Rural Broadband Deployment: Improved Consistency with Leading Practices Could Enhance Management of Loan and Grant Programs
Published: 2017-04-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: RUS provides loans and grants to help finance the construction of broadband infrastructure in rural America. GAO was asked to review RUS's management of its programs to fund broadband deployment, including consistency with leading practices for federal funding, program management, and broadband deployment.
This report examines the extent to which RUS's procedures and activities are consistent with leading practices and how, if at all, its management practices could be improved. GAO synthesized, from federal guidance and relevant literature, a set of 10 leading practices that would be appropriate for the management of broadband loan and grant programs. GAO validated its set of practices with states that have programs similar to the RUS programs. GAO then reviewed RUS documentation and interviewed RUS officials and six program recipients, selected for having geographically dispersed projects currently under construction. Based on this information, GAO determined whether RUS's procedures and activities were consistent, partially consistent, or not consistent with each leading practice.
section_title: What GAO Found
paragraphs: The Rural Utilities Service (RUS), an agency within the United States Department of Agriculture (USDA), has procedures and activities that are consistent with four leading practices and partially consistent with six leading practices in managing two loan programs and one grant program aimed at funding broadband infrastructure projects in rural communities.
Consistent with Leading Practices: With regard to reviewing applications, RUS has procedures for training reviewers, guarding against conflicts of interest, and conducting multiple levels of review. For external training and external communication, RUS holds workshops and seminars to inform rural communities and applicants about its programs. RUS's website contains program information, including eligibility criteria, time frames, and frequently asked questions. Applicants can also seek assistance from the RUS general field representative (GFR) assigned to their area. Program recipients whom GAO interviewed often spoke positively of the help provided by GFRs. As to coordination mechanisms, RUS has worked with other federal agencies on rural broadband-deployment efforts, including having a memorandum of understanding with the Federal Communications Commission.
Partially Consistent with Leading Practices: While USDA has a high-level goal and a performance metric for measuring the benefits to rural communities of the broadband loans and grants, RUS has not developed specific program-level goals or performance measures for its individual programs. Without specific measureable goals for each loan and grant program, RUS will have difficulty determining how well the programs are performing. Regarding risk assessment, RUS conducts a variety of risk assessment activities at the loan and grant application and project level, but has not conducted a risk assessment at the program level. A higher-level, programmatic risk assessment would provide a holistic look at the programs' core processes and internal controls. For broadband programs, another leading practice is establishing mapping systems that can provide program data and reveal areas that lack service. RUS has mapping tools and systems in place, but does not have complete mapping information. RUS has efforts under way to improve its mapping data going forward. These efforts should increase RUS's understanding of broadband coverage and help RUS begin to identify possible unserved areas for outreach. For project monitoring, RUS currently oversees loan and grant recipients' projects through GFR site visits, progress reports, and audits. However, RUS does not evaluate its grant projects post-completion and is therefore missing information that could be used to improve the selection of grant recipients or the results of grant awards. RUS has established an organizational structure that supports internal communication, but does not have a centralized system to monitor loan and grant data. RUS officials said USDA is working toward such a system, but they did not have established deliverables or time frames. RUS generally has external written documentation for recipients, but internal written documentation is often outdated, affecting RUS's ability to share knowledge among its staff and retain institutional knowledge.
section_title: What GAO Recommends
paragraphs: GAO recommends that RUS develop program performance goals and measures, conduct program risk assessments, evaluate completed grant projects, establish a timeline for implementing a centralized internal data system, and update written policies and procedures for RUS staff. USDA agreed with the recommendations.

section_title: Letter
paragraphs: Access to affordable broadband telecommunications is vital to economic  growth and improved quality of life across the country. In rural areas in  particular, broadband can serve to reduce the isolation of remote  communities and individuals. The provision of broadband Internet  infrastructure and services in the United States is generally privately  financed. However, rural areas can have attributes that increase the cost  of broadband deployment, such as remote areas with challenging terrain,  or make it difficult to recoup deployment costs, such as relatively low  population densities or incomes. These attributes can decrease the  likelihood that a broadband service provider will build out or maintain a  network in a rural area. For these reasons, some rural areas lag behind  urban and suburban areas in broadband deployment or service speed.
To improve access to broadband in rural America, the U.S. Department of  Agriculture’s (USDA) Rural Utilities Service (RUS) provides loans and  grants to finance the construction of broadband infrastructure through  three programs: the Telecommunications Infrastructure Loan and Loan  Guarantee Program, the Broadband Access Loan and Loan Guarantee  Program, and the Community Connect Grant Program. According to  RUS data, since fiscal year 2004, RUS has approved 704 broadband  projects totaling almost $8.6 billion in loans and $144.8 million in grants to  deploy telecommunications or broadband infrastructure networks in rural  areas.
You asked that we review RUS’s management of its broadband  deployment funding programs, including RUS’s incorporation of leading  practices regarding federal funding, program management, and  broadband deployment. This report examines the extent to which RUS  has established procedures and activities that are consistent with leading  practices in the management of its broadband infrastructure loan and  grant programs and how, if at all, its management practices could be  improved.
