Recovery Act: USDA Should Include Broadband Program's Impact in Annual Performance Reports
Released: 2014-06-17T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: Access to affordable broadband is seen as vital to economic growth and improved quality of life, yet its deployment in rural areas can be costly. The American Recovery and Reinvestment Act of 2009 (Recovery Act) appropriated funding for BIP, a USDA RUS program to fund broadband projects to provide service to end users in mostly rural areas. By 2010, RUS had awarded over $3 billion, primarily to 297 infrastructure projects, and required that projects be completed by June 2015 in approved areas.

GAO was asked to review BIP's results and impact. This report addresses (1) how RUS ensures that projects are completed by the deadline and as approved and (2) the extent to which RUS provides information to show BIP's impact. GAO interviewed RUS officials, reviewed policies, and analyzed RUS project data as of March 2014. GAO also interviewed five awardees from a nongeneralizable sample of seven BIP projects selected in part based on award size and location.

section_title: What GAO Found
paragraphs: The Rural Utilities Service (RUS) expects most Recovery Act-funded Broadband Initiatives Program (BIP) projects will be completed by the June 2015 deadline and as approved, but RUS faces challenges given the large scope of the program. As of March 2014, approximately 14 percent (42 of 297) of BIP infrastructure projects were terminated for a variety of reasons according to RUS officials, such as financial difficulties or inability to meet requirements. Of the 255 projects remaining, 87 percent were completed (39 projects) or partially operational (184 projects), meaning they provide service to some subscribers. To monitor projects and ensure they are completed within approved service areas, RUS relies on general field representatives to conduct in-person inspections and report monthly on project status. RUS officials said that they did not allow changes to service areas, but approved other types of changes such as changes in technology. GAO could not confirm this since RUS did not systematically track changes and did not provide GAO with information on project changes. Also, several challenges affect RUS's ability to oversee projects. For example, reduced staffing and travel funding levels during BIP's implementation will challenge RUS to complete inspections given the scope of the program, including 216 ongoing infrastructure projects to be completed by the June 2015 deadline.

RUS has reported limited information on BIP's impact since awarding funds to projects, and BIP results are not tracked in the Department of Agriculture's (USDA) annual performance reporting. Consequently, RUS has not shown how much the program's approximately $3 billion in project funding—an unprecedented level of federal investment in broadband—has affected broadband availability. RUS met the Recovery Act requirement to report to Congress quarterly until all funds were obligated. However, since the Recovery Act's reporting requirement ended, RUS has provided limited reporting on BIP program status and results during project implementation. A senior RUS official says RUS will now issue quarterly status reports until at least September 2015. USDA also has missed opportunities to report on BIP's impact as part of its annual performance plan and report. The GPRA Modernization Act of 2010 directs agencies to establish performance goals in annual performance plans and report the progress made toward these goals in annual performance reports. USDA's annual performance plan included a performance goal to provide new or improved broadband, but USDA did not include BIP results in its annual performance reports. USDA reported its BIP goal and results for fiscal year 2010 only and used the same estimate of BIP subscribership—developed before project execution—for both. RUS officials say the results were reported in fiscal year 2010 because that was the year funds were obligated. More recently, in March 2014, RUS updated the estimated number of subscribers from 847,239 to 728,733 to account for terminated projects. Reporting on and tracking BIP actual results against the updated goal is particularly important given that the majority of projects are ongoing and awardees are to continue to report the number of BIP subscribers added for at least 5 years after construction is completed. Without an updated performance goal and regular information reported on the results of BIP projects, it will be difficult for USDA, RUS, and policy makers to determine the impact of Recovery Act funds or BIP's progress on improving broadband availability.

section_title: What GAO Recommends
paragraphs: GAO recommends that the Secretary of Agriculture include as part of the USDA annual performance plan and report, actual BIP results achieved against the updated subscribership goal. In commenting on a draft of this report, USDA said it agreed with the recommendation and will institute procedures to fully address it. USDA also provided technical comments, which were incorporated as appropriate.

section_title: Letter
paragraphs: Access to affordable broadband telecommunicationsviewed as vital to long-term economic growth and improved quality of life,  just as electricity, telephone service, and the Interstate Highway System  filled similar roles in previous generations. Sharing large amounts of  information at ever greater speeds increases productivity, facilitates  commerce, and drives innovation. Furthermore, broadband can improve  citizens’ quality of life. For example, broadband technology makes it  possible for a patient to visit a local clinic and receive medical attention  from specialists hundreds of miles away or for a student to access  information not available from the local library. Broadband is particularly  critical to provide advanced communications to remote communities and  offer rural Americans new ways to participate in our economy and society.

