Recovery Act: Agencies Are Addressing Broadband Program Challenges, but Actions Are Needed to Improve Implementation
Published: 2009-11-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Access to broadband service is seen as vital to economic, social, and educational development, yet many areas of the country lack access to, or their residents do not use, broadband. To expand broadband deployment and adoption, the American Recovery and Reinvestment Act (Recovery Act) provided $7.2 billion to the Department of Commerce's National Telecommunications and Information Administration (NTIA) and the Department of Agriculture's Rural Utilities Service (RUS) for grants or loans to a variety of program applicants. The agencies must award all funds by September 30, 2010. This report addresses the challenges NTIA and RUS face; steps taken to address challenges; and remaining risks in (1) evaluating applications and awarding funds and (2) overseeing funded projects. The Government Accountability Office (GAO) reviewed relevant laws and program documents and interviewed agency officials and industry stakeholders.
section_title: What GAO Found
paragraphs: NTIA and RUS face scheduling, staffing, and data challenges in evaluating applications and awarding funds. NTIA, through its new Broadband Technology Opportunities Program, and RUS, through its new Broadband Initiatives Program, must review more applications and award far more funds than the agencies formerly handled through their legacy telecommunications grant or loan programs, including NTIA's largest legacy grant program, Public Safety Interoperable Communications. NTIA and RUS initially proposed distributing these funds in three rounds, but recently adopted two rounds. To meet these challenges, the agencies have established a two-step application evaluation process that uses contractors or unpaid, independent experts for application reviews and plan to publish information on applicants' proposed service areas to help ensure the eligibility of proposed projects. While these steps address some challenges, the upcoming deadline for awarding funds may pose risks to the thoroughness of the application evaluation process. In particular, the agencies may lack time to apply lessons learned from the first funding round and to thoroughly evaluate applications for the remaining rounds. NTIA and RUS will oversee a significant number of projects, including projects with large budgets and diverse purposes and locations. In doing so, the agencies face the challenge of monitoring these projects with far fewer staff per project than were available for their legacy grant and loan programs. To address this challenge, NTIA and RUS have hired contractors to assist with oversight activities and plan to require funding recipients to complete quarterly reports and, in some cases, obtain annual audits. Despite these steps, several risks remain, including a lack of funding for oversight beyond fiscal year 2010 and a lack of updated performance goals to ensure accountability for NTIA and RUS. In addition, NTIA has yet to define annual audit requirements for commercial entities funded under the Broadband Technology Opportunities Program.

section_title: Letter
paragraphs: Increasingly, access to affordable broadband telecommunications is  viewed as critical to economic, educational, and social development. For  example, broadband technology makes it possible for patients to visit local  clinics and receive medical attention from specialists hundreds of miles  away; allows students to access information not available from their local  libraries; and gives school systems a means of using one teacher to  provide advanced courses to students in multiple schools. According to  the Federal Communications Commission (FCC), broadband technology is  a key driver of economic growth. The ability to share large amounts of  information at ever-greater speeds increases productivity, facilitates  commerce, and drives innovation. Broadband is particularly critical in  rural areas, where advanced communications can reduce the distances  that isolate remote communities. Yet millions of Americans do not have  access to, or do not use, broadband.
Enacted on February 17, 2009, the American Recovery and Reinvestment  Act (Recovery Act) appropriated $7.2 billion to extend access to  broadband throughout the United States. Of the $7.2 billion, $4.7 billion  was appropriated for the Department of Commerce’s (DOC) National  Telecommunications and Information Administration (NTIA) and $2.5  billion for the Department of Agriculture’s (USDA) Rural Utilities Service  (RUS). Specifically, the Recovery Act authorized NTIA, in consultation  with FCC, to create the Broadband Technology Opportunities Program  (BTOP) to manage competitive grants to a variety of entities for  broadband infrastructure, public computer centers, and innovative  projects to stimulate demand for, and adoption of, broadband. Of the $4.7  billion, up to $350 million was available pursuant to the Broadband Data  Improvement Act and for the purpose of developing and maintaining a  nationwide map featuring the availability of broadband service, with some  funds available for transfer to FCC for the development of a national  broadband plan to help ensure that all people in the United States have  access to broadband. Similarly, RUS established the Broadband Initiatives  Program (BIP) to make loans and to award grants and loan-grant  combinations for broadband infrastructure projects in rural areas.
This report is part of GAO’s ongoing efforts to monitor Recovery Act  programs. In addition, it builds on prior reports by GAO and the Inspectors  General of USDA, DOC, and FCC that found that broadband programs  pose certain challenges—including difficulties in identifying broadband  coverage, targeting rural areas, and completing projects—and may present  risks of waste, fraud and abuse. Accordingly, this report addresses two  questions: (1) what are the challenges and risks, if any, NTIA and RUS face  in evaluating applications and awarding funds and the steps they have they  taken to address identified risks, and (2) what are the challenges and risks,  if any, the agencies face in overseeing funded projects and the steps they  have taken to address identified risks?
To address these questions, we reviewed NTIA, RUS, and FCC program  documentation. We also interviewed relevant staff from the three agencies  regarding their agencies’ efforts to implement the broadband provisions of  the Recovery Act. We reviewed relevant laws and regulations; guidance  from the Office of Management and Budget (OMB), DOC, the Department  Justice, and the Domestic Working Group, an intergovernmental audit  community of 19 federal and state agencies; and prior GAO reports. We  compared the agencies’ efforts to relevant laws, regulations, and guidance  to identify strengths and weaknesses in their efforts. To determine what  reporting and audit requirements will apply to recipients of NTIA and RUS  funding, we reviewed the Single Audit Act, agency regulations and  documents, and OMB guidance, and interviewed agency officials. We  reviewed these audit requirements to determine which requirements  would apply to the different types of applicants, including commercial (for  profit) applicants, nonprofit organizations, and state or local governments;  we did not evaluate which audit requirements would be most effective for  providing oversight of awarded funds. In addition, we did not evaluate  how NTIA or RUS have reviewed and analyzed submitted audit reports in  the past to determine the effectiveness of their review of these audit  reports. Finally, we interviewed 15 stakeholders representing a range of  interests, including associations representing wireline, wireless, cable, and  satellite service providers; consumer advocates; telecommunications  policy researchers; and state telecommunications regulators to obtain  their views on the potential challenges and risks facing the agencies. See  appendix I for a list of the stakeholders we interviewed.