To determine the extent to which RUS has procedures and activities  consistent with leading practices, we identified leading practices that  would be appropriate for the management of broadband loan and grant  programs. To do this, we synthesized leading practices from the  Standards for Internal Control in the Federal Government (commonly  referred to as the “Green Book”), the Office of Management and  Budget’s (OMB) Circular A-129, a National Governors Association’s  Center for Best Practices Issue Brief, and past GAO reports on leading  practices. We also reviewed reports pertaining to broadband deployment  by USDA, the Federal Communications Commission (FCC), and the  Department of Commerce’s National Telecommunications and  Information Administration (NTIA), as well as research and academic  papers on broadband deployment in rural areas. We conducted  interviews with representatives of USDA, USDA’s Office of Inspector  General, FCC, NTIA, the National Governors Association, and NTCA– The Rural Broadband Association. Based on our research and interviews,  we identified a set of 10 leading practices, and key activities associated  with each, that are reasonable, sufficient, and appropriate to the  management of loan and grant programs involving broadband  deployment. In making this determination we considered whether the  criteria related directly to and covered all elements of our researchable  question, represented a balanced set of criteria, and were from sources  that were professionally recognized and respected. This process resulted  in the following leading practices: (1) program performance  measurement, (2) risk assessment, (3) application review procedures, (4)  mapping, (5) external training, (6) project monitoring, (7) external  communication, (8) internal communication, (9) written documentation,  and (10) coordination mechanisms. To validate our list of leading  practices and the key activities associated with each, we identified,  through searches of state websites and our interviews, states that have  broadband deployment programs at the state level that are similar to  RUS’s programs. We then discussed our set of leading practices with  broadband program officials from the states of California, New York,  Oklahoma, and Wisconsin to obtain their opinions on the validity of our  leading practices and key activities as applied to the management of  similar broadband deployment programs. We selected these states  because they had active state broadband programs and were  geographically diverse. Based on our discussions with the state officials,  we made slight modifications to our leading practices and key activities  and then shared them with RUS officials to obtain the agency’s input on  the leading practices. RUS officials agreed that our leading practices and  key activities were applicable to the agency’s management of its  programs for broadband infrastructure grants and loans.
To determine the extent to which RUS’s procedures and activities are  consistent with the leading practices, we reviewed program  documentation provided by RUS and interviewed RUS officials about their  management of the loan and grant programs. We also interviewed six  RUS loan and grant recipients (two recipients from each program) to  obtain their perspectives on RUS’s management of its programs with  respect to the leading practices with which the recipients would be  familiar (e.g., external communication, project monitoring). We selected  the six loan and grant recipients from a list of recipients whose RUS- funded projects were currently in the construction phase, that each had a  different RUS general field representative (GFR), and that were  geographically dispersed. The views of the recipients cannot be  generalized to all RUS loan and grant recipients. Based on the  information we obtained about RUS’s activities, we determined the extent  to which RUS established procedures and conducted activities that were  consistent with each leading practice. We assessed the evidence against  the criteria and assigned one of three ratings for each leading practice:  (1) consistent, (2) partially consistent, and (3) not consistent. A rating of  “consistent” was determined when RUS had procedures addressing all of  the key activities associated with the leading practice. A “partially  consistent” rating was determined when RUS had procedures addressing  some key activities of the leading practice, but not others. A rating of “not  consistent” was determined when RUS did not have procedures  addressing any of the key activities associated with the leading practice.  See appendix I for a summary of each leading practice, the key activities  associated with each, and our assessment of how consistent RUS’s  procedures and activities are with each leading practice.
We conducted this performance audit from March 2016 to April 2017 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: RUS, an agency in USDA’s Rural Development mission area, oversees  three programs for deploying broadband infrastructure in rural  communities. The Telecommunications Infrastructure Loan and Loan  Guarantee Program (Infrastructure Program) has funded traditional  telephone networks but, since the mid-1990s, has been used primarily to  fund broadband network infrastructure that can provide both voice and  data services. The Rural Broadband Access Loan and Loan Guarantee  program (Broadband Program) and the Community Connect Grant  Program (Community Connect) are assistance programs that are  specifically dedicated to financing broadband deployment.
Differences among these programs include their definitions of rural areas  and their eligibility rules for recipients and services.
Infrastructure Program: The largest and oldest of the three programs,  the Infrastructure Program was created as part of the Rural  Electrification Act of 1936, as amended. The program provides loans  and loan guarantees for the deployment of telecommunications  systems, including broadband systems, to rural areas. The program  is generally not available to any city, village, or borough having a  population exceeding 5,000. Since fiscal year 2008, the authorized  principal amount for the loans and loan guarantees (“lending  authority”) has been $690 million. According to RUS, since 2004,  individual loans have ranged from $81,600 to $90 million, depending  on the size of the project. A loan recipient has 5 years to complete its  infrastructure project. According to RUS, the terms of Infrastructure  Program loans are typically around 20 years, depending on the nature  of the facilities to be financed. This program often sees repeat  borrowers as borrowers use the funds to either upgrade existing  services in rural areas or expand their rural service area.
Broadband Program: Authorized in 2002, this program provides loans  and loan guarantees for the construction, improvement, and  acquisition of facilities and equipment for broadband service in eligible  rural communities. Recent amendments have revised the program  including the definition of rural area, among others. The lending  authority for this program has decreased from $602 million in fiscal  year 2004 to $20.6 million in fiscal year 2016. According to RUS, the  terms of the Broadband Program’s loans depend on the type of  broadband system being deployed: generally around 20 years for fiber  systems and around 12 years for wireless systems. According to  RUS, since 2004, individual loans have ranged from $24,000 to $244  million, depending on the size of the project.
Community Connect: This program started as a pilot program in fiscal  year 2002, with $20 million in competitive grants. Noting the positive  response it received, RUS made the Community Connect program an  annual competitive grant program in fiscal year 2004. Annual  appropriations for the program have ranged from $9 million to $18  million. As of December 2016, Community Connect grants have  funded approximately 138 projects across the nation intended to  improve broadband service. In the past few years, grant awards could  not be greater than $3 million per project, with a 15-percent matching- fund requirement placed on the recipient. Further, projects must be in  rural areas, as confirmed by the most recent decennial Census. A  recipient has 3 years to complete construction of its broadband  infrastructure project.
Tables 1 and 2 show the annual lending authority for the loan programs  and the annual appropriations for the grant program, respectively.
As shown in figure 1, the dollar amount of loans approved by RUS varies  by state, with Colorado, Kansas, and North Dakota receiving the largest  loan amounts—each receiving over $500 million in loans from fiscal years  2004 through 2016. Conversely, Vermont, Maine, and New Hampshire  received the lowest loan amounts—each receiving around $6 million or  less during this time. While most states have obtained the majority of their  funding from the Infrastructure Program, Colorado and Hawaii used  mainly the Broadband Program.
