a lower scoring application. When

this occurs, the regulations should

describe the procedure for processing

these higher scoring applications.

Response. This provision allows the

Administrator to approve a lesser

scoring application over a higher

scoring application of a greater dollar

amount when there are insufficient

funds to provide full funding for the

higher scoring application and the

higher scoring applicant does not desire

a lesser grant amount, or the project is

not feasible with the lesser amount. In

this event, the higher scoring applicant

would need to wait until additional

funding becomes available and resubmit

its application for consideration at that

time.

Comment Summary (§ 1703.140

Expedited telecommunications loans.).

One commenter noted that, in the

background section, it is stated that

these proposed rules do not address the

new DLT loan program for FY 1996

because no funding is available.

However, this section appears to

contradict that statement by describing

procedures for obtaining expedited

telecommunications loans.

Response. Expedited

telecommunications loans and the DLT

loan program are not the same. The

reference to expedited loans refers to
33626 Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations

loans made by the RUS’

telecommunications loan program, not

loans to be made under the new DLT

loan program. Section 1703.140 covers

the process for expedition of RUS

telecommunications loans.

Comment Summary (General). One

commenter, noting that the

requirements for preparation of the

application and supporting

documentation are extensive and will

entail a considerable amount of time,

technical expertise, and financial

resources, suggested that a

preapplication approval or preproposal

process may be needed to screen

applications with the greatest potential

for funding before the entire application

process is completed. Because of this

significant initial investment, the

procedures may favor more affluent

areas or neglect areas where the need is

the greatest but resources are not

available to compile the information

required by the regulations.

Response. RUS believes that a

‘‘double’’ filing on behalf of interested

applicants would be overly

burdensome, cost prohibitive for some,

and inefficient.

RUS has determined that unless this

rule is effective upon publication in the

Federal Register, it is unlikely that

much if any of the Fiscal Year 1996

authorization for the Distance Learning

and Telemedicine Grant Program will be

available for use by grantees before the

authorization lapses.

List of Subjects in 7 CFR Part 1703

Community development, Grant

programs-education, grant programshealth care, Grant programs-housing

and community development, Reporting

and recordkeeping requirements, Rural

areas.

For the reasons set forth in the

preamble, chapter XVII of title 7 of the

Code of Federal Regulations is amended

as follows:

PART 1703—RURAL DEVELOPMENT

1. The authority citation for part 1703

continues to read as follows:

Authority: 7 U.S.C. 901 et seq. and 950aaa

et seq., Pub. L. 103–354, 108 Stat 3178 (7

U.S.C. 6941 et seq.).

2. Subpart D of part 1703 is revised to

read as follows:

Subpart D—Distance Learning and

Telemedicine Grant Program

Sec.

1703.100 Purpose.

1703.101 Policy.

1703.102 Definitions.

1703.103 Applicant eligibility.

1703.104 Allowable grant funding

percentage, grant purposes, and in-kind

matching provisions.

1703.105 Ineligible grant purposes.

1703.106 Maximum and minimum sizes of

a grant.

1703.107 The grant application.

1703.108 Conflict of interest.

1708.109 Determining what is rural.

1703.110–1703.112 [Reserved]

1703.113 Application filing dates, location,

processing, and public notification.

1703.114–1703.116 [Reserved]

1703.117 Criteria for scoring applications.

1703.118 Other application selection and

appeal provisions.

1703.119–121 [Reserved]

1703.122 Further processing of selected

applications.

1703.123–1703.125 [Reserved]

1703.126 Disbursement of grant funds.

1703.127 Reporting and oversight

requirements.

1703.128 Audit requirements.

1703.129–1703.134 [Reserved]

1703.135 Grant administration.

1703.136 Changes in project objectives or

scope.

1703.137 Grant termination provisions.

1703.138–139 [Reserved]

1703.140 Expedited telecommunications

loans.

Apprendix A to Subpart D of Part 1703—ERS

Rural—Urban Continuum Scale.

Appendix B to Subpart D of Part 1703—

Environmental Questionnaire.

Subpart D—Distance Learning and

Telemedicine Grant Program

§ 1703.100 Purpose.

The grants provided under this

subpart D are to encourage, improve,

and make affordable the use of

advanced telecommunications,

computer networks, and related

advanced technologies to provide

educational and medical benefits

through distance learning and

telemedicine projects to people living in

rural areas and to improve rural

opportunities.

§ 1703.101 Policy.

(a) RUS recognizes that the

transmission of communications and

information is a vital component of the

infrastructure of rural areas and is

necessary to promote rural

development. Enhancing

communication and information

transmission by making affordable

advanced telecommunications,

computer networks, and related

advanced technologies more widely

available in rural areas will improve

rural opportunities, promote rural

economic growth, and enhance the

quality of life of rural residents. To

further this objective, RUS will award

grants under this subpart to distance

learning and telemedicine projects that

will improve the access of people

residing in rural areas to improved

educational, training, and medical

services, and to opportunities that rely

on advanced communication and

information technologies to provide

such services.

(b) In providing assistance under this

subpart, RUS will give priority to rural

areas that it believes have the greatest

need of enhanced communications. RUS

believes that generally the need is

greatest: in the most sparsely populated

rural areas; and in rural areas that are

experiencing economic hardship. RUS

will take into consideration the

community’s involvement in the project

and the applicant’s ability to leverage

grant funds based on its access to

capital.

(c) RUS believes that the residents of

rural areas and their local institutions

which service them can best determine

what are the most appropriate

communications or information systems

for use in their respective communities.

Therefore, in administering this subpart,

RUS will not favor or mandate the use

of one particular technology over

another. RUS does believe that it is

generally desirable to use technology

that would incidentally allow other

providers or developers to purchase the

elemental functions or access so other

users, in addition to educational and

medical users, may benefit from any

transmission facilities receiving funding

under this subpart. In addition, RUS

believes it is generally desirable for the

project to use products and technologies

that are considered open systems.

Further, RUS believes that it is desirable

to use products and technologies that

employ or adhere to nationally

recognized standards that will permit

equipment from various companies to

be connected to the system, and permit

the system to be connected to other

systems or networks.

(d) Applicants, if they are to be

successful in obtaining grant funds

must:

(1) Explain the problem that the

applicant is intending to solve using

grant funds;

(2) Explain how the applicant will use

the grant as well as other funds to solve

the problem and why this is the best

solution;

(3) Explain why RUS grant funds are

needed for the project to be successful;

(4) Explain how the grant will be

leveraged using funds from the

applicant, and local and non-Federal

sources;

(5) Show that rural areas are the

primary beneficiaries; and,

(6) Show that the project will be

sustainable without additional grant

funds.
Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations 33627

(e) RUS electric and

telecommunications borrowers are

encouraged to cooperate with each other

and with applicants and end users in

promoting the program being

implemented under this subpart.

(f) RUS staff will make diligent efforts

to inform potential applicants in rural

areas of the program being implemented

under this subpart.

(g) The applicant must check with the

Rural Development State Director, U.S.

Department of Agriculture, before

submitting the application to RUS in

order to explore any funding sources

that may be available at the state or local

level. Evidence of this consultation is a

requirement of the grant application.

§ 1703.102 Definitions.

Act means Title XXIII, subtitle D,

chapter 1, of the Rural Economic

Development Act of 1990 (7 U.S.C.

950aaa through 950aaa–4).

Administrator means the

Administrator of the Rural Utilities

Service or his or her designee.

Applicant means an eligible

organization which applies for a grant

under this subpart.

Approved purpose means a purpose

that RUS has specifically approved in

the letter of agreement and scope of

work covering the use of RUS grant

funds provided to the grantee.

Borrower means any organization

which has an outstanding loan made by

RUS or RTB, or guaranteed by RUS, or

which is seeking such financing.

Communication satellite ground

station complex means transmitters,

receivers, and communications

antennas at the earth station site

together with the interconnecting

terrestrial transmission facilities (cables,

line, or microwave facilities) and

modulating and demodulating

equipment necessary for processing

traffic received from the terrestrial

distribution system prior to

transmission via satellite and the traffic

received from the satellite prior to

transfer to terrestrial distribution

systems.

Comprehensive rural

telecommunications plan means the

plan submitted by an applicant in

accordance with § 1703.107(a).

Computer networks means computer

hardware and software, terminals, signal

conversion equipment including both

modulators and demodulators, or

related devices, used to communicate

with other computers to process and

exchange data through a

telecommunication network in which

signals are generated, modified, or

prepared for transmission, or received,

via telecommunications terminal

equipment and telecommunications

transmission facilities.

Consortium means a combination or

group of eligible entities formed to

undertake the purpose of which the

distance learning and telemedicine

grant is provided. Each consortium shall

be composed of the following:

(1) A tertiary care facility, rural

referral center, medical teaching

institution, or educational institution

accredited by the State;

(2) Any number of institutions that

provide health care services or

educational services; and,

(3) Not less than three rural hospitals,

clinics, community health centers,

migrant health centers, local health

departments, or similar facilities, or not

less than three educational institutions

accredited by the State.

Construct means to construct, acquire,

install, improve, or extend a facility or

system.