To extend access to broadband throughout the United States, as well as  to stimulate the economy and create jobs, Congress appropriated $7.2  billion for broadband programs under the American Recovery and  Reinvestment Act of 2009 (Recovery Act). This appropriation  represented an unprecedented level of federal investment in expanding  broadband. The $7.2 billion included $2.5 billion for the Broadband  Initiatives Program (BIP) of the U.S. Department of Agriculture’s (USDA)  Rural Utilities Service (RUS), to provide loans, grants, and loan and grant  combinations for broadband infrastructure projects primarily in rural  areas. In 2010, RUS awarded over $3.5 billion to awardees for 320 BIP  projects, primarily for projects expected to provide broadband service  directly to end users in rural areas, including critical community facilities  such as hospitals, libraries, and schools.

This review responds to your request that we assess the results and  impact of BIP to assist Congress in its ongoing oversight of Recovery Act  broadband programs. This report also builds on our previous work on  BIP. In this report, we address: (1) how RUS ensures that funded  projects are completed within required time frames and as approved,  including within designated service areas, and (2) the extent to which  RUS is providing information to show the program’s impact on broadband  availability. The information provided in this report also responds to a  recurring mandate in the Recovery Act that we review bimonthly, the use  of Recovery Act funds by recipients.

To determine what actions RUS is taking to ensure that funded projects  are completed within required time frames and as approved, including  within designated service areas, we reviewed documents on RUS’s  monitoring policies and procedures and conducted interviews with RUS  officials who oversee loan specialists, engineers, and general field  representatives (GFR) who have BIP-related duties. We collected data  from RUS on all BIP infrastructure projects, including completion status  and disbursement of funds as of March 31, 2014. We assessed the  reliability of this data by interviewing RUS officials about their databases  and collection practices and reviewing relevant documentation, including  guidance, descriptions of internal controls, and USDA Office of Inspector  General (OIG) reviews. Based on this information, we determined that the  data provided by RUS were sufficiently reliable for our reporting  purposes. To further identify RUS’s oversight actions, we selected seven  (six ongoing and one completed) BIP infrastructure projects with  approved service area locations throughout the United States based on  criteria such as location, percentage of funds disbursed, and total award  size. We selected ongoing projects to understand BIP’s current oversight  activities and one completed project in order to understand project  impact. For each project we selected, we reviewed documents provided  by RUS such as applications, award files, and quarterly visit reports. We  also interviewed the RUS GFRs responsible for overseeing the projects  and representatives from the awardees.

To determine the extent to which RUS is providing information to show  the program’s impact on broadband availability, we reviewed publicly  available RUS performance information such as BIP project directories,  BIP quarterly reports and status reports, and USDA’s annual performance  plans and reports. We also reviewed previous GAO and USDA OIG  reports on BIP performance goals and measures, including previous  recommendations. To determine RUS’s policies and procedures for  collecting and reporting performance information and the agency’s  actions in response to recommendations made by USDA’s OIG, we  interviewed officials from RUS and USDA OIG. We also reviewed RUS’s  data collection policies and procedures and spoke with GFRs from the  sample of seven projects, and awardee representatives from five of the  seven, in regard to how they report, collect, and verify performance  information. We also reviewed applicable criteria related to agency  performance measurement and reporting, such as reporting provisions in  the Recovery Act, associated Office of Management and Budget (OMB)  guidance, and the GPRA Modernization Act of 2010, which updated the  Government Performance and Results Act of 1993.

We conducted this performance audit from August 2013 to June 2014 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: Rural areas tend to lag behind urban and suburban areas in broadband  deployment. The provision of broadband Internet networks and services  in the United States is generally privately financed. Rural areas, though,  can have conditions that increase the cost of broadband deployment— such as remote areas with challenging terrain like mountains, which  increase construction costs—or conditions that make it difficult to recoup  deployment costs—such as relatively low population densities and  incomes. These conditions make it less likely that a private service  provider will build out or maintain a broadband network. Low population  density can mean fewer potential subscribers, and low-income  populations are less likely to use broadband. Other evidence suggests  that rural low-income households are less likely to use broadband than  metropolitan low-income households are.