As shown in figure 2, the dollar amounts of Community Connect grants  approved by RUS from fiscal years 2004 through 2016 varied, with  Oklahoma receiving the largest amount of grant funds (about $22.5  million) and Pennsylvania receiving the lowest amount (around  $290,000).
section_title: RUS’s Management Procedures and Activities for Broadband Loan and Grant Programs Are Consistent or Partially Consistent with Leading Practices, and Could Improve in Some Areas
paragraphs: Overall, RUS has procedures and activities addressing the leading  practices we identified, including the key activities associated with these  practices, as part of its management of the rural broadband programs.  We found that RUS has procedures and activities consistent with the  leading practices for reviewing applications, conducting external training,  communicating with applicants and recipients, and coordinating with other  federal agencies. RUS has procedures and activities that are partially  consistent with leading practices for conducting program performance  measurement, conducting risk assessments, mapping, monitoring loan  and grant infrastructure projects, communicating internally, and providing  written program documentation.
subsections: section_title: Program Performance Measurement
paragraphs: RUS has procedures and activities that are partially consistent with the  leading practice of program performance measurement because USDA  has identified a goal and a performance measure at a high level.  However, at the individual program level, RUS has not established a  process that ensures program goals are identified, tracked, and fulfilled;  has not developed performance measures linked to goals; and does not  evaluate or document the results of program measurement activities.  First, we have previously found that results-oriented organizations  implement two key practices to lay a strong foundation for successful  program management—setting performance goals to clearly define  desired program outcomes and developing performance measures that  are clearly linked to the performance goals. Through our review of  USDA and RUS documentation, we identified a goal set by USDA at the  Rural Development mission area level. Specifically, USDA’s Fiscal Year  2015 Annual Performance Report and Fiscal Year 2017 Annual  Performance Plan describes the year-end progress of USDA toward  achieving the department’s strategic goals, objectives, and performance  measures. USDA sets forth a strategic goal “to assist rural communities  to create prosperity so they are self-sustaining, repopulating, and  economically thriving.” Under this strategic goal, the annual performance  report contains a performance measure for RUS: the annual number of  borrowers or subscribers receiving new or improved telecommunications  services. According to the report, the performance target for 2016 was  120,000 borrowers or subscribers receiving new or improved  telecommunications services; the 2017 target is 100,000. Outside of this  one high-level strategic goal and performance measure, RUS officials told  us they do not have formal documented program performance goals and  measures for the individual loan and grant programs. RUS officials told us  that they believe their goals for each of the three programs are to ensure  that facilities are constructed properly and that the service is actually  provided. However, these goals are not documented, and there are no  specific performance measures that link to these goals.
Federal agencies can use the information gained from performance  measurement to make various types of management decisions to  improve programs and results. Both the Government Performance and  Results Act (GPRA) and OMB’s Circular A-129 highlight the use of  performance measures and goals as a means to evaluate program  performance. For example, GPRA requires agencies to develop a  performance plan covering each program activity set forth in the budget,  including program goals that are objective, quantifiable, and  measurable. Although such practices are only required at the federal  department or agency level under GPRA, they can serve as leading  practices for planning at lower levels within federal agencies, such as at  an individual program or initiative level. In addition, OMB’s Circular A-129  stipulates that for credit programs, agencies shall periodically evaluate programs in terms of the policy goals of the program and the program’s  effectiveness towards addressing those goals. Without specific,  documented goals for each loan and grant program—and specific  performance measures that are crafted around those goals—it is difficult  to determine in an objective, quantifiable way if these programs are  fulfilling USDA’s strategic goal of assisting rural communities, and it could  be more difficult for RUS to manage the programs in a proactive, results- oriented manner.
section_title: Risk Assessment
paragraphs: RUS has procedures and activities that are partially consistent with the  leading practice of risk assessment because RUS conducts a variety of  risk assessment activities at the application and the individual project  level, as well as having procedures to guard against fraud; however, RUS  has not established procedures to conduct risk assessment activities at  the program level. The Green Book defines the standards for internal  control in the federal government, noting that management should: define objectives clearly to enable the identification of risks and define  identify, analyze, and respond to risks related to achieving the defined  objectives;  consider the potential for fraud when identifying, analyzing, and  responding to risks; and  identify, analyze, and respond to significant changes that could impact  internal controls.
OMB’s Circular A-129 provides that, for credit programs, agencies must have robust management and oversight frameworks for credit  programs to monitor the program’s progress towards achieving policy  goals within acceptable risk thresholds,  reinforce these frameworks with appropriate internal controls, and  take action where appropriate to increase efficiency and  effectiveness.
RUS’s risk assessment efforts have focused on the proposed and funded  broadband projects and their financial risks, particularly for the loan  programs, which have greater inherent risk to the federal government  because borrowers are expected to repay loans with interest. The  application review process for both of the loan programs includes a  financial risk review to determine whether the borrower has a sufficient  forward-looking return on investment. Borrowers are required to maintain  a times interest earned ratio (TIER) between 1.0 and 1.5, based on the  projected TIER determined by a feasibility study prepared for each loan.  According to RUS, all borrowers receive the same treatment once their  loans are approved, irrespective of the risk involved with the project. In  other words, RUS does not vary interest rates based on risk or set a  higher TIER requirement for riskier borrowers. However, because the  loan programs target rural areas that, as previously mentioned, may not  appeal to private broadband providers, the programs tend to attract some  applicants that may present higher financial risks. Since 2004, the  Broadband Program’s loans have had defaults on 22 of 108 loans. In  analyzing the risk factors behind these defaults, RUS determined that the  majority of the defaulting companies were startup firms. In response, RUS  has put in place new financial requirements on startup firms to better  ensure that such borrowers are financially sound and less likely to default.  For 2017 Broadband applicants, RUS has a Calculation of Additional  Cash Requirement for startup operations or firms that have not  demonstrated a positive cash flow from operations for the 2 years prior to  the application date. This stipulation is in addition to the audited financial  statements, tax returns, methodology, and assumptions that must be part  of the application package. According to RUS officials, these  requirements will enable RUS to place greater emphasis on evaluating  these applicants’ subscriber and revenue projections to help address  default risks.