Data terminal equipment means

equipment that converts user

information into data signals for

transmission, or reconverts the received

data signals into user information, and

is normally found on the terminal of a

circuit and on the premises of the end

user.

Distance learning means a

telecommunications link to an end user

through the use of eligible equipment to:

(1) Provide educational programs,

instruction, or information originating

in nonrural areas to students and

teachers who are located in rural areas;

or

(2) Connect teachers and/or students,

located in one rural area with teachers

and/or students that are located in a

different rural area.

Eligible equipment means a

communication satellite ground station

complex, computer networks, data

terminal equipment, fiber-optic cable,

interactive video equipment, microwave

transmission equipment,

telecommunications transmission

facilities, and telecommunications

terminal equipment.

Eligible organization means an

incorporated entity that meets the

requirements of § 1703.103.

End user means either or both of the

following:

(1) Rural elementary or secondary

schools or other educational

institutions, such as institutions of

higher education, county extension

services, vocational and adult training

and education centers, and teacher

training centers, and students, teachers

and instructors using such rural

educational facilities, that participate in

a rural distance learning

telecommunications program through a

project funded under this subpart;

(2) Rural hospitals, primary care

centers or facilities, such as medical

centers and clinics, and physicians and

staff using such rural medical facilities,

that participate in a telemedicine

telecommunications program through a

project funded under this subpart.

End user site means a facility located

in a rural area that is part of a network

or telecommunications system that is

utilized by end users.

ERS means the Economic Research

Service, an agency of the United States

Department of Agriculture.

Grantee means a recipient of a grant

from RUS to carry out the purposes of

this subpart.

Hub means originating source of a

network or telecommunications system.

Instructional programming means

educational programming, including

computer software, which would be

used for tutorial purposes in connection

with eligible equipment.

Interactive video equipment means

equipment used to produce and prepare

for transmission audio and visual

signals from at least two distant

locations such that individuals at such

locations can verbally and visually

communicate with each other. Such

equipment includes monitors, other

display devices, cameras or other

recording devices, audio pickup

devices, and other related equipment.

Letter of agreement means a legal

document executed by RUS and the

grantee that contains specific terms,

conditions, requirements, and

understandings applicable to a

particular grant.

Local exchange carrier means a

commercial, cooperative or mutual-type

association, or public body that

provides telecommunications service,

through a local central switching office,

to the subscribers within its designated

service area, and between the local

subscribers and the toll network.

Project means an undertaking to

provide or improve distance learning or

telemedicine by using financial

assistance from RUS under this subpart.

Project service area means the area in

which at least 90 percent of the persons

to be served by the project are likely to

reside.

RE Act means the Rural Electrification

Act of 1936, as amended (7 U.S.C. 901

et seq.).

REA means the Rural Electrification

Administration, formerly an agency of

the United States Department of

Agriculture, and predecessor agency to

RUS with respect to administering

certain electric and telecommunications

loan programs.
33628 Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations

Rural means any area of the country

that meets the determining criteria in

§ 1703.109.

Rural community facilities means

facilities such as schools, libraries,

hospitals, medical centers, or similar

facilities, located in rural areas, or

primarily used by residents of rural

areas, that will use a

telecommunications, computer network,

or related advanced technology system

to provide educational and/or medical

benefits primarily to residents of rural

areas.

RUS means the Rural Utilities

Service, an agency of the United States

Department of Agriculture established

pursuant to Section 232 of the Federal

Crop Insurance Reform and Department

of Agriculture Reorganization Act of

1994 (Public Law 103–354, 108 Stat.

3178), successor to REA with respect to

administering certain electric and

telecommunications programs. See 7

CFR 1700.1.

Scope of work means a detailed plan

of work that has been approved by the

Administrator and that will be

performed by the applicant using funds

provided under the grant.

Secretary means the Secretary of

Agriculture.

Technical assistance means

(1) Assistance in learning to operate

equipment or systems; and

(2) Studies, analyses, designs, reports,

manuals, guides, literature, or other

forms of creating, acquiring, and/or

disseminating information.

Telecommunications terminal

equipment means the assembly of

telecommunications equipment at the

end of a circuit or path of a signal,

including but not limited to over the air

broadcast, satellite, and microwave,

normally located on the premises of the

end user, that interfaces with

telecommunications transmission

facilities, and that is used to modify,

convert, encode, or otherwise prepare

signals to be transmitted via such

telecommunications facilities, or that is

used to modify, reconvert, or carry

signals received from such facilities, the

purpose of which is to accomplish the

goal for which the circuit or signal was

established.

Telecommunications transmission

facilities means facilities that transmit,

receive, or carry data between the

telecommunications terminal

equipment at each end of the

telecommunications circuit or path.

Such facilities include microwave

antennae, relay stations and towers,

other telecommunications antennae,

fiber-optic cables and repeaters, coaxial

cables, communication satellite ground

station complexes, copper cable

electronic equipment associated with

telecommunications transmissions, and

similar items.

Telemedicine means a

telecommunications link to an end user

through the use of eligible equipment

which electronically links medical

professionals at separate sites in order to

exchange medical information in audio,

video, graphic, or other format for the

purpose of providing improved health

care services primarily to residents of

rural areas.

§ 1703.103 Applicant eligibility.

(a) To be eligible to receive a grant

under this subpart, the applicant must

be organized in one of the following

corporate structures:

(1) An incorporated organization,

partnership, Indian tribes and tribal

organizations as defined in 25 U.S.C.

450b (b) and (c), or other legal entity

which operates, or will operate, a

school, college, vocational training

facility, or other educational institution,

including a regional educational

laboratory, library, hospital, medical

center, medical clinic or other rural

community facility. A state government,

other than a state government entity that

operates a rural community facility, is

not considered an eligible applicant.

The applicant may be a private or

municipal corporation organized on a

for-profit or not-for-profit basis, or

(2) A consortium, as defined in

§ 1703.102. A consortium which

includes a state government entity is

only eligible if the state government

entity operates a rural community

facility.

(3) An incorporated organization,

partnership, or other legal entity which

is providing or proposes to provide

telemedicine service or distance

learning service to other legal entities or

consortia at rates calculated to ensure

that the economic value and other

benefits of the distance learning or

telemedicine grant is passed through to

such other legal entities or consortia.

(b) At least one of the entities of a

partnership or consortium must be

eligible individually, and the

partnership or consortium must provide

written evidence of its legal capacity to

contract with RUS. If a partnership or

consortium lacks the capacity to

contract, each individual entity must

contract with RUS on its own behalf.

§ 1703.104 Allowable grant funding

percentage, grant purposes, and in-kind

matching provisions.

(a) Grants may be used by eligible

organizations for distance learning and

telemedicine projects to finance up to

70 percent of the cost of allowable grant

purposes outlined in paragraph (b) of

this section. The applicant will,

therefore, provide matching funding in

an amount no less than 42.85 percent of

the RUS grant. (If the grant covers 70

percent of total project costs, the

applicant provides the other 30 percent

of the project costs. Thirty percent of the

project costs is 42.85 percent of the 70

percent, i.e., the minimum amount of

the match.)

(b) Grants for purposes outlined in

paragraphs (b)(2) through (b)(6) of this

section shall be limited to costs

associated with initial capital expenses

for establishing the project. The

following are allowable grant purposes:

(1) Acquiring, by lease or purchase,

eligible equipment as defined in

§ 1703.102;

(2) Acquiring, by lease or purchase,

software to operate eligible equipment,

including any related software;

(3) Acquiring or developing

instructional programming;

(4) Providing technical assistance and

instruction for using eligible equipment,

including any related software;

(5) Engineering or environmental

studies relating to the establishment or

expansion of the phase of the project

that is being financed with the RUS

grant; and

(6) Facilities, equipment, or activities

and non-recurring service charges that

are described in a comprehensive rural

telecommunications plan which has

been approved by the Administrator.

(c) In kind matching—the applicant’s

minimum 30 percent funding

contribution for allowable grant

purposes, i.e., 42.85 percent matching of

the RUS grant, generally is required in

the form of cash. However, certain inkind contributions may be substituted

for cash as follows:

(1) Equipment, activities and facilities

as set forth in § 1703.104(b);

(2) Improvements made to real

property necessary to accommodate

eligible equipment;

(3) Facilities constructed to

accommodate eligible equipment, such

as buildings in which terminal

equipment and/or transmission facilities

would be located;

(4) Real property purchased or

acquired for the sole purpose of

accommodating distance learning and

telemedicine facilities; or

(5) The present value of long term

leases of eligible equipment, with

duration according to recognized

industry standards and compatible with

the type of equipment leased.

(d) In kind items furnished in

paragraph (c)(1) of this section must be

non-depreciated or new assets with

established monetary value by industry
Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations 33629

standards. The value of improvements

of construction paragraphs (c)(2) and

(c)(3) of this section must be established

by a qualified independent real property

appraiser based on the actual cost of

those improvements. The value of land

in paragraph (c)(4) of this section must

be established by a qualified

independent real property appraiser

based on a market value appraisal.