We conducted our work from April through November 2009 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on our  audit objectives.
subsections: section_title: Background
paragraphs: Both NTIA’s BTOP and RUS’s BIP programs focus primarily on broadband  infrastructure deployment, but the programs have some differences based  on provisions in the Recovery Act (see table 1). BTOP funds are intended  to expand broadband access to unserved and underserved areas. BTOP  funds can also be awarded to projects that promote broadband demand  and adoption and provide equipment, training, and access for higher  education, job creation, public safety and health, and other facilities that  serve vulnerable populations. BIP focuses on rural areas and its funds can  be used solely for broadband infrastructure deployment. The agencies also  have different project eligibility requirements. For example, the Recovery  Act requires that BTOP applicants demonstrate that a project would not  have been implemented during the grant period without federal grant  assistance; the Recovery Act does not include a similar requirement for  RUS broadband applicants.
To implement the Recovery Act, NTIA and RUS will fund several types of  projects. The agencies will fund last-mile and middle-mile network  infrastructure projects to extend broadband service in unserved or  underserved areas. According to NTIA and RUS, last-mile projects are  those infrastructure projects whose predominant purpose is to provide  broadband service to end users or end-user devices. Middle-mile projects  mostly do not provide broadband service to end users or end-user devices,  but instead provide relatively fast, large-capacity connections between  backbone facilities—long-distance, high-speed transmission paths for  transporting massive quantities of data—and last-mile projects. NTIA is  also funding public computer centers and sustainable adoption projects.
Both NTIA and RUS have experience with similar broadband grant or loan  programs. Before receiving Recovery Act funding, NTIA implemented the  Technology Opportunities Program; this program promoted the innovative  use of information and communication technologies, primarily in  underserved population segments, to promote public benefits.  Additionally, NTIA implemented other, nonbroadband programs, such as  the Public Safety Interoperability Communications (PSIC) program, which  provides funding to public safety organizations; the digital television  transition coupon program; and the Public Telecommunications Facilities  Program, which provides funding to public broadcasters. RUS has prior  and ongoing experience with several broadband-specific programs— including the Rural Broadband Access Loan and Loan Guarantee  (Broadband Access Loan) Program which funds the construction,  improvement, and acquisition of facilities and equipment for broadband  service in eligible rural communities, and the Community Connect  broadband grant program, which funds broadband on a “community- oriented connectivity” basis to currently unserved rural areas for the  purpose of fostering economic growth and delivering enhanced health  care, education, and public safety services.
To implement the broadband provisions in the Recovery Act, NTIA and  RUS coordinated their efforts and developed program milestones (see   fig. 1). OMB tasked agencies implementing Recovery Act programs to  engage in aggressive outreach with potential applicants. NTIA and RUS,  with FCC coordination, held a series of public meetings in March 2009,  explaining the overall goals of the new broadband programs. NTIA and  RUS also sought public comments from interested stakeholders on various  challenges that the agencies would face in implementing the broadband  programs through these meetings and by issuing a Request for  Information. NTIA and RUS received over 1,500 comments. FCC, in a  consultative role, provided support in developing technical definitions and  participated in the first kick-off meeting. On July 1, 2009, Vice President  Joe Biden, Secretary of Commerce Gary Locke, and Secretary of  Agriculture Tom Vilsack announced the release of the first joint Notice of  Funds Availability (NOFA) detailing the requirements, rules, and  procedures for applying for BTOP grants and BIP grants, loans, and loan- grant combinations. Subsequently, the agencies held 10 joint  informational workshops throughout the country for potential applicants  to explain the programs, the application process, and the evaluation and  compliance procedures, and to answer stakeholder questions. NTIA and  RUS coordinated and developed a single online intake system whereby  applicants could apply for either BTOP or BIP funding. NTIA and RUS  initially indicated that they would award Recovery Act broadband program  funds in three jointly-conducted rounds and initially expected to issue the  NOFA for a second funding round before the end of calendar year 2009  and for a third round in 2010. In a draft version of this report, we  recommended that the agencies combine the second and third funding  rounds. Subsequently, on November 10, 2009, the agencies announced that  they would award the remaining program funds in one round, instead of  two. Both BTOP and BIP projects must be substantially complete within  2 years and fully complete no later than 3 years following the date of  date of  issuance of their award.  issuance of their award.
section_title: NTIA and RUS Have Taken Steps to Address Challenges, Including Scheduling and Staffing, Associated With Evaluating Applications and Awarding Funds; However, Some Risks Remain
paragraphs: NTIA and RUS face scheduling, staffing, and data challenges in evaluating  applications and awarding funds. The agencies have taken steps to meet  these challenges, including the adoption of a two-step evaluation process,  utilization of nongovernmental personnel, and publication of information  on the applicant’s proposed service area. While these steps address some  challenges, the agencies’ remaining schedule may pose risks to the review  of applications. In particular, the agencies may lack the needed time to  apply lessons learned from the first funding round and may face a  compressed schedule to review new applications, thereby increasing the  risk of awarding funds to projects that may not be sustainable or do not  meet the priorities of the Recovery Act.
subsections: section_title: NTIA and RUS Face Scheduling, Staffing, and Data Challenges in the Evaluation of Applications and Awarding of Funds
paragraphs: Scheduling challenges. Under the provisions of the Recovery Act, NTIA  and RUS must award all funds by September 30, 2010. Thus, the agencies  have 18 months to establish their respective programs, solicit and evaluate  applications, and award funds. While in some instances a compressed  schedule does not pose a challenge, two factors increase the challenges  associated with the 18-month schedule. First, while RUS has existing  broadband programs, albeit on a much smaller scale than BIP, NTIA must  establish the BTOP program from scratch. Second, the agencies face an  unprecedented volume of funds and anticipated number of applications  compared to their previous experiences.