With regard to fraud risks, there are procedures to help limit fraud  incidents. For instance, the grant agreements that Community Connect  recipients are required to sign stipulate that invoices are to be submitted  with requests for advance or with reimbursement forms before grant  funds are disbursed. Recipients, depending on entity type, are to provide  RUS with an audit for each year in which grant funds are expended and  an annual project performance activity report. Loan agreements lay out  specific conditions that loan recipients are required to follow for loan  advances. Loan recipients are required by their loan agreements to have  fidelity bond or theft insurance coverage and maintain all documentation,  such as invoices, receipts, and annual financial reports, available for  federal inspection, if requested. Loan recipients are required to provide  RUS with annual audited financial statements until the loans are paid off.
RUS performs compliance audits for all grant and loan projects on a 2-5  year cycle (depending on the amount of unaudited advances) until all  funds are disbursed. Furthermore, USDA requires GFRs to submit reports  on construction status based on regular site visits. These site visits also  allow GFRs an opportunity to examine the projects for any misuse of  funds. If a discrepancy is found, RUS officials told us that they will  immediately disallow funding. If fraud involving a grant project is  suspected, RUS officials said they would turn the information over to  USDA’s Office of Inspector General (OIG) for investigation. Investigations  can also be turned over to the Department of Justice for further action,  such as a criminal indictment or an action to recover funds. According to  RUS officials, fraud cases have been rare and have involved fake  invoices and employee theft.
While RUS has risk assessment activities at the application and individual  project level and procedures related to fraud risks, RUS has no risk  assessment activities at the overall program level. As set forth in the  Green Book, a precondition to risk assessment is the establishment of  clear, consistent program objectives. When clear program objectives are  established up front, then internal controls can be designed around the  fundamental risk that program objectives will not be met. As previously  discussed, RUS does not have clear goals and performance measures in  place for its loan and grant programs. RUS officials acknowledged that  they have not conducted a formal risk assessment of the broadband loan  and grant programs because to date, as noted, they have focused on risk  assessment at the application and project level. But a higher-level,  programmatic risk assessment would provide a holistic look at the  programs’ core processes and practices and assess internal controls over  each program. Such a programmatic risk assessment could include an  examination of risks at the portfolio level for both the portfolio of loans and  the portfolio of grants. RUS officials told us that they recognize the need  for portfolio risk assessments and would like to put procedures in place in  the future to assess the loan and grant portfolios. In late 2016, USDA  hired a Chief Risk Officer for the Rural Development mission level. While  RUS’s efforts to address risks in applications and funded projects and its  recent creation of the Chief Risk Officer position are positive steps, these  efforts are not fully consistent with the level of risk assessment that is  intended under the Green Book. Those standards call for first establishing  clear objectives for each program and then for comprehensively  identifying risks to meeting those objectives. Without doing so, RUS is  missing information crucial to the thoughtful design of an internal control  structure that appropriately considers program risks for each of the three  programs.
section_title: Application Review Procedures
paragraphs: RUS has procedures and activities consistent with the leading practice for  application review, such as procedures for assigning applications to  reviewers, reviewing and scoring applications, recording the results of  application reviews, resolving scoring variances, and ensuring consistent  reviews across reviewers. We found some differences among the  individual loan- and grant-application review processes as a result of the  nature of their individual funding mechanisms. For example, the  Infrastructure loan application process is not competitive and uses a first- come, first-served procedure as long as the applications meet eligibility  requirements.  The Broadband Program is a competitive program that  currently requires two application windows per year.  Priority is given to  those applications with the highest percentage of unserved areas.  The  grant program is also competitive but selects applications based on a  scoring process. In addition, RUS has procedures for training reviewers,  ensuring relevant expertise and the appropriate application of criteria, and  guarding against conflicts of interest. For example, RUS uses a  combination of guidance documents and on-the-job training to train  reviewers, and helps ensure relevant expertise by hiring staff in particular  job classifications for particular types of reviews (e.g., only engineers in  the engineering job series conduct the engineering reviews of proposed  projects).
With regard to loans, the application review procedures for the  Infrastructure Program start in the field, where the GFR conducts the first  level of review (see fig. 3, which illustrates the loan review and approval  process). For both loan programs, once an application is at RUS  headquarters, staff from RUS’s engineering and financial-operations  branches review the application for completeness. If complete, RUS’s  financial and engineering analysts, managers, GFR, and GFR managers  discuss the eligibility of the applicant. Once a loan application package is  determined complete and eligible, it undergoes an engineering and  financial review, followed by multi-level reviews and approvals by a  number of committees and divisions. RUS officials noted a difference  between the two loan programs in that the Infrastructure Program has a  rolling application process while the Broadband Program holds two  application submission periods each year.
Like the loan applications, Community Connect grant applications go  through a multilevel review process (see fig. 4). To confirm that the area  in question is truly unserved, a GFR physically goes to the area of the  proposed broadband project to test that existing broadband services are  not present. After the engineering and financial review, the application is  scored independently by two GFRs who do not oversee the applicant’s  area, to avoid any conflict of interest. Each application is scored  according to the criteria outlined in the Notice of Funding Availability or  Notice of Solicitation of Applications. RUS has guidelines on how to score  applications and how many points each criterion is worth. While the  expectation is for the two scores to be similar, RUS officials said that  occasionally there can be substantial differences. If such variance occurs,  the officials review the application again and hold discussions with the  Deputy Assistant Administrator and their branch chiefs to determine  whether to move the application forward. All awards in the grant program  must have been approved by the Administrator.
section_title: Mapping
paragraphs: Currently, RUS’s procedures and activities are partially consistent with  the leading practice of mapping because RUS has two mapping systems  in place, but its mapping information is not complete and the agency has  efforts under way to improve its mapping activities. RUS officials told us  that they currently use mapping data to determine if the service proposed  by an applicant overlaps the service of an existing provider in the same  area, and to determine and prioritize grant applications that propose to  serve areas with the greatest need. Applicants requesting funding under  the Infrastructure Program and Broadband Program for loans and the  Community Connect grant program are required to submit maps of their  service area and proposed service area. RUS uses a number of sources  to collect mapping data, but has two distinct mapping tools. First,  applicants upload digital maps of their proposed service areas in RDApply  as they submit their applications. Second, applicants can also use the  RUS mapping tool, which predates the RDApply mapping system.  According to RUS, the mapping tool serves three purposes. First, it can  be used by existing borrowers or those interested in applying for loan or  grant funding to draw their existing or proposed service-area maps.  Second, it can be used by RUS to post Public Notices of applicants’  proposed service areas or be used by existing providers to submit  information regarding their service offerings. Third, it can be used by any  state, local, or other entity that wishes to upload an authenticated map of  existing broadband services.