(e) In kind contributions can be an

integral component of an approved

comprehensive rural

telecommunications plan as set forth in

§ 1703.107(a).

(f) In kind contributions shall not

consist of eligible equipment which has

been subject to depreciation (used

equipment), or for equipment, services

and labor not eligible for grant funding

as set forth in § 1703.105.

(g) Funding may be provided for end

user sites. Funding may also be

provided for hubs located in rural an

non-rural areas, if they are necessary to

provide distance learning and/or

telemedicine services to rural residents

at end user sites. However, funding will

not be provided for sites proposed as

hubs if it is not demonstrated that they

are an integral part of the proposed

network and are necessary to transmit

distance learning and/or telemedicine

services to end users.

§ 1703.105 Ineligible grant purposes.

(a) Grants must not be used;

(1) To fund more than 70 percent of

the eligible costs of a project under this

subpart;

(2) To cover the costs of installing or

constructing telecommunications

transmission facilities, except as

provided in paragraph (c) of this

section;

(3) To pay for medical equipment

except medical equipment primarily

used for encoding and decoding data,

such as images, for transmission over a

telecommunications or computer

network;

(4) To pay salaries, wages, or

employee benefits to medical or

educational personnel;

(5) To pay for the salaries or

administrative expenses of the

applicant;

(6) To purchase equipment that will

be owned by the local exchange carrier

or another telecommunications service

provider;

(7) To duplicate services in place on

the date the completed application is

received by RUS, or to reimburse the

applicant or others for costs incurred

prior to RUS’s receipt of the completed

application;

(8) To pay costs of preparing the

application package for funding under

this program;

(9) To refinance indebtedness

incurred prior to receipt of the

completed application by RUS;

(10) For projects whose sole objective

is to provide links between teachers and

students or medical professionals who

are located at the same facility;

(11) For site development, the

destruction of alteration of building, or

other activities that might adversely

affect the environment or limit the

choice of reasonable alternatives unless

and until the requirements of

§ 1703.107(j) have been satisfied;

(12) For projects located in areas

covered by the Coastal Barrier Resources

Act (16 U.S.C. 3501 et seq.); or

(13) For any purpose that the

Administrator has not specifically

approved.

(b) Except as otherwise provided in

§ 1703.140, funds shall not be used to

finance a project in part when success

of the project is dependent upon the

receipt of additional funding under this

subpart D or is dependent upon the

receipt of other funding that is not

assured.

(c) Grants must not be used to cover

the costs of telecommunications

transmission facilities if the local

exchange carrier for the project area will

install such facilities through the use of

the expedited telecommunications loans

made under the RE Act or through other

financing procedures within a

reasonable time period and at a cost that

does not destroy the feasibility of the

project, as determined by the

Administrator.

(d) Except for leases provided in

§ 1703.104(b) (1) and (2), grants must

not be used to pay the cost of recurring

or operating expenses for the project.

§ 1703.106 Maximum and minimum sizes

of a grant.

Applications for grants to be

considered under this subpart will be

subject to limitations on the proposed

amount of funding. The maximum grant

amount that will be awarded for any one

project in any given fiscal year will not

exceed 10 percent of the appropriated

funds available for all grants during the

fiscal year in which the application for

such project is selected. The

Administrator may publish notice of the

annual maximum grant amount in the

Federal Register. An applicant

submitting an application which

exceeds the maximum will be notified

to that effect by RUS and given the

opportunity to revise the application.

The minimum size of a grant is $50,000.

§ 1703.107 The grant application.

The following items comprise the

required material that must be

submitted to RUS in support of the grant

request:

(a) Comprehensive Rural

Telecommunications Plan. A

Comprehensive Rural

Telecommunications Plan, consisting of

the following is required only when the

applicant is requesting grant funds for

telecommunications transmission

facilities:

(1) A detailed explanation of the

proposed rural telecommunications

system, how such system is to be

funded, and a description of the

intended uses for a grant received under

this subpart.

(2) The capabilities of the

telecommunications transmission

facilities, including bandwidth,

networking topology, switching,

multiplexing, standards and protocols

for intra-networking and open systems

architecture (the ability to effectively

communicate with other networks). In

addition, the applicant must explain the

manner in which the transmission

facilities will deliver the proposed

services. For example, for medical

diagnostics, the applicant might

indicate whether or not a guest or other

diagnosticians can join the network

from locations off the network. For

educational services, indicate whether

or not all hub and end-user sites are able

to simultaneously hear in real-time and

see each other or the instructional

material in real-time. The applicant

must include detailed cost estimates for

operating and maintaining the network,

and include evidence that alternative

delivery methods and systems were

evaluated.

Note: if a local exchange carrier is

providing the transmission facilities, the

requirements of this paragraph may be

omitted form the Comprehensive Rural

Telecommunications Plan.

(3) The capabilities of the

telecommunications terminal

equipment, including a description of

the specific equipment which will be

used to deliver the proposed service.

The applicant must document

discussions with various technical

sources which could include

consultants, engineers, product vendors,

or internal technical experts, provide

detailed cost estimates for operating and

maintaining the end user equipment

and provide evidence that alternative

equipment and technologies were

evaluated.

(4) A listing of the proposed

purchases or leases of

telecommunications terminal
33630 Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations

equipment, telecommunications

transmission facilities, data terminal

equipment, interactive video

equipment, computer hardware and

software systems, and components that

process data for transmission via

telecommunications, computer network

components, communication satellite

ground station equipment, or any other

elements of the telecommunications

system designed to further the purposes

of this subpart, that the applicant

intends to build or fund using the grant

funds.

(5) An explanation of the special

financial or other needs of the affected

rural communities and of the applicant

for such grant assistance.

(6) An analysis of the relative costs

and benefits of proposals for leasing or

purchasing of facilities, equipment,

components, hardware and software, or

other items.

(7) A description of the consultations

with the appropriate local exchange

carrier or carriers and with a wide

variety of additional

telecommunications service providers

(including other interexchange carriers,

cable television operators, enhanced

service providers, providers of satellite

services and telecommunications

equipment manufacturers and

distributors) and the anticipated role of

such providers in the proposed

telecommunications system.

(b) Proposed scope of work of the

project. The proposed scope of work of

the project which includes, at a

minimum:

(1) The specific activities to be

performed under the project;

(2) Who will carry out the activities;

(3) The time-frames for accomplishing

the project objectives and activities;

(4) A budget for capital expenditures

reflecting the line item costs for both the

grant funds and other sources of funds

for the project;

(5) Information indicating the ability

of the applicant to reduce the size or

scope of the project in the event RUS

funding, or other projected sources of

funding, were reduced or delayed. The

applicant must indicate the respective

components of the project that would

receive the highest priority of funding;

and

(6) Information about the potential of

the proposed network to expand its size

or scope if additional funding was

available.

(c) Executive summary for the project.

The applicant must provide RUS a

general project overview, verification of

compliance with the general

requirements of this subpart, and

documentation of eligibility. The

executive summary should not exceed

eight one-sided double spaced pages,

size 8.5′′ x 11′′, with a minimum font

size of 12 points. The executive

summary shall contain the following 10

categories:

(1) A description of the applicant,

documenting eligibility with § 1703.103.

(2) An explanation of:

(i) The problem the applicant is

intending to solve;

(ii) How the applicant will use the

grant funds to solve the problem;

(iii) The amount of RUS grant funds

required and why such grant funds are

needed; and

(iv) How the RUS grant funds will be

leveraged, including both amount and

source of these additional funds.

(3) A brief economic and demographic

description of the proposed service area,

the types of educational and/or medical

services to be offered by the project, and

the benefits to the rural residents.

(4) A physical description of the

project service area. The applicant

should include information regarding

topography and available transportation

and telecommunications infrastructure.

(5) A description of the project as

distance learning or telemedicine

facility as defined in § 1703.102. If the

project provides both distance learning

and telemedicine services, the applicant

must identify the predominant use of

the system.

(6) A list of expected outcomes,

benefits or services to be provided by

the project. Some examples include, but

are not limited to:

(i) Improved education opportunities

for a specified number of students;

(ii) Travel time and money saved by

telemedicine diagnosis;

(iii) Number of doctors retained in

rural areas;

(iv) Number of additional students

electing to attend higher education

institutions,

(v) Lives saved due to prompt medical

diagnosis and treatment;

(vi) New education courses offered,

including college level courses; and

(vii) Expanded use of educational

facilities such as night training.

(7) A general overview of the

telecommunications system to be

developed, including the types of

equipment, technologies, and facilities

used.

(8) A description of the participating

hubs and end user sites and the number

of rural residents which will be served

by the proposed project at each end user

site.

(9) A brief narrative describing the

project service area to allow a

determination of rural eligibility in

accordance with § 1703.109. The

applicant must list all counties located

in the proposed service area, and the

Economic Research Service’s Rural—

Urban Continuum Category for each

county. These categories may be

obtained from RUS, any USDA Rural

Development state office or from State

Land Grant University Cooperative

Extension Offices.

(10) The applicant must indicate

whether or not it is willing to have its

grant application forwarded to other

agencies within USDA for consideration

in the event the application is not

selected for funding under this subpart.