The volume of funds to be awarded exceeds previous broadband-related  programs implemented by NTIA and RUS. While NTIA and RUS have prior  experience in administering grant or loan programs, these programs had  less budgetary authority than the programs in the Recovery Act (see fig. 2).  Of the $7.2 billion appropriated in the Recovery Act, NTIA received $4.7  billion for BTOP. In comparison, NTIA administered the PSIC program, a  one-time grant program with an appropriation of about $1 billion for a  single year, in close coordination with the Department of Homeland  Security (DHS). Additionally, NTIA’s Public Telecommunications Facilities  Program received an average of $23 million annually and its  Telecommunications Opportunities Program received $24 million  annually. RUS received $2.5 billion from the Recovery Act for BIP. In  comparison, RUS’s Community Connect program’s average annual  appropriation was $12 million and its Broadband Access Loan Program’s  average annual appropriation was $15 million. According to preliminary  information from the agencies, they received approximately 2,200  applications requesting $28 billion in grants and loans in the first funding  round. Based on the number of applications received and the funds  requested, the average amount an applicant sought was $12.7 million, or  almost half the size of the total average appropriation for NTIA’s  l average appropriation for NTIA’s  Technology Opportunities Program.  Technology Opportunities Program.
NTIA and RUS also face an increase in the number of applications that  they must review and evaluate in comparison to similar programs (see fig.  3). As mentioned previously, the agencies indicated that for the first round  of funding alone, they received 2,200 applications. Of these 2,200  applications, NTIA received 940 applications exclusively for BTOP and  RUS received 400 applications exclusively for BIP and 830 dual  applications for both programs. Both NTIA and RUS will review the dual  applications; if RUS does not fund the project through the BIP program,  NTIA can consider funding the project through the BTOP program. By  comparison, NTIA received an average of 838 applications annually for the  Telecommunications Opportunities Program; for PSIC, NTIA and DHS  received 56 applications from state and territorial governments containing  a total of 301 proposed projects. RUS received an average of 35  applications annually for the Broadband Access Loan Program and an  average of 105 applications annually for the Community Connect program.  In addition, since BTOP and BIP will not carry over applications between  rounds, applicants who do not receive funding in the first round must  reapply to be eligible for consideration for funding in the second round.  Therefore, a single proposed project may be evaluated multiple times by  BTOP and BIP reviewers. Fourteen of 15 stakeholders with whom we  spoke expressed concern that the agencies will face challenges in  adequately reviewing the large number of expected applications in the  time frame allotted.
Staffing challenges. NTIA and RUS will need additional personnel to  administer BTOP and BIP. NTIA is establishing a new program with BTOP  and will for the first time award grants to commercial entities. NTIA’s  initial risk assessment indicated that a lack of experienced and  knowledgeable staff was a key risk to properly implementing the program  in accordance with the priorities of the Recovery Act. In its fiscal year  2010 budget request to Congress, NTIA estimated that it will need 30 full- time-equivalent staff in fiscal year 2009 and 40 more full-time-equivalent  staff for fiscal year 2010. While RUS already has some broadband loan and  grant programs in place and staff to administer them, it also faces a  shortage of personnel. RUS’s staffing assessments indicated that the  agency will need 47 additional full-time-equivalents to administer BIP.  Prior to the Recovery Act, RUS had 23 full-time-equivalent staff in fiscal  year 2008 for its Broadband Access Loan Program and no full-time- equivalent staff dedicated to the Community Connect program; RUS  utilized personnel from the Broadband Access Loan Program for the  Community Connect program. RUS indicated that it would have  Broadband Access Loan Program staff also assist with BIP.
Data challenges. NTIA and RUS lack detailed data on the availability of  broadband service throughout the country that may limit their ability to  target funds to priority areas. According to NTIA and RUS, priority areas  include unserved and underserved areas. NTIA and RUS require applicants  to assemble their proposed service areas from contiguous census blocks  and to identify the proposed service area as unserved or underserved.  However, RUS and NTIA will be awarding loans and grants before the  national broadband plan or broadband mapping is complete. NTIA does  not expect to have complete, national data on broadband service levels at  the census block level until at least March 2010. Eight of 15 stakeholders  with whom we spoke said that the agencies face challenges determining  whether proposed service areas meet the requirements for underserved  and unserved in order to effectively award funds. To work around this  problem, the agencies plan to use existing FCC data on broadband  service levels (Form 477 data) and state broadband service maps where  available. However, the data collected by FCC are at the census tract level,  not the census block level. In addition, although FCC and NTIA have  discussed NTIA’s access to and use of the Form 477 data, the agencies  have not developed formal procedures; RUS has not discussed use of the  Form 477 data with FCC. Finally, not all states have broadband maps.
section_title: NTIA and RUS Have Taken Steps to Address Challenges in Evaluating Applications and Awarding Funds
paragraphs: Two-step evaluation process. To address the scheduling and staffing  challenges, NTIA and RUS are conserving scarce staff resources by  screening applications and therefore reducing the number of applications  subject to a comprehensive review by using a two-step process. In the first  step, the agencies will evaluate and score applications based on the  criteria delineated in the NOFA, such as project purpose and project  viability. During this step, the agencies will select which applications  proceed to the second step. After the first step is complete and the pool of  potential projects is reduced, the agencies intend to conduct the second  step—due diligence, which involves requesting extra documentation to  confirm and verify information contained in an application. Since not all  applications will proceed to the second step, not all applicants will be  required to submit extra documentation. This will reduce the amount of  information the agencies must review. In the NOFA, the agencies indicated  that using this two-step process balances the burdens on applicants with  the needs of the agencies to efficiently evaluate applications.