According to RUS officials, they intend that the RDApply system will  eventually incorporate the mapping tool information and they will no  longer use the mapping tool, but will instead rely on one system. They  explained that they are building a mapping system based on recent and  current application information because they did not previously require all  applicants to submit mapping data. They began requiring submission of  geospatial mapping data for the Broadband Program in 2009, for  Community Connect in 2012, and for the Infrastructure Program in 2015.  According to RUS officials, USDA’s Office of General Counsel ruled that  they do not have the authority to require past recipients to provide them  with mapping data, so they are unable to completely fill in historical  mapping information for past projects.
Presently, RUS has service-area and proposed service-area data for the  loan and grant recipients in the RUS mapping tool, which it then overlays  with decennial Census data. RUS also incorporates data from federal and  state sources, including FCC’s National Broadband Map, into the RUS  mapping tool. Currently, RUS uses information from the National  Broadband Map as part of its review of an applicant’s proposed coverage  area. However, according to RUS, it has found the National Broadband  Map to have accuracy limitations. We testified before Congress in April  2016 that when a service provider reports any availability of high-speed  Internet in a Census block, the entire block was counted as served in  FCC’s National Broadband Map. As we testified, this reporting could  overstate service in rural areas, which generally constitute large Census  blocks. RUS officials told us that they do not have a mapping system  that houses extensive broadband service-area data. RUS officials told us  that they are in the process of improving the data and their broadband- mapping capabilities as they move to improve their RDApply mapping  information and move to having one mapping system. If successful, this  effort should lead to improved information about the location of rural  broadband services. Going forward, improved mapping information can  help RUS begin to use its mapping information to determine if there are  unserved rural areas where it should consider additional outreach.
section_title: External Training
paragraphs: RUS has procedures and activities that are consistent with the leading  practice of providing external training to prospective applicants,  applicants, and recipients of its loan and grant programs. For example,  we found that, over the past 5 years, RUS has held a number of external  training and outreach events, such as workshops and seminars, to  provide a range of information about its broadband loan and grant  programs to rural communities and prospective applicants. For example,  RUS has hosted multi-day construction and engineering workshops on  broadband engineering and construction issues. RUS also hosted  workshops on contract administration issues, such as the financial,  accounting, and audit processes and requirements for the programs. RUS  has also provided technical training on system installation. In addition,  RUS representatives have participated in conferences held by broadband  trade associations and other groups, setting up information booths or  holding information sessions on the RUS programs. For applicants, RUS  has held webinars on the loan- and grant-application processes. While  RUS does not have a formal process for identifying external training  needs, the agency assesses and makes training decisions at the  beginning of each fiscal year or when there are available funds.  According to an RUS official, decisions are made after consulting with the  GFRs, state officials, and RUS loan and grant recipients.
Officials representing all six loan and grant recipients we spoke with had  participated in external training provided by RUS. Project recipients  participated in at least one training course and felt that the RUS training  was helpful. Moreover, all six recipients said that their GFR was critical to  obtaining necessary program information by providing ongoing support  and assistance, such as assisting applicants in filling out the forms for the  loan programs and helping explain program policies or procedures.
section_title: Project Monitoring
paragraphs: RUS’s procedures and activities are partially consistent with the leading  practice of project monitoring because RUS has in place a number of  monitoring and oversight activities of program recipients, but RUS does  not currently evaluate Community Connect project results. According to  the Green Book, effective project monitoring incorporates a process that  helps ensure that project goals are identified, tracked, and met. Project  monitoring should include corrective actions to address identified internal- control issues and penalties for serious and frequent offenses of program  requirements. Project activities are to be evaluated and reported on a  regular basis to help determine whether changes are needed to better  meet project goals and detect fraud and abuse.
A July 2014 RUS reorganization resulted in separate divisions for  overseeing the different phases of RUS projects. Prior to the  reorganization, analysts were responsible for overseeing each loan and  grant project from beginning to end. The reorganization split the  responsibilities by divisions—Loan Origination and Approval Division  (LOAD) oversees all project applications and approvals, while Portfolio  Management and Risk Assessment (PMRA) is responsible for monitoring  all broadband loans and grants and has procedures for tracking  performance and monitoring projects. While there are some differences in  the monitoring requirements for the three programs, PMRA tracks the  following for all projects:
Subscriber number and service area: Applicants are required to  provide details on the service area and the number of subscribers  intended to be served. The GFR is responsible for visiting the  designated service area to ensure that these goals are met.
Deliverables and time frames: PMRA reviews recipients’ contracts  with construction firms and the related invoices to evaluate recipients’  progress toward established deliverables and project milestones.
Progress reports: Project recipients are required to submit progress  reports to RUS. According to RUS officials, Community Connect grant  recipients submit annual progress reports to their GFRs while  Infrastructure Program and Broadband Program loan recipients are  required to submit quarterly progress reports as well as an annual  report. Progress report data are tracked in RUS’s Broadband  Collection Analysis System and Data Collection System.
Financial information for loans: The financial information required in  the progress reports includes balance sheets, income, debt service  ratios, cash flow, and long-term debt. PMRA analysts evaluate the  financial data against broadband miles constructed and the number of  subscribers to ensure compliance with the project goals and flag any  potential issues.