(d) A section on compliance with

scoring criteria. The applicant must

provide a justification for the number of

points the proposed project will obtain

for each of the criteria for scoring

applications set forth in § 1703.117.

(e) Financial information. The

applicant must provide financial

information to support the need for the

grant funds for the project, show its

financial capacity to carry out the

proposed work, and show project

feasibility. The financial information

must include the following:

(1) A current balance sheet from the

applicant reflecting its financial

condition. When the applicant is a

partnership, company, corporation or

other entity, current balance sheets are

needed from each of the entities that has

at least a 20 percent interest in such

partnership, company, corporation or

other entity. When the applicant is a

consortium, a current balance sheet is

needed from each member of the

consortium and from each of the entities

that has at least a 20 percent interest in

such member of the consortium. While

not required, an audit report is

preferable and must be for a period

which ended no earlier than 12 months

preceding the date of the application;

and

(2) A pro-forma income and expense

statement for each participating hub and

end user site for the project covered by

the application. The pro-forma

statements must cover a minimum of 5

years after completion of the project and

reflect that the project is feasible and

sustainable in order to be considered for

grant funds by showing sufficient

income to pay cash operating expenses

including telecommunications access

and/or toll charges, system

maintenance, salaries, training, and any

other general operating expenses; and

provide for replacement of depreciable

items. Depreciation shall be based on

Internal Revenue Service depreciation

rules, or other recognized

telecommunications industry

guidelines. The applicant shall provide

sufficient documentation to substantiate

any depreciation projections.
Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations 33631

(3) For each hub and end user site, the

applicant must identify and provide

reasonable evidence of each source of

revenue. If the projection relies on cost

sharing arrangements among hub and

end user sites, the applicant must

provide evidence of agreements made

among project participants.

(4) For applicants eligible under

§ 1703.103(a)(3), and explanation of the

economic analysis justifying the rate

structure to ensure that the benefit of

the financial assistance is passed

through to the other persons receiving

telemedicine or distance learning

services.

(5) Exception. An exception is granted

for K to 12 school in meeting the

requirements of paragraphs (e)(1)

through (e)(4) of this section. In lieu of

submitting the financial data required in

paragraphs (e)(1) through (e)(4) of this

section, RUS will accept the current

financial statements in a form currently

acceptable to the applicant school

system’s county or State authority.

(f) A statement of experience. The

applicant must provide a written

narrative (not exceeding three single

spaced pages) describing its

demonstrated capability and experience,

if any, in operating an education or

health care endeavor and any project

similar to the proposed project.

Experience in a similar project is

desirable but not required.

(g) Funding commitment from other

sources. The applicant must provide

evidence of the commitment of funds

for the project in addition to the funds

requested under this subpart. Evidence

should be from an authorized

representative of the source organization

that the funds are available and will be

used for the purposed project.

(h) Proposed evaluation methodology.

The applicant must provide a proposed

method of evaluating the success of the

project in meeting the objectives of the

program as set forth in §§ 1703.100 and

1703.101 and the proposed scope of

work.

(i) Compliance with other Federal

statutes and regulations. The applicant

is required to submit evidence that it is

in compliance with other Federal

statutes and regulations, as detailed in

§ 1703.33 as follows:

(1) Equal opportunity and

nondiscrimination requirements;

(2) Architectural barriers;

(3) Flood hazard area precautions;

(4) Uniform Relocation Assistance

and Real Property Acquisition for

Federal and Federally Assisted

Programs;

(5) Drug-free workplace;

(6) ‘‘Certification Regarding

Debarment, Suspension and Other

Responsibility Matters—Primary

Covered Transaction (See 7 CFR

3017.510);

(7) Intergovernmental review of

Federal programs; and

(8) Restrictions on lobbying. For an

application for a grant in excess of

$100,000, a certification statement,

‘‘Certification Regarding Lobbying:’’ is

required. If the applicant is engaged in

lobbying activities, the applicant must

submit a completed disclosure form,

‘‘Disclosure of Lobbying Activities’’ (see

7 CFR part 3018).

(j) Environmental impact and historic

preservation. The applicant must

provide details of the project’s impact

on the environment and historic

preservation. Grants made under this

part are subject to part 1794 of this

chapter which contains the policies and

procedures of RUS for implementing a

variety of Federal statutes, regulations

and executive orders generally

pertaining to protection of the quality of

the human environment that are listed

in § 1794.1 of this chapter. The

application shall contain a separate

section entitled ‘‘Environmental Impact

of the Project.’’

(1) Environmental information. An

‘‘Environmental Questionnaire,’’

appendix B to this subpart, may be used

by applicants to assist in complying

with the requirements of this section.

Copies of the Environmental

Questionnaire are available for RUS.

(2) Grants for technical assistance

projects. For a proposal to fund a

technical assistance project, the only

environmental information normally

required is whether or not the proposed

project being studied or analyzed will

be located within an area protected

under the Coastal Barrier Resources Act

(16 U.S.C. 3501 et seq.). Generally, the

use of Federal funds to promote

development on coastal barriers is

strictly limited by the Coastal Barrier

Resources Act.

(3) Grants for all other projects.

Applications for a grant to fund a

project that is not subject to paragraph

(j)(2) of this section must be

accompanied by the information

described in this paragraph. The

Administrator will review supporting

materials in the application and initiate

an environmental review process

pursuant to part 1794 of this chapter.

This process will focus on any

environmental concerns or problems

that are associated with the project. The

level and scope of the environmental

review will be determined in

accordance with the National

Environmental Policy Act of 1969

(NEPA), as amended, (42 U.S.C. 4321 et

seq.), the Council on Environmental

Policy for Implementing the Procedural

Provisions of NEPA (40 CFR parts 1500

through 1508), RUS’s Environmental

Policies and Procedures (part 1794 of

this chapter) and other relevant Federal

environmental laws, regulations and

Executive orders. Activity related to the

project that may adversely affect the

environment or limit the choice of

reasonable alternatives shall not be

undertaken prior to completion of RUS’s

environmental review process.

(4) For a proposed project that only

involves internal modifications or

equipment additions to buildings or

other structures (for example, relocating

interior walls or adding computer

facilities) and/or external changes or

additions to existing buildings,

structures or facilities requiring physical

disturbance of less than 0.4 hectare

(0.99 acre) the environmental

information normally required is: a

description of the internal modifications

or equipment additions, and the

external changes or additions to existing

buildings, structures or facilities being

proposed, the size of the site in hectares,

and the general nature of the proposed

use of the facilities once the project is

completed, including any hazardous

materials to be used, created or

discharged, any substantial amount of

air emissions, wastewater discharge, or

solid waste that will be generated.

(k) A completed Standard Form 424

‘‘Application for Federal Assistance,’’

along with a board of directors

resolution authorizing the grant request.

(l) Evidence of the applicant’s legal

existence and authority to enter into a

grant agreement with RUS and perform

activities proposed under the grant

application.

(m) Evidence that the applicant is not

delinquent on any obligation owed to

the Federal government (7 CFR parts

3015 and 3016).

(n) Evidence that the applicant has

consulted with the USDA State Director,

Rural Development, concerning the

availability of other sources of funding

available at the state or local level.

(o) Supplemental information. The

applicant should provide any additional

information it considers relevant to the

project and likely to be helpful in

determining the extent to which the

proposed project would further the

purposes of this subpart.

(p) Additional information requested

by RUS. The applicant must provide

any additional information the

Administrator may consider relevant to

the application and necessary to

adequately evaluate the application and

make grant decisions. The

Administrator may also request

modifications or changes, including
33632 Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations

changes in the amount of funds

requested, in any proposal described in

a grant application submitted under this

part.

§ 1703.108 Conflict of interest.

At any time prior to the disbursement

of a grant awarded under this subpart,

the Administrator may disqualify an

otherwise eligible project whenever, in

the judgment of the Administrator, the

project would create a conflict of

interest or the appearance of a conflict

of interest. The Administrator will

notify the applicant in writing of his/her

intention to disqualify the project under

this section and set forth the basis for

his/her determination that a conflict of

interest or appearance exists. Thereafter,

the applicant will have 30 days from the

date of such notice to file a written

response with the Administrator. If the

Administrator receives the applicant’s

response within the 30-day period, the

Administrator will consider the

information contained therein before

making a final determination whether to

disqualify the project. The

Administrator will promptly notify the

applicant of the final determination

whether a conflict of interest or

appearance of a conflict exists. If the

determination is affirmative, the notice

will also advise the applicant whether

the project is disqualified or

conditionally disqualified. If the project

is conditionally disqualified, the notice

will state under what circumstances the

project may continue to be eligible for

assistance under this subpart. The

Administrator’s decision under this

section will be final.

§ 1703.109 Determining what is rural.