However, because of broadband’s perceived economic and social  benefits, several federal programs aim to encourage its deployment, and  the Recovery Act represented an unprecedented investment in this area.

To extend access to broadband and therefore increase rural economic  opportunity, RUS finances broadband infrastructure deployment in rural  areas. The BIP program represented an unprecedented federal  investment in broadband deployment in general and for RUS in particular.  Prior to the enactment of the Recovery Act, RUS’s Rural Broadband  Access Loan and Loan Guarantee and Community Connect programs  were the only federal programs exclusively dedicated to deploying  broadband infrastructure. Together, these programs were appropriated  a total of $295 million in the past decade (See table 1). The $2.5 billion  appropriated to BIP through the Recovery Act represented over eight  times the federal investment in RUS broadband programs over the past  decade.

BIP awardees must meet requirements set by the Recovery Act and  RUS—such as requirements to deploy broadband infrastructure within  and throughout service areas that are at least 75 percent rural—and  regularly report information on progress to RUS. The Recovery Act  authorized RUS to award grants, loans, and loan guarantees for  broadband infrastructure in any area of the United States and mandated  that areas to be served be at least 75 percent rural without sufficient  access to high-speed broadband service to facilitate rural economic  development. The rest of the project could be located in an area that  was not rural. As a condition of the award, RUS requires BIP awardees to  provide service to all customers who request and subscribe to its services  within and throughout the approved service area. In addition, RUS  officials say they require BIP awardees to submit quarterly financial and  performance reports for at least 5 years after the completion of BIP  projects. These quarterly reports, called Broadband Collection and  Analysis System (BCAS) reports, require awardees to list detailed  financial information and the number of subscribers in the approved  service area.

By September 2010, RUS awarded $3.5 billion in BIP loans, grants, and  loan and grant combinations to 320 projects, of which about $3.4 billion  went to 297 infrastructure projects to enable service to end users such as  households and businesses. RUS solicited applications and made awards in two rounds, with the first round beginning in June 2009 and  ending in April 2010, and the second round beginning in January 2010  and ending in September 2010. BIP awards went mainly to private-sector  entities, including for-profit companies and cooperatives, to construct  “last-mile” infrastructure projects, meaning a project that provides service  directly to end users. Specifically, of the 297 infrastructure projects  originally awarded, 267 were awarded to for-profit companies or  cooperatives. In addition, 285 were last-mile projects, while the remaining  12 projects were middle-mile projects to provide a link from the Internet  backbone to the last-mile networks of local providers that serve end  users. RUS also funded 19 technical assistance and four satellite projects  that accounted for approximately $103 million awarded.

Based on information provided in the applications selected for award, in  2010 RUS estimated that 847,239 subscribers would receive new or  improved broadband service through BIP infrastructure projects (see  table 2). However, since the time of award to March 31, 2014,  approximately 14 percent of the awarded BIP infrastructure projects (42  out of 297) were terminated. According to RUS officials, these projects  were turned down by the awardee or terminated by RUS for a variety of  reasons, such as awardee financial difficulties or inability to meet  requirements. Consequently, in a BIP status report as of March 31, 2014,  RUS updated its subscribership estimate goal to show that 728,733  subscribers were expected to receive new or improved broadband access  as a result of BIP funding. According to RUS officials, this new number  was calculated by removing the subscribership estimates attributed to  terminated projects. In addition, after the terminated projects were  removed, RUS estimated that 61,047 fiber miles and 1,391 wireless  access points would be installed through BIP infrastructure projects.