Use of nongovernmental personnel. Both NTIA and RUS are using  nongovernmental personnel to address anticipated staffing needs  associated with evaluating applications and awarding funds. To evaluate  applications, NTIA is using a review system, in which three unpaid,  independent expert reviewers examine and score applications. To be  considered an expert reviewer, the individual must have significant  expertise and experience in at least one of the following areas: (1) the  design, funding, construction, and operation of broadband networks or  public computer centers; (2) broadband-related outreach, training, or  education; or (3) innovative programs to increase the demand for  broadband services. In addition, NTIA will use contractors in an  administrative role to assist the expert reviewers. NTIA officials said that  the agency issued three guides to be used by the reviewers for each of the  three project categories—broadband infrastructure, public computer  centers, and sustainable adoption—and conducted more than 15 Web- based training seminars. RUS will use contractors to evaluate and score  applications. Both NTIA and RUS said that they are confident that an  expert would be able to draw conclusions on the technical feasibility or  the financial sustainability of a project based on information provided in  the application. Regardless of who reviews the application, the final  selection and funding decisions are to be formally made by a selecting  official in each agency.
Publish applicant information. To address the challenge of incomplete  data on broadband service, NTIA and RUS require applicants to identify  and attest to the service availability—either unserved or underserved—in  their proposed service area. In order to verify these self-attestations, NTIA  and RUS will post a public notice identifying the proposed funded service  area of each broadband infrastructure applicant. The agencies intend to  allow existing service providers in the proposed service area to question  an applicant’s characterization of broadband service in that area.  According to the NOFA, existing service providers will have 30 days to  submit information regarding their service offerings. If this information  raises eligibility issues, RUS may send field staff to the proposed service  area to conduct a market survey. RUS will resolve eligibility issues by  determining the actual availability of broadband service in the proposed  service area. Currently, NTIA has no procedures in place for resolving  these types of issues, but said that it is developing these procedures using  its contractors and other means.
section_title: The Agencies’ Remaining Schedule May Pose Risks to the Review of Applications
paragraphs: During the first funding round, the compressed schedule posed a challenge  for both applicants and the agencies. As mentioned previously, NTIA and  RUS initially proposed to utilize three separate funding rounds during the  18-month window to award the entire $7.2 billion. As such, each funding  round would operate under a compressed schedule. Eight of the 15  industry stakeholders with whom we spoke expressed concern that a  small entity would have difficulties completing an application in a timely  manner. Specifically, some stakeholders said that small entities were  having trouble locating the professional staff needed to assemble an  application. The compressed schedule also posed challenges for the  agencies. During the first funding round, the agencies missed several  milestones. For example, RUS originally intended to select a contractor on  June 12, 2009, and NTIA intended to select a contractor on June 30, 2009;  however, both agencies missed their target dates, with RUS selecting its  contractor on July 31, 2009, and NTIA selecting its contractor on August 3,  2009. Also, the agencies intended to begin awarding the first-round grants  and loans on November 7, 2009, but the agencies now expect to begin  awarding funds in December 2009.
Because of the compressed schedule within the individual funding rounds,  NTIA and RUS have less time to review applications than similar grant and  loan programs. In the first funding round, the agencies have approximately  2 months to review 2,200 applications. With other telecommunications  grant and loan programs, agencies have taken longer to evaluate  applications and award funds. For example, from fiscal year 2005 through  2008, RUS took from 4 to 7 months to receive and review an average of 26  applications per year for its Broadband Access Loan Program. NTIA  officials acknowledged that the BTOP timeline is compressed compared  with the timeline for the Public Telecommunications Facilities Program,  which operated on a year-long grant award cycle. For the PSIC program,  NTIA and DHS closed the application period in August 2007 and  completed application reviews in February 2008, a period of roughly 6  months. In California, the Public Utilities Commission took 4 to 6 months  to review 54 applications and award funds for 25 projects in the first year  of the California Advanced Services Fund, a $100 million broadband  program.
Based on their experience with the first funding round, on November 10,  2009, NTIA and RUS reported that they will reduce the number of funding  rounds from three to two. In the second and final funding round, the  agencies anticipate extending the window for entities to submit  applications. This change will help mitigate the challenges the compressed  schedule posed for applicants in the first funding round. However, it is  unclear whether the agencies will similarly extend the amount of time to  review the applications and thereby bring the review time more in line  with the experiences of other broadband grant and loan programs. NTIA  officials indicated that the agency would like to award all $4.7 billion by  summer 2010, to promote the stimulative effect of the BTOP program. RUS  officials indicated that the agency will award all $2.5 billion by September  30, 2010, as required by the Recovery Act, indicating a potentially longer  review process.
Depending on the time frames NTIA and RUS select, the risks for both  applicants and the agencies may persist with two funding rounds. In  particular, these risks include:    Limited opportunity for “lessons learned.” Based on the current  schedule, NTIA and RUS will have limited time between the completion of  the first funding round and the beginning of the second funding round.  NTIA and RUS recently announced that the agencies will begin awarding  funds for the first funding round in December 2009. On November 10,  2009, the agencies sought public comment on approaches to improve the  application experience and strengthen BTOP and BIP; the public has 14  days to respond with comments following publication of the notice in the  Federal Register. Because of this compressed time frame, applicants might  not have sufficient time to analyze their experiences with the first funding  round to provide constructive comments to the agencies. Further, the  agencies might not have sufficient time to analyze the outcomes of the first  round and the comments from potential applicants. As such, a compressed  schedule limits the opportunity to apply lessons learned from the first  funding round to improve the second round.