The RUS Administrator shall

determine whether a project service area

possesses sufficient characteristics to be

considered a rural area for purposes of

this subpart. The Administrator shall

make such determination on the

following basis:

(a) The project service area is located

within nonmetropolitan counties

included in one of the lowest four

categories (6–9) of the ERS Rural—

Urban Continuum Scale (rural—urban

continuum) as set forth in appendix A

to this subpart. Those categories are as

follows:

(1) Aggregate urban population (sum

of cities, towns, villages or other

incorporated communities of 2,500 or

more) of less than 20,000, adjacent to a

metropolitan area (category 6);

(2) Urban population of less than

20,000, not adjacent to a metropolitan

area (category 7);

(3) Completely rural (no cities, towns,

villages or other incorporated areas of

2,500 or greater) adjacent to a

metropolitan area (category 8);

(4) Completely rural, not adjacent to

a metropolitan area (category 9).

(b) In the case of project service areas

not categorized as rural areas under

paragraph ( a) of this section,

consideration will be given to the degree

of rurality the area possesses taking into

account such factors as:

(1) Whether the project service area is

located within the boundaries of an

incorporated community of 2,500

persons or more as determined by the

U.S. Census Bureau;

(2) Where the county or counties in

which the project service area is located

rank on the rural—urban continuum;

(3) Whether natural geographic

barriers or an absence of roads may

impede access from the project service

area to metropolitan areas;

(4) Whether the county is a spatially

large county and the project service area

is not within the commuting area of an

urbanized area; and

(5) Whether the economy of the

project service area centers on natural

resource-based activities such as

farming, ranching, mining, or timber

production, or is highly specialized.

(c) In the case of a project that will

serve end users located in more than

one county, at least one of which is not

categorized as rural under paragraph (a)

of this section, RUS will determine the

rurality of the project service area caseby-case using factors such as those

identified in paragraph (b) of this

section. To the extent practicable, in the

case of a project that is expected to

benefit residents of urban areas as well

as residents of rural areas, instead of

rejecting an application because it

benefits areas they are not rural, RUS

may allocate the grant accordingly to

assure that grant funds primarily benefit

only residents of rural areas.

(d) If a determination made under this

section results in the denial of an

application, the applicant may appeal

such determination to the Administrator

in writing setting forth the reasons why

it disagrees. Thereafter, the

Administrator will review the

determination and decide in writing

whether to sustain, reverse or modify

the original determination. The

Administrator’s determination will be

final. A copy of the Administrator’s

decision will be furnished promptly to

the applicant.

§§ 1703.110–1703.112 [Reserved]

§ 1703.113 Application filing dates,

location, processing, and public

notification.

(a) Applications for funding under

this subpart shall be submitted to the

Administrator, Rural Utilities Service,

U.S. Department of Agriculture, 14th

and Independence Avenue, SW.,

Washington, DC 20250–1500.

Applications should be marked

‘‘Attention: Assistant Administrator,

Telecommunications Program’’.

(b) Applications will be reviewed for

eligibility and considered for funding on

a quarterly or annual basis. The

Administrator will publish a notice in

the Federal Register indicating the

deadline(s) for application submissions

and the amount of available grant funds.

(c) RUS will review each application

for completeness in accordance with

§ 1703.107, and notify the applicant,

within 15 working days of the receipt of

the application, of the results of this

review, citing any information which is

incomplete. To be considered, the

applicant must submit the remaining

information postmarked no later than

the application filing deadline set forth

in paragraph (b) of this section, or 15

working days from the receipt of RUS’s

letter, whichever is the later date. If the

applicant fails to submit such

information to complete the application

in accordance with § 1703.107, the

application shall be denied and

returned to the applicant.

(d) After receipt of all completed

applications, the Administrator will

publish notice in the Federal Register of

all completed applications received for

funding under this subpart. The

Administrator will also make those

applications available for public

inspection at the U.S. Department of

Agriculture, 14th and Independence

Avenue, SW., Washington, DC. For

purposes of this paragraph, applications

include any information not protected

by the Privacy Act of 1974, 5 U.S.C.

552a, and any other information that has

not been designated as proprietary

information by the applicant.

(e) For instances where multiple

applicants are necessary to carry out a

project due to project feasibility or

applicant authorities, multiple

applications may be submitted jointly

by the applicants. The applicants must

clearly mark or otherwise identify any

information in the application it deems

proprietary.

(f) The applicant must submit an

original and three copies of a completed

application. The applicant must also

submit a copy of the application to the

State government point of contact at the

same time it submits an application to

RUS. All applications must include the

information described in § 1703.107.
Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations 33633

§§ 1703.114–1703.116 [Reserved]

§ 1703.117 Criteria for scoring

applications.

(a) Criteria. The criteria in this section

will be used by the Administrator to

score applications that have been

determined to be in compliance with

the requirements of this subpart. There

are six general criteria for scoring

applications:

(1) The financial need of the

community and the project;

(2) The financial composition of the

project;

(3) The comparative rurality of the

proposed project service area;

(4) The documented need for services;

(5) Connectivity with outside

networks; and

(6) The cost effectiveness of the

design.

(b) Selection. Applications will be

selected for funding based on scores,

availability of funds, and the provisions

of § 1703.118. The Administrator will

make determinations regarding the

reasonableness of all numbers; dollar

levels; rates; the nature of the project;

cost; location; and other characteristics

of the application and the proposed

project to determine the number of

points assigned to an application for all

selection criteria. Joint applications

submitted by multiple applicants as set

forth in § 1703.113 will be rated as a

single application.

(c) Financial need of community and

project. A comparison of the per capita

personal income in the county or

counties where the project of the

beneficiaries are located to the national

per capita personal income levels—up

to 80 points.

(1) If the per capita personal income

level in the county where the grant

beneficiaries will be located:

(i) Is less than equal to 80 percent of

the national per capita personal income

level, 80 points, the maximum number

of points;

(ii) Is greater than 80 percent and less

than or equal to 90 percent of the

national per capita personal income

level—60 points;

(iii) Is greater than 90 percent and less

than or equal to 100 percent of the

national per capita personal income

level—30 points;

(iv) Is greater than 100 percent and

less than or equal to 110 percent of the

national per capita personal income

level—5 points;

(v) Exceeds 100 percent of the

national per capita personal income

level—0 points.

(2) If the project will serve grant

beneficiaries in several counties, the

Administrator will use an unweighted

mean of the counties for the

comparison.

(3) RUS will use the most recent

annual per capita personal income

levels it has obtained from the Bureau

of Economic Analysis, U.S. Department

of Commerce, or other government

sources and processed into a suitable

format.

(d) Financial composition of project.

A comparison of the ability of the

applicant to contribute financially to the

project, and to secure other non-Federal

sources of funding. Criteria include:

(1) Evidence of additional financial

support for the project from non-Federal

sources above the applicant’s required

42.85 percent matching of the RUS grant

as set forth in § 1703.104; the applicant

must include evidence from authorized

representatives of the sources that the

funds are available and will be used for

the proposed project—up to 60 points.

(i) Matching for allowable grant

purposes less than nor equal to 50

percent of the RUS grant—0 points;

(ii) Matching for allowable grant

purposes greater than 50 percent, but

less than or equal to 100 percent of the

RUS grant—10 points;

(iii) Matching for allowable grant

purposes greater than 100 percent, but

less than or equal to 150 percent of the

RUS grant—20 points;

(iv) Matching for allowable grant

purposes greater than 150 percent, but

less than or equal to 200 percent of the

RUS grant—30 points;

(v) Matching for allowable grant

purposes greater than 200 percent, but

less than or equal to 250 percent of the

RUS grant—40 points;

(vi) Matching for allowable grant

purposes greater than 250 percent, but

less than or equal to 300 percent of the

RUS grant—50 points;

(vii) Matching for allowable grant

purposes greater than 300 percent of the

RUS grant—60 points;

(2) Bonus Points For Community

Involvement. In addition to the points

allocated under § 1703.117(d)(1), bonus

points will be scored for funding

supplied by local sources. Criteria

include:

(i) Proportion of non-Federal sources

of funding supplied by local sources

above the applicant’s required 42.85

percent matching of the RUS grant. For

purposes of this paragraph, local

funding sources shall constitute any forprofit or non-profit entity or entities

which derive income from the area to be

served by the proposed project, and any

village, town, county, regional, or other

local governmental or public entity

whose jurisdiction includes at least part

of the proposed project service area. A

local funding source shall not include a

state or Federal governmental entity.

The applicant shall provide evidence

from authorized local representatives

that the funds are available and will be

used for the proposed project—up to 20

points.

(A) Less than or equal to 50 percent

to the RUS grant supplied by local

funding sources—0 points;

(B) Greater than 50 percent, but less

than or equal to 100 percent of the RUS

grant supplied by local funding

sources—5 points;

(C) Grater than 100 percent, but less

than or equal to 150 percent of the RUS

grant suppled by local funding

sources—10 points;

(D) Greater than 150 percent, but less

than or equal to 200 percent of the RUS

grant supplied by local funding

sources—15 points;

(E) Greater than 200 percent of the

RUS grant supplied by local funding

sources—20 points, the maximum

number of points;

(ii) Reserved

(e) The Comparative Rurality of the

Proposed Project Service Area. (1) This

criterion is used after a project service

area has been determined eligible in

accordance with § 1703.109. The

methodology contained in the section is

used to evaluate the relative rurality

(i.e., population and isolation) of service

areas for various projects. Under this

system, the end user sites and hubs (as

defined in § 1703.102) contained within

the proposed project service area are

identified. Then, that service area is

given a score according to the

characteristics for the county(ies) in

which the end user sites are located.