BIP projects have encountered delays, and in response, RUS has pushed  back the project completion deadline to shortly before funds expire in  September 2015. Initially, when BIP grants and loans were awarded to  projects in 2010, RUS stated that projects should be substantially  completed within 2 years of award and should be fully completed within 3  years. However, BIP projects generally follow a process that includes  planning/contracting, construction, funding, and reporting phases (see fig.  1).  We previously found that some BIP projects experienced delays in  the planning and contracting phase, such as delays in environmental  reviews, securing permitting and rights-of-way agreements, and obtaining  RUS approval of contracts and plans. Projects also encountered  challenges during construction due to severe weather or terrain and  difficulty securing fiber due to a shortage. In response to these delays, in  October 2011, RUS extended the BIP completion deadline to June 2015  to ensure that awardees could be reimbursed before the appropriation is  closed on September 30, 2015. In October 2011, RUS modified BIP  requirements, requiring that construction commence within 180 days of  the latter of the completion of the project’s historic preservation or  environmental reviews, and be fully completed no later than June 30,  2015. After September 30, 2015, the expired appropriation account will be  closed and any balances remaining will be cancelled.

To address the challenge of overseeing the approximately 300 BIP  projects and over $3 billion in funding, RUS hired temporary staff and a  contractor. Before BIP implementation, RUS reported having 26 GFRs in  fiscal year 2008. RUS awarded a contract to ICF International to assist  with reviewing technical and financial materials and developing the post- award monitoring and reporting framework. In addition, RUS hired eight  temporary GFRs to assist with the additional BIP workload. In August  2010, we recommended that USDA address the variability in funding  levels for post-award oversight of BIP, given that the Recovery Act BIP  funds could not be obligated after September 30, 2010, which ended the  period of availability of the BIP appropriation. In response, RUS  extended its contract with ICF International through fiscal year 2013.However, that contract and temporary staff appointments expired at the  end of September 2013. As a result, fewer RUS staff, including  engineers, loan specialists, and GFRs, are now responsible for BIP  oversight. Since the contract ended on September 30, 2013, RUS has  been transitioning the contractor’s work back to RUS staff.

section_title: RUS’s Oversight Indicates Most Projects Will Be Completed on Time and As Approved but Faces Challenges Given the Program’s Scope
subsections: section_title: RUS Monitors BIP Projects and Expects Most Will Be Completed by the 2015 Deadline, but Awardees Face Challenges
paragraphs: RUS monitors projects and takes oversight actions through all BIP project  phases, as shown in figure 2. For example, RUS engineers are  responsible for ensuring that projects meet the specifications listed in  applications and loan specialists are responsible for ensuring that projects are financially sustainable by reviewing funding requests and reporting.Meanwhile, GFRs are the primary RUS point of contact for awardees and  are responsible for collecting and reporting information on projects. For  example, RUS GFRs submit monthly reports on projects’ status and the  number of fiber miles and wireless access points deployed.

Based on GFR monthly reports, as of March 31, 2014, most projects were  completed or partially operational. Specifically, 87 percent of the 255 BIP  infrastructure projects were completed, meaning they were providing  service throughout the entire approved service area, or were partially  operational, meaning they were providing service to some subscribers in  the approved service area (see table 3). Therefore, about 87 percent of  BIP projects were beginning to offer broadband service to subscribers.  However, since the partially operational projects had not yet been  completed totally, as of this date, 216 projects, or about 85 percent of BIP  infrastructure projects, were incomplete.

RUS also tracks projects by the amount of funding they have received, as  RUS disburses funds to projects incrementally during implementation. As  of March 31, 2014, RUS had disbursed about $2.2 billion, about 72  percent of the $3.1 billion in total BIP funds, to awardees. In addition,  awardees of approximately 85 percent of the Recovery Act BIP  infrastructure projects had received over half of the funds they had been  awarded. The remaining approximately 15 percent have received less  than half of the funds they had been awarded. However, the  disbursement of funds by RUS does not fully reflect the amount of work  completed on projects. RUS disburses BIP funds incrementally through  advancements or reimbursements after awardees submit funding  requests. Funding schedules vary among projects and can lag behind  project construction. For example, representatives from one awardee told  us that they are currently constructing a wireless tower and that given the  nature of the contract, they would not be reimbursed by RUS until after  construction was completed.

Based on data RUS tracks on project status and funds disbursed, RUS  officials stated that they expect almost all BIP projects to be completed by  the 2015 deadline. However, they predicted a small number of projects  may have difficulty meeting the deadline due to project challenges and  delays. RUS officials told us that because building out the entire service  area was a condition of the original award agreement, awardees must  use their own funds to complete the project if construction extends  beyond the 2015 deadline. They also told us they are currently working  with their Office of General Counsel to develop policies and potential  actions in response to projects that have not built out the entire service  area of the project by the 2015 deadline.