Compressed schedule to review applications. Due to the complex  nature of many projects, NTIA and RUS need adequate time to evaluate  the wide range of applications and verify the information contained in the  applications. NTIA is soliciting applications for infrastructure, public  computer center, and sustainable adoption projects. Therefore, NTIA will  receive applications containing information responding to different  criteria and it will evaluate the applications with different standards. Even  among infrastructure applications, a wide variability exists in the  estimates, projections, and performance measures considered reasonable  for a project. For example, in RUS’s Broadband Access Loan Program,  approved broadband loans for the highest-cost projects, on a cost-per- subscriber basis, ranged as much as 15, 18, and 70 times as high as the  lowest-cost project, even among projects using the same technology to  deploy broadband. Previous experience with broadband loan programs  also reveals the challenges inherent in evaluating an application based on  estimates provided by the applicant. For example, as of fiscal year 2008, 55  percent of RUS broadband loan borrowers were meeting their forecasted  number of subscribers. Nine of the 15 stakeholders that we interviewed  expressed concerns that NTIA and RUS lack staffing expertise to  determine whether project proposals will generate sufficient numbers of  subscribers and revenues to cover operating costs and be sustainable on a  long-term basis.
Continued lack of broadband data and plan. According to NTIA,  national broadband data provide critical information for grant making.  Additionally, some stakeholders, including members of Congress, have  expressed concern about awarding broadband grants and loans without a  national broadband plan. Under the Recovery Act, up to $350 million was  available pursuant to the Broadband Data Improvement Act to fund the  development and maintenance of a nationwide broadband map for use by  policymakers and consumers. NTIA solicited grant applications to help  develop the national broadband map, and grant applicants must complete  their data collection by March 1, 2010. Additionally, based on provisions in  the Recovery Act, FCC must deliver to Congress a national broadband  plan by February 17, 2010. To prepare the plan, FCC sought comment on  a variety of topics, including the most effective and efficient ways to  ensure broadband service for all Americans. By operating on a  compressed schedule, NTIA and RUS will complete the first funding round  before the agencies have the data needed to target funds to unserved and  underserved areas and before FCC completes the national broadband  plan. Depending on the time frames the agencies select for the second  funding round, they may again review applications without the benefit of  national broadband data and a national broadband plan.
section_title: NTIA and RUS Face Staffing Challenges in Overseeing Funded Projects, and Despite Steps Taken, Several Risks to Project Oversight Remain
paragraphs: NTIA and RUS will need to oversee a far greater number of projects than  in the past, including projects with large budgets and diverse purposes and  locations. In doing so, the agencies face the challenge of monitoring these  projects with far fewer staff per project than were available in similar  grant and loan programs they have managed. To address this challenge,  NTIA and RUS procured contractors to assist with oversight activities and  will require funding recipients to complete quarterly reports and, in some  cases, obtain annual audits. Despite the steps taken, several risks to  adequate oversight remain. These risks include insufficient resources to  actively monitor funded projects beyond fiscal year 2010 and a lack of  updated performance goals for NTIA and RUS. In addition, NTIA has yet to  define annual audit requirements for commercial entities funded under  BTOP.
subsections: section_title: A Large Number of Projects to Oversee Creates Staffing Challenges
paragraphs: NTIA and RUS will need to oversee a far greater number of projects than  in the past. Although the exact number of funded projects is unknown,  both agencies have estimated for planning purposes that they could fund  as many as 1,000 projects each—or 2,000 projects in total—before  September 30, 2010. In comparison, from fiscal year 1994 through fiscal  year 2004, NTIA awarded a total of 610 grants through its Technology  Opportunities Program—or an average of 55 grants per year. From fiscal  year 2005 through fiscal year 2008, RUS awarded a total of 84 Community  Connect grants, averaging 21 grants per year; and through its Broadband  Access Loan Program, RUS approved 92 loans from fiscal year 2003  through fiscal year 2008, or about 15 loans per year.
In addition to overseeing a large number of projects, the scale and  diversity of BTOP- and BIP-funded projects are likely to be much greater  than projects funded under the agencies’ prior grant programs. Based on  NTIA’s estimated funding authority of $4.35 billion for BTOP grants and  RUS’s estimated potential total funding of approximately $9 billion for BIP  grants, loans, and loan-grant combinations, if the agencies fund 1,000  projects each, as they have estimated, the average funded amount for  BTOP and BIP projects would be about $4.35 million and $9 million,  respectively. In comparison, from fiscal year 1994 to fiscal year 2004,  NTIA’s average grant award for its Technology Opportunities Program was  about $382,000, and from fiscal year 2005 to fiscal year 2008, RUS  awarded, on average, about $521,000 per Community Connect grant  award. Further, NTIA and RUS expect to fund several different types of  projects that will be dispersed nationwide, with at least one project in  every state. NTIA is funding several different types of broadband  projects, including last- and middle-mile broadband infrastructure projects  for unserved and underserved areas, and public computer center and  sustainable broadband adoption projects. BIP can fund last- and middle- mile infrastructure projects in rural areas across the country.
Because of the volume of expected projects, NTIA and RUS plan to  oversee and monitor BTOP- and BIP-funded projects with fewer staff  resources per project than the agencies used in similar grant and loan  programs (see table 2). In its fiscal year 2010 budget request to Congress,  NTIA estimated that it would need a total of 70 full-time-equivalent staff  for fiscal year 2010 to manage BTOP, which includes overseeing funded  projects. After refining its spending and budget plans, NTIA said that it will  need 41 full-time-equivalent staff for BTOP; at the time of our review, it  had filled 33 of these positions. Based on NTIA’s estimate of funding 1,000  projects and its estimated 41 full-time-equivalent staff needed, NTIA will  have about 1 full-time-equivalent staff available for every 24 projects.  Under the Technology Opportunities Program, NTIA had an average of 1  full-time-equivalent staff in any capacity for every three projects funded  annually from fiscal year 1994 through fiscal year 2004. NTIA reported  that it is continually assessing its resources and is considering additional  staff hires. Similarly, RUS reported that it will need 47 full-time-equivalent  staff to administer all aspects of BIP, and the majority of these positions  were to be filled by the end of September 2009. These 47 staff members  are in addition to the 114 full-time-equivalent staff in the Rural  Development Telecommunications program which support four existing  loan or grant programs, including the Telecommunications Infrastructure  loan program, the Distance Learning and Telemedicine loan and grant  program, the Broadband Access Loan Program, and Community Connect  grant program. If RUS funds a total of 1,000 projects, as estimated, based  on the 47 staff assigned to BIP, it would have 1 staff of any capacity  available for every 21 funded projects. Under its Broadband Access Loan  Program, RUS had more than 1 full-time-equivalent staff for every loan  made annually from fiscal year 2003 through fiscal year 2008. RUS  reported that it could use other staff in the Rural Development  Telecommunications program to address BIP staffing needs, if necessary.