Evaluation is based on the population of

the county or counties, and the location

of the county or counties relative to

metropolitan statistical areas. This

system incorporates a framework based

on the classification of nonmetropolitan

counties by urbanization and proximity

to metropolitan areas, developed by

analysts and demographers at the USDA

Economic Research Service (ERS), as set

forth in appendix A to this subpart.

(2) The following definitions are used

in the evaluation of rurality:

(i) Metropolitan statistical area

(MSA)—as defined by the Office of

Management and Budget (OMB), and

MSA includes core counties containing

a city of 50,000 or greater population or

containing several smaller cities totaling

50,000 or greater population and a total

population of at least 100,000.

Additional contiguous counties are

included in the MSA if they are

economically and socially integrated

with the core county.

(ii) Metropolitan County—as defined

by OMB, a metropolitan county is part
33634 Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations

of an MSA and contains a place, or two

adjoining places, totaling at least 50,000

in population, and has residents who

are economically and socially integrated

with a metropolitan core.

(iii) Adjacency to Metropolitan area—

the proximity of a county to an MSA

measured by a shared boundary with an

MSA, and having at least 2 percent of

employed county residents commuting

to MSA’s for employment.

(3) If the end user site(s) for the

project are located in a nonmetropolitan

county or counties (ERS Rural—Urban

Continuum Scale categories 4–9 as set

forth in Appendix A to this subpart), the

applicant will receive points as follows:

(i) With an ERS category of 9—60

points, the maximum number of points;

(ii) With an ERS category of 8—55

points;

(iii) With an ERS category of 7—40

points;

(iv) With an ERS category of 6—35

points;

(v) With an ERS category of 5—20

points;

(vi) With an ERS category of 4–15

points; or

(vii) With an ERS category of 0

through 3 (metropolitan counties)—0

points.

(4) Applicants having proposed end

users sites located in a nonmetropolitan

county or counties which are adjacent to

a metropolitan area, may receive an

adjustment of up to 5 additional points,

as determined by the Administrator.

Applicants must document that the end

users are isolated from urban centers by

virtue of available mass transportation,

highway infrastructure, or geography.

(5) Applicants having proposed user

sites located in a metropolitan county or

counties (ERS categories 0–3) may

receive 10 points if the population

density of the county or counties is no

greater than 110 percent of the adjoining

nonmetropolitan county with the lowest

population density.

(6) If all the end user sites in a

proposed network or system are located

in a single county or in multiple

counties which have the same

characteristics, a score will be assigned

directly from one of the categories set

forth in § 1703.117(e)(3).

(7) If end users sites are located in

multiple counties with different

characteristics, a weighted average will

be calculated using the following:

(i) The total number of end user sites

located in rural areas will be determined

and be assigned a uniform percentage to

be used in a weighted average formula

(e.g., with 5 sites, each site would be

weighted 20%). A hub will not be

counted in a weighted average unless

the hub is also utilized as an end user

site. For purposes of ranking, if a hub

also is utilized as an end user site, the

hub will be considered as an end user

site.

(ii) The counties which contain end

user sites will be identified.

(iii) Each end user site will be

assigned a number of points according

to the classification system for the

county in which it is located.

(iv) The percentage value for each site

determined in step 1 will be multiplied

by the number of points scored from the

site’s county classification.

(v) The total points for each end user

site, obtained from the calculations in

step 4, will be added to reach a final

weighted average for the project.

(8) The following example illustrates

the provision of paragraph (e)(7) of this

section.

Example Calculation. Greenbriar Valley

Development Authority has submitted an

application for an interactive classroom

network which includes a hub in a

metropolitan area and 3 end user sites,

located in 3 rural counties. The hub is

located in a large city and is not utilized as

an end user site, so the hub will not be

considered part of the network or system.

The first end user site is located in the

town of Midway, in Greenbriar County, less

than 20,000 adjacent to a metropolitan area.

Thus, it has a category of 6 on the ERS

Rural—Urban Continuum Scale.

The second end user site is in Lewistown,

in Lewis County, which has an aggregate

urban population of less than 20,000, not

adjacent to a metropolitan area. Thus, it has

a category of 7 on the ERS Rural—Urban

Continuum Scale.

The third end user site is in the town of

Rocky Creek, in Fayette County, which has

an aggregate urban population of 20,000 or

more, but not adjacent to a metropolitan area.

Thus, it has a category of 5 on the ERS

Rural—Continuum Scale.

Step (1) The total number of end user sites

= 3; thus each end user site receives 33%

weight in the formula.

Step (2) The counties identified are

Greenbriar, Lewis and Fayette.

Step (3) Greenbriar County, ERS Rural—

Urban Continuum Scale category 6 = 30

points;

Lewis County, ERS Rural—Urban

Continuum Scale category 7 = 35 points;

Fayette County, ERS Rural Urban

Continuum Scale category 5 = 10 points.

Step (4) Midway site—30 points × 33% =

9.9 points Lewistown site—35 points × 33%

= 11.6 points

Rocky Creek site—10 points × 33% = 3.3

points

Step (5) 9.9 + 11.6 + 3.3 = 24.8 total

weighted average score.

(f) Documented need for services (1)

This criterion will be used by the

Administrator to score applications

based on the documentation submitted

in the support of the grant application

that reflects the need for the services

proposed by the project. The applicant

should indicate whether or not the

proposed services could be provided if

RUS grant funds were not available. Up

to 60 points can be assigned to this

criterion.

(2) The Administrator will consider

the extent to which the need for

improved educational or medical

services in the proposed rural area

compares to other regions. RUS will also

consider any support by recognized

experts in the related educational or

medical field, and documentation

substantiating the educationally and/or

medically underserved nature of the

applicant’s proposed service area. The

Administrator will consider the extent

of the applicant’s documentation

showing:

(i) The justification for specific

educational and/or medical services

which are needed and will provide

direct benefits to rural residents;

(ii) That rural residents, and other

beneficiaries, desire the educational

and/or medical services to be provided

by the project (a strong indication of

need is the willingness of local end

users or institutions to pay, to the extent

possible, for proposed services);

(iii) The applicant’s inability to pay

for the proposed project without grant

funds, given the financial strength of the

applicant, its partners, or subsidiaries,

as described in § 1703.107(e)(1);

(iv) The project’s development and

support based on input from the local

residents and institutions.

(v) The extent to which the

application is consistent with the State

strategic plan prepared by the Rural

Development State Director of the

United States Department of

Agriculture.

(3) Examples of the need for medical

services could include rural physicians

and medical professionals inability to

access support functions, such as

consulting with others on a diagnosis or

access to the latest recommendations in

treatment procedures and techniques,

up-to-date health-care research, or

continuing medical studies. Other

medical needs could be to retain more

patients at the local hospital or medical

facility in order to prevent the closure

of the rural hospital or medical facility.

(g) Connectivity with outside

networks. (1) This criterion will be used

by the Administrator to score

applications based on the

documentation submitted in support of

the grant application that reflects the

connectivity of the proposed projects

with other educational and/or medical

networks. Up to 25 points can be

assigned to this criterion.
Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations 33635

(2) Consideration will be given to the

extent that the proposed project will

interconnect with other existing

networks at the regional, statewide or

national levels. RUS believes that to the

extent possible, educational and

medical networks should be designed to

connect to the widest practicable

number of other networks that expand

the capabilities of the proposed project,

thereby affording rural residents

opportunities that may not be available

at the local level.

(3) Consideration will also be given to

the extent that facilities constructed

with federal financial assistance,

particularly financial assistance under

this chapter provided to entities other

than the applicant, will be utilized to

extend or enhance the benefits of the

proposed project.

(h) Cost effective design. (1) This

criterion will be used by the

Administrator to score applications

based on the documentation submitted

in the support of the grant application

that reflects the cost efficiency of the

project design. Up to 15 points can be

assigned to this criterion.

(2) Consideration will be given to the

extent that the proposed technology or

technologies for delivering the proposed

educational and/or medical services for

the project service area are the most cost

effective for the type of project

proposed, including utilizing the

transmission facilities of the local

telecommunications provider. The

Administrator will consider the

applicant’s documentation comparing

various systems and technologies, and

the choice of the applicant’s system as

being the most cost-effective system.

The Administrator will also consider

the applicant’s documentation relating

to buying or leasing options for specific

equipment. The application must

contain information necessary for the

Administrator to use accepted analytical

and financial methodologies to

determine whether the applicant is

proposing the most cost-effective

option.

§ 1703.118 Other application selection and

appeal provisions.