Monitoring duration: Community Connect grants are monitored for the  duration of the grant project, typically up to the 3 years the program  allows for construction and implementation; all recipients are required  to submit a project performance-activity report and audit report  annually. Infrastructure Program and Broadband Program loans are  monitored for the life of the loans and audited for compliance every 2- 5 years until all funds are disbursed . A final audit is conducted after  all funds are disbursed.  Annual audited financial statements are  reviewed annually until the loans are paid in full.
The two grant and four loan recipients we spoke with confirmed that their  GFRs make site visits to ensure the eligibility of the area to receive  service. While the number of visits may vary, the recipients said that work  by their GFRs ranged from evaluating construction progress and ensuring  compliance with contract goals and deliverables to validating billing  statements. They also stated that actions that RUS can take for non- compliance are laid out in their loan or grant agreements.
While RUS established many project-monitoring activities, with regard to  the key activity of evaluating project results, we found that RUS evaluates  loan performance but does not review post-award grant program  performance. For loans, RUS necessarily follows loan projects through  the repayment process—which is often 20 years or more—and evaluates  what happened when a loan recipient defaults. However, for grants, once  a Community Connect grant is fully disbursed, RUS does not conduct any  evaluation of whether the grant recipient is still providing broadband  service at a later date or measure the effectiveness of the project in  meeting its goals. RUS officials told us that they would like to go back and  evaluate grant projects, but that staffing resource constraints have  prevented them from doing so. However, not periodically evaluating grant  project results affects RUS’s ability to measure the outcomes and  success of its grant program. Without analysis of post-award project  successes or failures, Community Connect program managers are  missing information that could be used to determine if programmatic  changes might improve the selection of grant recipients or the results of  grant awards.
section_title: External Communication
paragraphs: RUS’s procedures and activities related to its communications with  program applicants and recipients are consistent with the leading practice  of external communication. RUS provides outreach efforts to publicize its  broadband loan and grant programs through workshops and seminars  located around the country, and to provide information on program  requirements, key dates, funding availability, and the review processes,  including how applications are scored. Both RUS headquarters  employees and GFRs in the field conduct outreach efforts. According to  an RUS official, it is not cost-effective to visit very remote areas to  disseminate information about their programs, but they do try to hold their  workshops in areas where there may be an interest in the programs. For  example, the workshops that RUS has held in recent years included a  2014 Telecommunications Workshop held in Clanton, Alabama, which  has a population under 9,000, and a 2-day workshop in 2015 held in the  Washington State Rural Development Office in Olympia, Washington, that  covered broadband access and deployment. To reach out to others,  RUS’s website contains information on its programs, including information  about eligibility criteria, corresponding regulations, time frames, and  frequently asked questions.
Applicants can get pre-application assistance from their GFRs and RUS  headquarters staff. Applicants can also obtain program application  guidance on the RUS website, including fact sheets, process information,  and application instructions. We reviewed documentation and interviewed  officials and found that RUS sent eligibility, acceptance, and rejection  letters that explain how decisions were reached. RUS also publicizes  information on loan and grant awards through press releases and  announcements on its website.
All six recipients we spoke with said that their GFR was their primary  communication link, followed by someone in the RUS headquarters office.  The recipients’ views about RUS’s external communication ranged from  “adequate” to “excellent.” Typically, the recipients would first reach out to  their GFRs and then to RUS headquarters if a GFR could not answer the  question. Recipients also said that they would try to get information and  answers on the RUS website; however, as one recipient noted, it is easier  to ask the GFR. Overall, the recipients said that RUS’s external  communication efforts kept them informed. Specifically, recipients praised  their GFRs’ efforts to inform them about relevant events, such as  available funding, upcoming application periods, and deadlines.
section_title: Internal Communication
paragraphs: RUS’s procedures and activities are partially consistent with the leading  practice of internal communication as it has established an organizational  structure to permit the flow of information to assist agency staff and  recipients, appropriate methods of communication throughout the  organization, and mechanisms to obtain relevant data based on identified  project information requirements. However, RUS falls short of this leading  practice in that it does not have a centralized system to obtain relevant  data to monitor grant awards and loans, including correspondence and  deliverables.
As noted above, RUS established a new organizational structure in 2014  to consolidate expertise and assist agency staff in fulfilling their  responsibilities. For example, the new organizational structure has clearly  defined reporting lines that include four divisions with respective Deputy  Assistant Administrators. These divisions oversee operations, loan  origination and approval, portfolio management and risk assessment, and  policy and outreach. With regard to communication methods, internal  meetings are held on an ad-hoc basis throughout the year, and at the  Rural Development mission area level, regular announcements and  notices are sent to the various offices. As discussed earlier, RUS’s  application review process includes numerous meetings and distribution  of pertinent information throughout the process among field and  headquarters staff.
RUS has multiple software systems to monitor loan and grant data, and  both division and field staff are responsible for collecting and monitoring  data. However, the current loan and grant data are not aggregated or  housed in a centralized database. According to RUS officials, RUS has  updated the application system with RDApply, but in addition to that, uses  a number of different databases that are mostly legacy systems and  antiquated. RUS headquarters and field staff can access pertinent data  from the various software systems. However, RUS officials told us they  cannot conduct complex analyses, but can produce data such as, for  example, spreadsheets on how many obligations have been made since  a particular year. RUS officials told us that they want to move to a  modern, single, centralized database that would enable them to conduct  analyses of all loan and grant applications. RUS officials said that USDA’s  information technology department is working on a new software system,  but RUS was not able to provide us with a plan or implementation  timelines for when the system would become operational. Moving toward  a centralized system would allow RUS to more effectively monitor loans  and grants and more fully analyze program performance.
section_title: Written Documentation
paragraphs: RUS’s procedures and activities are partially consistent with the written  documentation leading practice. According to the Green Book, an  effective management framework for grants and loans includes  developing and maintaining written documentation as a means to obtain  and retain organizational knowledge and to ensure accountability for  achieving agreed-upon results. Although RUS has effectively developed  written documentation to communicate to program applicants and  recipients, we found that RUS has not consistently updated its written  policies and procedures to retain organizational knowledge and to  communicate loan- and grant-management knowledge internally among  its staff.