section_title: NTIA and RUS Are Addressing Project Oversight Challenges by Procuring Contractor Services and Requiring Funding Recipient Reports and Audits
paragraphs: Contractor services. NTIA and RUS will use contractors to help monitor  and provide technical assistance for BTOP and BIP projects, in addition to  evaluating applications as discussed earlier. On August 3, 2009, NTIA  procured contractor services to assist in a range of tasks, including  tracking and summarizing grantees’ performance, developing grant- monitoring guidance, and assisting with site visits and responses to audits  of BTOP-funded projects. Through its statement of work for contracted  services, NTIA estimated that its contractor will provide about 35,000  hours of support for grants administration and postaward support in 2010  and about 55,000 hours of support for additional optional years. On July  31, 2009, RUS awarded a contract to a separate contractor for a wide range  of program management activities for BIP. RUS’s contractor will be  responsible for a number of grant-monitoring activities, including  developing a workflow system to track grants and loans; assisting RUS in  developing project monitoring guidance and policies; and assisting in site  visits to monitor projects and guard against waste, fraud, and abuse.
In addition to its contractor, RUS intends to use existing field staff for  program oversight. RUS reported that it currently has 30 general field  representatives in the telecommunications program and 31 field  accountants in USDA’s Rural Development mission area that may be  available to monitor broadband programs. RUS field accountants conduct  financial audits primarily within its telecommunications and electric utility  loan programs. Two of the 30 general field representatives are dedicated to  RUS’s broadband grant and loan programs, and RUS reported that the  other general field representatives would be available to assist with BIP  oversight if needed. Of the 47 full-time-equivalent staff that RUS has  estimated needing to implement BIP, it plans to hire a total of 10 general  field representatives and 10 field accountants on a temporary basis. In  addition, RUS officials told us that Rural Development has an estimated  5,000 field staff available across the country that support a variety of Rural  Development loan and grant programs. Although these individuals do not  have specific experience with telecommunications or broadband projects,  according to RUS, this staff has experience supporting RUS’s business and  community development loan programs, and this workforce could be used  for project monitoring activities if there was an acute need.
Recipient reports and audits. To help address the challenge of  monitoring a large number of diverse projects, NTIA and RUS have  developed program-specific reporting requirements that are intended to  provide transparency on the progress of funded projects. Based on our  review of the requirements, if NTIA and RUS have sufficient capacity to  review and verify that information provided by funding recipients is  accurate and reliable, these requirements could provide the agencies with  useful information to help them monitor projects. The following reporting  requirements apply to BTOP and BIP funding recipients:    General Recovery Act reports. Section 1512 of the Recovery Act and  related OMB guidance requires all funding recipients to report quarterly to  a centralized reporting system on, among other things, the amount of  funding received or obligated, the project completion status, and an  estimate of the number of jobs created or retained through the funded  project.  Under OMB guidance, awarding agencies are responsible for  ensuring that funding recipients submit reports to a central, online portal  no later than 10 calendar days after each calendar quarter in which the  recipient receives assistance. Awarding agencies must also perform their  own data quality review and request further information or corrections by  funding recipients, if necessary. No later than 30 days following the end of  the quarter, OMB requires that detailed recipient reports are made  available to the public on the Recovery.gov Web site.
BTOP-specific reports. The Recovery Act requires BTOP funding  recipients to report quarterly on their use of funds and NTIA to make these  reports available to the public. NTIA also requires that funding recipients  report quarterly on their broadband equipment purchases and progress  made in achieving goals, objectives, and milestones identified in the  recipient’s application, including whether the recipient is on schedule to  substantially complete its project no later than two years after the award  and complete its project no later than 3 years after the award. Recipients  of funding for last- and middle-mile infrastructure projects must report on  a number of metrics, including the number of households and businesses  receiving new or improved access to broadband as a result of the project,  the advertised and averaged broadband speeds and the price of the  broadband services provided, and the total and peak utilization of network  access links.
BIP-specific reports. RUS requires BIP funding recipients to submit  quarterly balance sheets, income and cash-flow statements, and the  number of customers taking broadband service on a per community basis,  among other information. In addition, RUS requires funding recipients to  specifically state in the applicable quarter when they have received 67  percent of the award funds, which is RUS’s measure for “substantially  complete.” BIP funding recipients must also report annually on the  number of households; businesses; and educational, library, health care,  and public safety providers subscribing to new or improved access to  broadband. RUS officials reported that it plans to use quarterly reports to  identify specific projects for on-site monitoring and to determine when  that monitoring should take place.