(a) Regardless of the number of points

an application receives in accordance

with § 1703.117, the Administrator may,

based on his/her review of the

applications in accordance with the

requirements of this part:

(1) Limit the number of applications

selected for projects located in any one

state during a fiscal year;

(2) Limit the number of selected

applications for a particular project; and

(3) Select an application receiving

fewer points than another higher scoring

application if there are insufficient

funds during a particular funding period

to select the higher scoring application;

provided, however, the Administrator

may ask the applicant of the higher

scoring application if it desires to

reduce the amount of its application to

the amount of funds available if,

notwithstanding the lower grant

amount, the Administrator determines

the project is financially feasible in

accordance with § 1703.107(h) at the

lower amount.

(b) The Administrator will not

approve a grant application if he/she

determines that:

(1) The applicant’s proposal does not

indicate financial feasibility or is not

sustainable in accordance with the

requirements of § 1703.107(e) (1) and

(2);

(2) The applicant’s proposal indicates

technical flaws, which, in the opinion of

the Administrator, would prevent

successful implementation, operation,

or sustainability of the proposed project;

or

(3) Any other aspect of the applicant’s

proposal fails to adequately address any

requirements of this subpart or contains

inadequacies which would, in the

opinion of the Administrator,

undermine the ability of the project to

meet the general purpose of this part or

comply with policies of the Distance

Learning and Telemedicine Grant

Program set forth in § 1703.101.

(c) The Administrator may reduce the

amount of the applicant’s grant award

based on insufficient program funding

for the fiscal year in which the project

is reviewed if the Administrator

determines that, notwithstanding a

lower grant award, the project will show

financial feasibility in accordance with

§ 1703.107(e), and the program purposes

set forth in § 1703.100 can be met. RUS

will discuss its findings informally with

the applicant and make every effort to

reach a mutually acceptable agreement

with the applicant. Any discussions

with the applicant and agreements made

with regard to a reduced grant amount

will be confirmed in writing, and these

actions shall be deemed to have met the

notification requirements set forth in

paragraph (d) of this section.

(d) The Administrator will provide

the applicant an explanation of any

determinations made with regard to

paragraphs (b)(1) through (b)(3) of this

section prior to making final project

funding selections for the year. The

applicant will be provided 15 days from

the date of the Administrator’s letter to

respond, provide clarification, or make

any adjustments or corrections to the

project. If, in the opinion of the

Administrator, the applicant fails to

adequately respond to any

determinations or other findings made

by the Administrator, the project will

not be funded, and the applicant will be

notified of this determination.

(e) For Fiscal Year 1996 grant

applications, RUS will notify all grant

applicants of the numerical scoring each

complete grant application received and

the cutoff points needed to receive

funding for Fiscal Year 1996. If the grant

application numerical scoring is below

the score necessary to obtain funding,

the applicant may appeal the numerical

scoring to the Secretary in writing not

later than 10 days after the applicant is

notified of the scoring level. The

applicant must state the reason it is

appealing the numerical scoring and

submit the reasons the application

should be reconsidered. RUS will allow

14 days after the close of the appeal

period to make the final grant selections

for Fiscal Year 1996.

(f) RUS reserves the right to use other

data it considers most appropriate if

‘‘county’’ data is unavailable for a

particular area. In those cases, the

Administrator will use data compiled

on a basis of the equivalent of a county

in the state, such as a parish, or on

another basis that most approximates

‘‘county’’ level data.

§§ 1703.119–1703.121 [Reserved]

§ 1703.122 Further processing of selected

applications.

(a) During the period between the

selection of the application and the

execution of implementing documents,

the applicant must inform the

Administrator if the project is no longer

viable or the applicant no longer desires

a grant for the project. If the applicant

so informs the Administrator, the

selection will be rescinded and written

notice to that effect shall be sent

promptly to the applicant.

(b) If an application has been selected

and the nature of the project changes,

the applicant may be required to submit

a new application to the Administrator

for consideration depending on the

degree of change. A new application

will be subject to review in accordance

with this subpart. The selection may not

be transferred to another project.

(c) If state or local governments raise

objections to a proposed project under

the intergovernmental review process

that are not resolved within 3 months of

the Administrator’s selection of the

application, the Administrator may

rescind the selection and written notice

to that effect will be sent promptly to

the applicant.

(d) Recipients of grants will be

required to submit RUS Form 479–A,
33636 Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations

‘‘Distance Learning and Telemedicine

Technical Questionnaire.’’

(e) After an applicant has submitted

such additional information, if any, the

Administrator determines is necessary

for completing the grant documents, the

Administrator will send the documents

to the applicant to execute and return to

RUS.

(1) The grant documents will include

a letter of agreement and any other legal

documents the Administrator deems

appropriate, including suggested forms

of certifications and legal opinions.

(2) The letter of agreement will,

among other things, constitute the

Administrator’s approval of funds for

the project subject to certain terms and

conditions and include at a minimum,

a project description, approved

purposes of the grant, the maximum

amount of the grant, supplemental

funds to be provided to the project and

certain agreements or commitments the

applicant may have proposed in its

application.

(f) Until the letter of agreement has

been executed and delivered by RUS

and by the applicant, the Administrator

reserves the right to require any changes

in the project or legal documents

covering the project to protect the

integrity of the program and the

interests of the United States

Government.

(g) If the applicant fails to submit,

within 120 calendar days from the date

of the Administrator’s selection of an

application, all of the information that

the Administrator determines to be

necessary to prepare legal documents

and satisfy other requirements of this

subpart, the Administrator may rescind

the selection of the application and

written notice to that effect will be sent

promptly to the applicant.

§§ 1703.123–1703.125 [Reserved]

§ 1703.126 Disbursement of grant funds.

(a) For grants of $100,000 or greater,

prior to the disbursement of funds, the

grantee, if it is not a unit of government,

will provide evidence of fidelity bond

coverage as required by § 3015.17 of this

title.

(b) Grant funds will be disbursed to

grantees on a reimbursement basis, or

with unpaid invoices for the eligible

purposes set forth in this subpart, by the

following process:

(a) An SF 270, ‘‘Request for Advance

or Reimbursement,’’ will be completed

by the applicant and submitted to RUS

not more frequently than once a month;

and

(2) After receipt of a properly

completed SF 270, payment will

ordinarily be made within 30 days.

(c) The grantee’s share in the cost of

the project will be disbursed in advance

of grant funds, or if the grantee agrees,

on a pro rata distribution basis with

grant funds during the disbursement

period. Grantee will not be permitted to

provide its contribution at the end of the

project.

§ 1703.127 Reporting and oversight

requirements.

(a) A project performance activity

report will be required of all grantees on

a semi-annual basis.

(b) A final project performance report

will be required. It must provide an

evaluation of the success of the project

in meeting the objectives of the

program. The final report may serve as

the last semi-annual report.

(c) RUS will monitor grant recipients

as necessary to assure that projects are

completed in accordance with the

approved scope of work and that funds

are expended for approved purposes.

Grants made under this part will be

administered under, and are subject to

parts 3015 through 3018 of this title.

(d) Grantees shall diligently monitor

performance to ensure that time

schedules are being met, projected work

by time periods is being accomplished,

and other performance objectives are

being achieved. Grantees are to submit

an original and one copy of each report

to RUS. The project performance reports

shall include, but not be limited to, the

following:

(1) A comparison of actual

accomplishments to the objectives

established for that period;

(2) Reasons why established

objectives were not met;

(3) A description of any problems,

delays, or adverse conditions which

have occurred, or are anticipated, and

which may affect the attainment of

overall project objectives, prevent the

meeting of time schedules or objectives,

or preclude the attainment of particular

project work elements during

established time periods. This

disclosure shall be accompanied by a

statement of the action taken or planned

to resolve the situation; and

(4) Objectives and timetable

established for the next reporting

period.

§ 1703.128 Audit requirements.

The grantee will provide an audit

report in accordance with part 3015,

subpart I, of this title. The audit

requirements only apply to the year(s)

in which grant funds are received.

Audits must be prepared in accordance

with generally accepted government

auditing standards (GAGAS) using

publication, ‘‘Standards for Audit of

Governmental Organization, Program,

Activities and Functions.’’

§§ 1703.129–1703.134 [Reserved]

§ 1703.135 Grant administration.

(a) The Administrator will review

grantees, as necessary, to determine

whether funds were expended for

approved purposes. The grantee is

responsible for ensuring that the project

complies with all applicable

regulations, and that the grant funds are

expended only for approved purposes.

The grantee is responsible for ensuring

that disbursements and expenditures of

funds are properly supported by

invoices, contracts, bills of sale,

canceled checks, or other appropriate

forms of evidence, and that such

supporting material is provided to the

Administrator, upon request, and is

otherwise made available, at the

grantee’s premises, for review by the

RUS representatives, grantee’s certified

public accountant, the Office of

Inspector General, U.S. Department of

Agriculture, the General Accounting

Office and any other officials

conducting an audit of the grantee’s

financial statements or records, and

program performance under the grant

awarded under this subpart. Grantees

will be required to permit RUS to

inspect and copy any records and

documents that pertain to the project.