For each of the three programs, RUS has updated application guides to  assist applicants in the application process. For Community Connect,  RUS created an application guide for fiscal year 2016. The current  application guides for both the Broadband Program and the Infrastructure  Program incorporate updates regarding the eligibility of equipment and  facilities for funding. For the benefit of applicants and recipients, we found  that RUS has periodically issued announcements and letters pertaining to  the programs, frequently asked questions, and fact sheets. Furthermore,  information about the three programs and their application documents are  online.
According to RUS officials, RUS documents its award decisions. RUS  conducts an initial assessment of applications to determine whether an  application meets eligibility requirements, is complete, or needs  clarification. For those not complete, RUS would send the applicant a  letter stating the deficiencies or with questions. The applicant would have  30 days to address the concerns of the letter and amend the application  in order for it to continue through the decision making process. Once final  application decisions are made, RUS notifies the applicants of the  decisions and reasons for denial of loan or grant. Recipients are required  to sign agreements which lay out their expectations during the course of  the awards.
The six loan and grant recipients we spoke with told us that the  application processes are lengthy and require a great deal of information.  However, two recipients for the Community Connect and Infrastructure  Programs told us that they found the written documentation for the  processes to be relatively clear and straightforward. RUS has provided  guidance and templates that have been helpful to some of the recipients.
While written guidance to assist applicants and recipients exists, since its  reorganization in 2014, RUS has not fully updated written documentation  for loan and grant management policies and procedures to communicate  knowledge among its staff. For the Community Connect program, RUS  has updated its staff instructions, templates and worksheets for  determining eligibility, conducting technical reviews, and scoring the  applications. For the Infrastructure Program, RUS provided us with  revised application checklists, loan checklists, and post-award project- visit checklists to be used by the GFR. For the Broadband Program, RUS  provided us with the program’s initial application review report. However,  RUS does not have any formalized staff instructions for processing the  Broadband Program’s loan applications. According to one RUS official,  employees use checklists and review packets similar to those for the  Infrastructure Program. Moreover, the dates of other checklists and  instructions RUS provided range from 1995 to 2011, and some of them  make reference to agency offices that no longer exist.
RUS officials told us that they have not been able to update employee  manuals on the grant and loan programs due to resource constraints.  While we were told that engineers (job series 855—Professional series  for engineers) and financial analysts (job series 1101—Business-Industry  Analyst) review the applications, the grant- and loan-review process steps  are not written down. New employees are assigned a mentor and learn  their responsibilities through on-the-job training. The GFR manual is  dated March 2007 and has not been updated to reflect organizational  changes within RUS. According to one of the loan recipients we spoke  with, new RUS employees seemed to have a difficult time ensuring that  they are passing correct information to program applicants.
The Telecommunications Division responsible for overseeing the  broadband grant and loan programs consists of employees located in its  headquarters and GFRs located in 27 regional territories throughout the  country. Since fiscal year 2000, the Telecommunications Division’s  approved full-time equivalents (FTE) have decreased about 25 percent,  from 133 FTEs in fiscal year 2000 to 98 FTEs in fiscal year 2016. We  found that much of the critical knowledge of these programs resides in  one key official located at headquarters, who is close to retirement.  Furthermore, several of the recipients we spoke with noted that their GFR  has changed, either due to retirement or reassignment. These changes  could negatively affect the agency in efficiently carrying out its tasks,  unless the agency has documented detailed information on how the  programs are to be managed for the next generation of RUS officials.
section_title: Coordination Mechanisms
paragraphs: RUS’s procedures and activities for coordinating and collaborating with  other federal agencies are consistent with the leading practice of  coordination mechanisms, which should help the agencies in minimizing  redundancies and removing regulatory barriers, for example:  In 2014, RUS and FCC, the other agency with primary responsibility  for providing rural broadband funding, entered into a memorandum of  understanding (MOU). The MOU was intended to govern the sharing  of data between the agencies, thereby improving federal coordination  and facilitating the agencies’ efforts to carry out the responsibilities of  their broadband-funding programs. For example, documentation we  reviewed showed RUS and FCC staff coordinating on issues  regarding carriers that use both agencies’ programs, data resulting  from carrier audits, and questions about program rules.
RUS signed an interagency agreement with the Environmental  Protection Agency (EPA) in September 2015 to provide technical  assistance for the Cool & Connected project, which aims to support  community development by leveraging investments in Internet access.  The agreement states that the two agencies will provide technical  assistance to the partner communities and conduct outreach for the  Cool & Connected project. The technical assistance includes  consultations, analysis, and workshops to help members of the  partner communities develop action plans for improving broadband  access and revitalizing downtowns and traditional neighborhoods in  rural areas. According to the agreement, both RUS and EPA will  invest financial resources into the project and both agencies will offer  the services of headquarters and field staff to provide technical  assistance.
In addition, the Department of Agriculture co-chairs the Broadband  Opportunity Council, an effort involving 25 federal agencies and  departments with missions or programs with the potential to drive  broadband infrastructure investment and adoption. The Broadband  Opportunity Council seeks to foster increased collaboration among  agencies, to identify regulatory barriers and additional opportunities to  improve broadband access, and to elevate the importance of broadband  as a cross-cutting policy objective across the federal government. The  Broadband Council issued a report in 2015 with dozens of action items  intended to improve broadband nationwide and, in January 2017, issued  a progress report stating that more than one-third of the action items had  been completed by the federal agencies involved.