NTIA and RUS also require some funding recipients to obtain annual,  independent audits of their projects. The primary tool for monitoring  federal awards through annual audits is the Single Audit report required  under the Single Audit Act, as amended. We recently reported that the  Single Audit is a valuable source of information on internal control and  compliance for use in a management’s risk assessment and monitoring  processes—and with some adjustments, we said, the Single Audit process  could be improved for Recovery Act oversight. The Single Audit report is  prepared in accordance with OMB’s implementing guidance in OMB  Circular No. A-133. OMB’s Recovery Act guidance directed federal  agencies to review Single Audit reports and provide a synopsis of audit  findings to OMB relating to obligations and expenditures of Recovery Act  funding. All states, local governments, and nonprofit organizations that  expend over $500,000 in federal awards per year must obtain an annual  Single Audit or, in some cases, a program-specific audit (referred to  collectively in this report as a Single Audit). Commercial (for profit)  entities awarded federal funding of any amount are not covered by the  Single Audit Act, and states, local governments, and nonprofit  organizations expending less than $500,000 in federal awards per year are  also not required to obtain an annual Single Audit under the Single Audit  Act. RUS, however, requires all commercial recipients of BIP funds to  obtain an annual, independent audit of their financial statements under  requirements that also apply to RUS’s existing broadband grant and loan  programs. However, RUS’s existing audit requirements are different from  the Single Audit requirements. NTIA has yet to determine what annual  audit requirements will apply to commercial grantees; NTIA reported that  it intends to develop program-specific audit requirements and guidelines  that will apply to commercial recipients that receive broadband grants and  plans to have those guidelines in place by December 2009. See table 3 for a  description of BTOP and BIP audit requirements.
section_title: Several Risks to Project Oversight Remain
paragraphs: Lack of sufficient resources beyond fiscal year 2010. Both NTIA and  RUS face the risk of having insufficient resources to actively monitor  BTOP- and BIP-funded projects after September 30, 2010, which could  result in insufficient oversight of projects not yet completed by that date.
As required by the Recovery Act, NTIA and RUS must ensure that all  awards are made before the end of fiscal year 2010. Under the current  timeline, the agencies do not anticipate completing the award of funds  until that date. Funded projects must be substantially complete no later  than 2 years, and complete no later than 3 years following the date of  issuance of the award. Yet, the Recovery Act provides funding through  September 30, 2010. The DOC Inspector General has expressed concerns  that “without sufficient funding for a BTOP program office, funded  projects that are still underway at September 30, 2010, will no longer be  actively managed, monitored, and closed.” NTIA officials told us that  NTIA has consulted with OMB about seeking BTOP funding after  September 30, 2010, to allow it to close grants. RUS officials reported that  given the large increase in its project portfolio from BIP, RUS’s capacity to  actively monitor these projects after its BIP funding expires may be  stressed. Without sufficient resources to actively monitor and close BTOP  grants and BIP grants and loans by the required completion dates, NTIA  and RUS may be unable to ensure that all recipients have expended their  funding and completed projects as required.
Lack of updated performance goals. The Government Performance and  Results Act of 1993 (GPRA) directs federal agencies to establish objective,  quantifiable, and measurable goals within annual performance plans.  GPRA stresses the importance of having clearly stated objectives, strategic  and performance plans, goals, performance targets, and measures in order  to improve a program’s effectiveness, accountability, and service delivery.  Specifically, performance measures allow an agency to track its progress  in achieving intended results. Performance measures also can help inform  management decisions about such issues as the need to redirect resources  or shift priorities.
NTIA has established preliminary program performance measures for  BTOP, including job creation, increasing broadband access, stimulation of  private sector investment, and spurring broadband demand. However,  NTIA has not established quantitative, outcome-based goals for those  measures. NTIA officials reported that the agency lacks sufficient data to  develop such goals and is using applications for the first round of funding  to gather data, such as the expected number of households that will  receive new or improved broadband service. According to NTIA officials,  data collected from applications for the first funding round could be used  to develop program goals for future funding rounds.
RUS has established quantifiable program goals for its existing broadband  grant and loan programs, including a measure for the number of  subscribers receiving new or improved broadband service as a result of  the programs. However, according to USDA’s fiscal year 2010 annual  performance plan, RUS has not updated its goals to reflect the large  increase in funding it received for broadband programs under the  Recovery Act. In addition, RUS officials told us that the agency’s existing  measure for the number of subscribers receiving new or improved  broadband access as a result of its programs is based on the estimates  provided by RUS borrowers in their applications. Consequently, these  program goals do not reflect actual program outcomes, but rather the  estimates of applicants prior to the execution of their funded projects.
Undefined audit requirements for commercial recipients. At the time  of our review, NTIA did not have audit requirements or guidelines in place  for annual audits of commercial entities receiving BTOP grants. NTIA  officials reported that because BTOP is the first program managed by  NTIA to make grants to commercial entities, the agency does not have  existing audit guidelines for commercial entities. However, NTIA reported  that it intends to develop program-specific audit requirements and  guidelines that will apply to commercial recipients that receive broadband  grants, and it plans to have those guidelines in place by December 2009.  Although award recipients that do not expend more than $500,000 per year  in federal awards may not be subject to an annual audit requirement, NTIA  officials reported that they do not yet know the extent to which they will  make awards in this range. In the absence of clear audit requirements and  guidelines for commercial recipients of BTOP funding, NTIA will lack an  important oversight tool to identify risks and monitor BTOP grant  expenditures.
section_title: Conclusions
paragraphs: The Recovery Act established an ambitious schedule for NTIA and RUS to  implement the broadband provisions. In particular, the agencies have 18  months to establish their respective programs, solicit and evaluate  applications, and award funds. Compounding the challenge, NTIA must  establish the BTOP program from scratch, and the agencies face an  unprecedented volume of funds and anticipated number of applications.
The agencies initially indicated that they would award Recovery Act funds  in three rounds; but, on November 10, 2009, the agencies announced that  they would consolidate the second and third funding rounds and award  the remaining funds in a single, second funding round. However, the  schedule of the new, second funding round is unclear.  Based on the  experience in the first funding round and their legacy grant and loan  programs, the agencies might have little time to thoroughly review  applications to ensure that funded projects meet the objectives of the  Recovery Act. Without adequate time to gather lessons learned from the  first funding round and to thoroughly review applications, the agencies  risk funding projects that might not meet the objectives of the Recovery  Act.