(b) Grants provided under this

program will be administered under,

and are subject to parts 3015 and 3016

of this title, as appropriate. Parts 3015

and 3016 of this title subject grantees to

a number of requirements which cover,

among other things, financial reporting,

accounting records, budget controls,

record retention and audits, bonding

and insurance, cash depositories for

grant funds, grant related income, use

and disposition of real property and/or

equipment purchased with grant funds,

procurement standards, allowable costs

for grant related activities, and grant

close-out procedures.

§ 1703.136 Changes in project objectives

or scope.

The grantee will obtain prior approval

for any material change to the scope or

objectives of the approved project,

including changes to the scope of work

or budget. Failure to obtain prior

approval of changes can result in

suspension or termination of grant

funds.

§ 1703.137 Grant termination provisions.

(a) Termination for cause. The

Administrator may terminate any grant

in whole, or in part, at any time before

the date of completion of grant

disbursement, whenever it is
Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations 33637

determined that the grantee has failed to

comply with the conditions of the grant.

The Administrator will promptly notify

the grantee in writing of the

determination and the reasons for the

termination, together with the effective

date.

(b) Termination for convenience. The

Administrator or the grantee may

terminate a grant in whole, or in part,

when both parties agree that the

continuation of the project would not

produce beneficial results

commensurate with further expenditure

of funds. The two parties will agree

upon termination conditions, including

the effective date, and in the case of

partial terminations, the portion to be

terminated. The grantee will not incur

new obligations for the terminated

portion after the effective date, and will

cancel as many outstanding obligations

as possible. The Administrator will

allow full credit to the grantee for the

Federal share of the noncancelable

obligations, properly incurred by the

grantee prior to termination.

§§ 1703.138–1703.139 [Reserved]

§ 1703.140 Expedited telecommunication

loans

(a) General. (1) The Administrator

will afford expedited consideration and

determination to an application for a

loan or a request for advance of funds

submitted by a local exchange carrier

pursuant to section 2334(h) of the Act

(7 U.S.C. 950aaa et seq.).

(2) Funds obtained through the

expedited procedures established by

this section must be used primarily to

provide advanced telecommunication

services in rural areas using a

telecommunications project that the

Administrator has approved under this

subpart.

(3) Only those elements of a

telecommunications project that have

not been funded in whole, or in part,

with a grant made under this subpart are

eligible for expedited consideration or

determination under this section.

(b) Expeditied loan applications. (1)

In order to qualify for expedited

consideration or determination under

paragraph(a)(1) of this section, the loan

application must:

(i) Be from a local exchange carrier

that will use the requested funds for the

purpose set forth in paragraph(a)(2) of

this section;

(ii) Be a completed one that complies

with the requirements of part 1737,

subpart C, of this chapter; and

(iii) Be received concurrently with the

related grant application or within 14

days of the date notice of such

application is published in the Federal

Register as set forth in § 1703.113(d).

(2) Expedited consideration and

determination of a qualifying

application for a loan under this section

means that within 45 days of receipt or

45 days of selection of the related grant

application, whichever occurs later, the

Administrator will:

(i) Issue a characteristics letter, as set

forth in part 1737, subpart I, of this

chapter, to the loan applicant; or

(ii) Inform the loan applicant that its

application for a loan has been denied.

(c) Expedited advances. (1) In order to

qualify for expedited consideration or

determination under paragraph(a)(1) of

this section, the request for advance of

funds must:

(i) Be from a local exchange carrier

that will use the funds for the purpose

set forth in paragraph(a)(2) of this

section;

(ii) Be for all or part of a loan which

has received release approval pursuant

to part 1737, subpart K, of this chapter;

and

(iii) Be in compliance with the

requirements of part 1744 of this

chapter.

(2) Expedited consideration and

determination of a qualifying request for

advance of loan funds under this section

means that the Administrator will

advance funds to the borrower within

45 days of receiving a request which

complies with the provision of this

section.

Appendix A to Subpart D of Part

1703—ERS Rural—Urban Continuum

Scale

ERS Rural—Urban Continuum Codes:

Metropolitan Counties:

0—Central counties of metropolitan areas

of 1 million population or more.

1—Fringe counties of metropolitan areas of

1 million population or more.

2—Counties in metropolitan areas of 250

thousand to 1 million population.

3—Counties in metropolitan areas of less

than 250 thousand population.

Nonmetropolitan Counties:

4—Aggregate urban population (sum of

cities, towns, villages or other incorporated

communities of 2,500 or more) of 20,000 or

more, adjacent to metropolitan area.

5—Aggregate urban population of 20,000

or more, not adjacent to a metropolitan area.

6—Aggregate urban population of 2,500 of

19,999, adjacent to a metropolitan area.

7—Aggregate urban population of 2,500 to

19,999, not adjacent to a metropolitan area.

8—Completely rural (no cities, towns,

villages or other incorporated areas of 2,500

or greater) adjacent to a metropolitan area.

9—Completely rural, not adjacent to a

metropolitan area.

Notes: Metropolitan status is that

announced by the Office of Management and

Budget in June 1993, when the current

population criteria were first applied to

results of the 1990 Census. Adjacency was

determined by physical boundary adjacency

and a finding that at least 2 percent of the

employed labor force in the nonmetropolitan

county commuted to metropolitan central

counties.

Codes prepared in Rural Economy Division,

Economic Research Service, USDA. A listing

of counties and corresponding codes are

available from ERS at the following address:

Room 337, 1301 New York Avenue, NW,

Washington, DC 20005–4788, Phone: (202)

219–0534

or through the Internet via the ERS Home

Page or directly at the following Internet

address:

gopher://usda.mannlib.cornell.edu:70/

11data-sets/rural/89021

Appendix B to Subpart D of Part 1703—

Environmental Questionnaire

Note: It is extremely important to respond

to all questions completely to ensure

expeditious processing of the Distance

Learning and Telemedicine grant. The

information herein is required by Federal

law.

Important: Any activity related to the

project that may adversely affect the

environment or limit the choice of reasonable

development alternatives shall not be

undertaken prior to the completion of Rural

Utilities Service’s environmental review

process.

Legal Name of Applicant lllllllll

Signature

(Type/Sign/Date) llllllllllll

The applicant’s representative certifies, to

the best of his/her knowledge and belief, that

the information contained herein is accurate.

Any false information may result in

disqualification for consideration of the grant

or rescission of the grant.

I. Project Description—Detailing

construction, including, but not limited to,

internal or external modifications of existing

structures, new building construction, and/or

installation of telecommunications

transmission facilities (defined in 7 CFR

1703.102), including satellite uplinks or

downlinks, microwave transmission towers,

and cabling.

1. Describe the portion of the project, and

site locations (including legal ownership of

real property), involving internal

modifications, or equipment additions to

buildings or other structures (e.g., relocating

interior walls or adding computer facilities)

for each site.

2. Describe the portion of the project, and

site locations (including legal ownership or

real property) involving external changes or

additions to existing buildings, structures or

facilities requiring physical disturbance of

less than .99 acres. List the size of each

individual site in acres and attach a diagram

showing the general layout of the proposed

facilities for each site.

3. Describe the portion of the project, and

site locations (including legal ownership or

real property), involving construction of

transmission facilities, including cabling,

microwave towers, satellite dishes; or, new

construction of buildings; or, disturbance of
33638 Federal Register / Vol. 61, No. 125 / Thursday, June 27, 1996 / Rules and Regulations

property of .99 acres or greater for each

project site.

4. Describe the nature of the proposed use

of the facilities, and whether any hazardous

materials, air emissions, wastewater

discharge or solid waste will result.

5. State whether or not any project site(s)

contain or are near properties listed or

eligible for listing in the National Register of

Historic Places, and identify any historic

properties (The grantee must supply

evidence that the State Historic Preservation

Officer (SHPO) has cleared development

regarding any historical properties).

6. Provide information whether or not any

facility(ies) or site(s) are located in a 100-year

floodplain. A National Flood Insurance Map

should be included reflecting the location of

the project site(s).

II. For projects which involve construction

of transmission facilities, including cabling,

microwave towers, satellite dishes, new

construction of buildings, or physical

disturbance of real property of .99 acres or

greater, the following information must be

submitted (7 CFR 1703.107(j)(3))

1. A map (preferably a U.S. Geological

Survey map) of the area for each site affected

by construction (include as an attachment).

2. A description of the amount of property

to be cleared, excavated, fenced or otherwise

disturbed by the project and a description of

the current land use and zoning and any

vegetation for each project site affected by

construction.

3. A description of buildings or other

structures (i.e., transmission facilities),

including dimensions, to be constructed or

modified.

4. A description of the presence of

wetlands or existing agricultural operations

and/or threatened or endangered species or

critical habitats on or near the project site(s)

affected by construction.

5. Describe any actions taken to mitigate

any environmental impacts resulting from

the proposed project (use attachment if

necessary).

Note: The applicant may submit a copy of

any environmental review, study,

assessment, report or other document that

has been prepared in connection with

obtaining permits, approvals or other

financing for the proposed project from State,

local or other Federal bodies. Such material,

to the extent relevant, may be used to meet

the requirements herein.

Dated: June 21, 1996.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 96–16321 Filed 6–26–96; 8:45 am]

BILLING CODE 3410–15–M