section_title: Conclusions
paragraphs: By following leading practices related to program management, federal  funding, and broadband deployment, RUS can more effectively and  efficiently use its resources to help promote the deployment of broadband  infrastructure to rural areas that are currently unserved or underserved.  RUS has established procedures and activities that are consistent with  leading practices in the management of its broadband infrastructure loan  and grant programs in several areas, including its application review  process, its external training of and communication with program  participants, and its collaboration with other federal entities on efforts  related to broadband deployment. With regard to mapping, we believe  that RUS’s plan to obtain mapping information from recipients going  forward will help RUS to better align with the leading practice in this area.  In other areas, RUS is consistent with some key activities of leading  practices, but further incorporation of key activities could enhance its  loan- and grant-program management. Most fundamentally, RUS needs  to develop clear goals and performance measures for each of its three  programs. With regard to risk assessments, RUS established procedures  to conduct numerous risk-assessment activities at the application and  project level. However, an assessment of each program could help RUS  determine whether modifications to business practices and internal  controls are necessary to cost-effectively address programmatic and  portfolio-level risks. Similarly, RUS established procedures to actively  monitor loan and grant projects in numerous ways, but has not evaluated  the outcomes of its grant awards over time. Such an evaluation could  better inform RUS as to whether changes to Community Connect are  warranted to help improve the outcomes for the communities served by  the grant projects. Internally, RUS could improve its practices by  establishing a centralized data system and improving its written  documentation for the benefit of its staff. These actions to improve RUS’s  consistency with leading practices can help the agency build a stronger  foundation for successful program management.
section_title: Recommendations for Executive Action
paragraphs: To improve RUS’s management of the Infrastructure Program,  Broadband Program, and Community Connect by more closely following  leading practices for broadband loan- and grant-program management,  we recommend that the Secretary of Agriculture direct RUS to take the  following five actions.
Develop and document clear goals and performance measures linked  to those goals, for each program.
Establish and implement procedures to conduct a risk assessment of  each program, including an examination of risk at both the  programmatic and portfolio level for each program.
Establish and implement procedures to conduct periodic evaluations  of completed grant projects to determine the outcomes associated  with these projects, and analyze the information gained to assess if  any programmatic changes are needed to improve the Community  Connect program.
Establish a timeline for implementing a centralized internal system for  staff to obtain relevant and timely program data for use in managing  and monitoring loans and grant awards.
Develop, update, and maintain complete written policies and  procedures for RUS’s programs as a way to retain and communicate  organizational knowledge internally among agency staff. RUS should  determine the critical documentation that should be created or  updated, including considering documentation such as loan- application review guidance and employee manuals for each of the  three programs.
section_title: Agency Comments
paragraphs: We provided a draft of this report to USDA, FCC, and NTIA for review and  comment.  USDA agreed with our recommendations. USDA, FCC, and  NTIA provided technical comments, which we incorporated as  appropriate.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of the United States Department of Agriculture,  the USDA’s Under Secretary for Rural Development, the Chairman of the  Federal Communications Commission, the Secretary of the Department  of Commerce, and the Assistant Secretary for Communications and  Information at the National Telecommunications and Information  Administration. In addition, the report will be available at no charge on the  GAO website at http://www.gao.gov.
If you or members of your staff have 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. Key contributors to this report are listed in  appendix II.
section_title: Appendix I: Description of Leading Practices and GAO’s Assessment
paragraphs: Appendix I: Description of Leading Practices  and GAO’s Assessment Key activities associated with the leading practice   Assessment  Establish a process that ensures program goals  are identified, tracked, and fulfilled.
Develop performance measures that link directly  to stated program goals.  Establish a process to evaluate and document the  results of program measurement activities,  including plans for corrective actions.
Define program objectives.
Define the program’s risk tolerances.
Establish a process to conduct risk assessments  to identify and analyze risks to achieving program  objectives.
Conduct risk assessments to identify and analyze  risks for credit programs.
Determine the program’s fraud risk factors and  the types of fraud for which the program is most  at risk.
Determine and conduct the appropriate  responses to identified risks.
Develop procedures for the review of grant and  loan applications that describes the process  (describing, for example, the number of panels or  reviewers, the methods for assigning applications  to panels or reviewers, how the results of the  review are recorded, how scoring variances  across panels or reviewers are resolved, how  panels or reviewers ensure consistent reviews,  etc.).
Use a panel or reviewers who hold relevant  expertise, do not have conflicts of interest, apply  the appropriate criteria, and are trained.
Map broadband availability to help both  policymakers and service providers determine  where to focus their efforts, and to reveal gaps in  service to providers that might wish to expand  their offerings.  Establish mapping systems that identify the  necessary information requirements, obtain  relevant data from reliable sources, and process  mapping data into quality information.
Key activities associated with the leading practice   Assessment  Identify external training needs.
Develop a mechanism that allows grant and loan  applicants and recipients to establish and  maintain a level of subject-matter expertise and  competence so that they can fulfill their  responsibilities related to compliance with the  terms and conditions of the program.
Develop training that helps grant and loan  recipients obtain sufficient understanding of  regulations, policies, and procedures governing  their grants or loans.  Establish baselines, goals, and performance  measures for projects.  Establish a system of internal control for  monitoring projects.  Identify problematic issues and design and take  corrective actions.
Require periodic reviews, including progress  reports.  Establish corrective actions, including penalties,  for serious and frequent offenses of program  requirements.  Evaluate project results.  Establish procedures for outreach efforts to  potential applicants.  Provide relevant information, prior to making  award decisions, on program requirements, time  frames, and review processes.  Establish a process to provide pre-application  assistance.  Establish a process to notify successful and  unsuccessful applicants of selection decisions in  writing and provide feedback on applications.  Ensure transparency by making program  documents, policies, procedures, and decisions  publicly available.  Publish information on the number of grants and  loans awarded annually.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: Mark L. Goldstein, (202) 512-2834 or goldsteinm@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Faye Morrison (Assistant  Director), Martha Chow (Analyst in Charge), Melissa Bodeau, Richard  Bulman, Russell Burnett, Marcia Carlsen, Carol Henn, Ken Rupar,  Terence Lam, Hannah Laufe, Benjamin Licht, SaraAnn Moessbauer,  Joshua Ormond, Cheryl Peterson, Mathew Scirè, and Sarah Veale made  key contributions to this report.