In addition to reviewing an unprecedented number of applications, NTIA  and RUS must oversee funded projects to ensure the projects meet the  objectives of the Recovery Act and to guard against waste, fraud, and  abuse. All funded projects must be complete no later than 3 years  following the award of funds; therefore, some funded projects might not  be complete until September 30, 2013. However, the Recovery Act only  provided funding through September 30, 2010. Without adequate resources  beyond fiscal year 2010, the agencies may not be able to ensure that all  projects are completed as intended and to guard against waste, fraud, and  abuse.
Due to the compressed schedule and limited staff resources, NTIA and  RUS have had limited time to develop outcome-based performance goals  for their programs. However, the agencies use of sequential funding  rounds provides them with an opportunity to collect important data from  funding applicants early in the program that could be used to develop  meaningful performance goals. For example, because applicants must  provide estimates for and reports on the number of households and other  entities that will receive new or improved broadband service as a result of  the projects, NTIA and RUS should have a good basis to establish program  goals for BTOP and BIP for the second funding round and to evaluate the  effectiveness of federal spending for broadband deployment. Without such  goals, future efforts to expand broadband deployment and adoption may  lack important information on the types of projects that were most  effective at meeting subscriber goals and other targets, thereby limiting  the ability to apply federal resources to programs with the best likelihood  of success.
Finally, although NTIA and RUS have established a range of reporting  requirements for funding recipients, NTIA has yet to define what annual  auditing requirements, if any, will apply to commercial funding recipients  under BTOP. Although we have previously reported that the Single Audit  Act’s annual audit requirement is not a perfect tool to oversee Recovery  Act funding, the absence of an annual audit requirement for commercial  entities would hamper NTIA’s oversight of its Recovery Act funding. For  example, NTIA would lack independent auditors’ assurances that its  funding recipients have important internal controls in place to fully track  expenditures and guard against fraud, waste, and abuse.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretaries of Commerce and Agriculture take the  following three actions:  1.  To reduce the risk of awarding funds to projects that may not be  sustainable or do not meet the priorities of the Recovery Act    delay the issuance of the second NOFA in order to provide time to  analyze application and evaluation processes and apply lessons  learned from the first funding round, and     provide review time in the second funding round comparable with  other broadband grant and loan programs. 2.  To ensure that all funded projects receive sufficient oversight and  technical support beyond September 30, 2010, and through their  required completion dates, develop contingency plans to ensure  sufficient resources for oversight of funded projects beyond fiscal year  2010. 3.  To ensure that management has appropriate tools in place to evaluate  the effectiveness of BTOP and BIP and to apply limited resources to  achieve desired program outcomes, use information provided by  program applicants in the first funding round to establish quantifiable,  outcome-based performance goals by which to measure program  effectiveness.
We also recommend that the Secretary of Commerce take the following  step:  To ensure that NTIA has sufficient insight into the expenditure of federal  funding by commercial entities that may receive BTOP grants, determine  whether commercial entities should be subject to an annual audit  requirement.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the departments of Commerce and  Agriculture, to OMB, and to FCC for review and comment. In the draft  report, we recommended that NTIA and RUS combine the second and  third planned funding rounds into one extended funding round. The  departments of Commerce and Agriculture agreed with our  recommendations; FCC and OMB did not comment on our  recommendations. Subsequently, on November 10, 2009, NTIA and RUS  announced that they would award the remaining program funds in one  round, instead of two. Therefore, we removed this recommendation from  the final report. In its comments, NTIA noted that the agency will take all  appropriate additional steps to apply the lessons learned and address  GAO’s concerns, including utilizing experiences from the first round of  funding to improve the program, establishing outcome-based performance  measures, and implementing reasonable audit requirements for  commercial grantees. NTIA’s full comments appear in appendix III. For the  recommendations directed to RUS, RUS described steps it is exploring  that are consistent with our first recommendation. RUS agreed with the  second and third recommendations. FCC, NTIA, OMB, and RUS provided  technical comments that we incorporated, as appropriate.
In its comments, RUS noted that it has extensive experience awarding and  managing grants and loans for rural America, including grants and loans  for electric and telecommunications projects. RUS noted that by focusing  on budget authority, our report does not reflect the true scope of its  telecommunications programs. In particular, RUS noted that the  Broadband Access Loan Program operated with a program level of $300 to  $400 million. We chose to report the budget authority for the various  programs to provide comparability between the grant and loan programs  operated by NTIA and RUS. We acknowledge that RUS’s legacy programs  operate at the program level exceeding the budget authority; however, the  BIP program will also operate at a program level exceeding the $2.5 billion  budget authority. RUS also noted that our report does not reflect the full  scale of its existing staffing levels. In particular, RUS noted that it has 114  full-time staff dedicated solely to telecommunications programs and 30  General Field Representatives who can assist with oversight of the BIP  program. In our report, we note the number of staff dedicated to RUS’s  broadband programs, and we also note that RUS has additional staff,  including 30 General Field Representatives, that the agency can draw upon  for the BIP program. RUS’s full comments appear in appendix II.
We are sending copies of this report to the Secretary of Agriculture, the  Secretary of Commerce, the Director of the Office of Management and  Budget, the Chairman of the Federal Communications Commission, and  interested congressional committees. The report also is available at no  charge on the GAO Web site at http://www.gao.gov.
If you have any questions about this report, please contact me at (202) 512- 2834 or goldsteinm@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Major contributors to this report are listed in appendix IV.
section_title: Appendix I: Stakeholder Organizations or Individuals Interviewed
section_title: Appendix II: Comments from the Department of Agriculture
section_title: Appendix III: Comments from the Department of Commerce
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Michael Clements, Assistant  Director; Eli Albagli; Matt Barranca; Elizabeth Eisenstadt; Dean Gudicello;  Tom James; Kim McGatlin; Sara Ann Moessbauer; Josh Ormond; and Mindi  Weisenbloom made key contributions to this report.