According to RUS officials and GFRs, current project delays were due to  a variety of challenges, some of which the awardee and RUS have limited  options to overcome. These challenges include lengthy environmental  reviews, weather, compliance with reporting requirements, and approval  of contracts and plans. To address these challenges, awardees have  tried to construct projects in compressed time frames but can encounter  further construction delays, such as weather. For example,  representatives from one awardee we spoke to noted that environmental  review delays caused the project to miss an entire construction season,  while subsequent seasons were shortened due to severe weather.  Additionally, RUS officials reported that some awardees faced financial  challenges. For example, according to a GFR, one BIP project was  struggling due in part to the awardee’s overall financial problems. The  GFR noted that RUS was limited in taking action against the awardee,  since holding back BIP funds would only make the financial problems  worse, putting the project further at risk.

Awardees who were unfamiliar with RUS’s processes encountered  particular challenges and delays. We previously found that, according to  RUS officials, BIP awardees that had not received funding from RUS in  the past were more likely to experience difficulties complying with  reporting requirements than those awardees with a history of borrowing  from RUS.projects went to new awardees that had not previously received funding  from RUS, we found these projects made up a majority of projects  terminated (64 percent). RUS officials and GFRs told us that new  awardees faced continued challenges complying with RUS’s reporting  and contracting requirements. Representatives from one such new  awardee we spoke to, a local government entity, noted they faced  challenges in filing BCAS reports regularly because their financial  systems were not designed to produce the information required on a  quarterly basis. These BCAS reporting problems resulted in RUS  withholding funding, and consequently, project delays. Representatives  from another new RUS awardee said they were a small company that  was unable to handle the additional BIP workload and, as a result, hired  an outside consultant to handle the required reporting. To help address   Although 38 percent of the original 297 BIP infrastructure  these challenges, RUS GFRs have provided additional assistance to new  awardees. For example, a GFR we spoke to told us he reminded a new  awardee of BIP reporting requirements. In another case, GFRs we spoke  to worked to ensure that a new awardee’s contracts met RUS  requirements by acting as a liaison to RUS headquarters staff to help  resolve issues.

section_title: RUS Expects That Projects Will Be Completed as Approved, but Faces Challenges Given Scope of Program
subsections: section_title: RUS’s Oversight Processes to Ensure Projects Are Completed as Approved
paragraphs: RUS takes several steps to ensure projects are completed as approved.  First, according to RUS officials and GFRs, RUS did not allow projects to  make changes to the approved service areas specified in their  applications. RUS officials expect all projects to provide service within  and throughout the areas specified in their applications. However, in  some cases, RUS officials said they approved other types of project  changes. We were unable to assess the nature of project changes  because RUS did not systematically track them and did not provide us   Second, as mentioned earlier, RUS  with a list of all project changes.also has a framework of oversight activities in place to ensure projects  are completed as specified in their applications (see fig. 2). As part of its  overall oversight framework, RUS relies on GFRs located throughout the  country to verify that project construction and subsequent service are  within and throughout approved service areas. GFRs are generally  assigned to BIP projects based on the state where the project or awardee  is located. GFRs monitor the implementation and status of project build- out through three steps, as described below:  1.  Ongoing construction inspections: RUS requires GFRs to conduct  construction inspections to confirm that BIP funds are used for  approved purposes and within the designated service areas. Through  periodic inspections, GFRs verify the work is aligned with the  approved application. The frequency of these inspections depends on  factors such as whether construction is active on site to inspect. GFRs  we interviewed described various ways they inspected construction.  For example, one GFR we spoke to described how he tracked  planned and completed construction on a map to ensure the awardee  was building within the approved service area. Another GFR we  spoke to mentioned viewing equipment installed, such as the  placement of fiber cables, to verify the construction was within the  service area.  2.  Verification of subscribership: RUS requires GFRs to review and  verify that the subscribership numbers reported by awardees are  reasonable. Once BIP project awardees begin signing up customers,  they submit subscribership numbers to RUS quarterly through BCAS.  GFRs we interviewed described various ways they verify the  awardee-reported subscribership numbers. For instance, a GFR told  us he requested copies of billing records from an awardee to verify  that subscribers were located within the project’s service area.  Another GFR we spoke to stated that he confirmed subscribership by  traveling throughout the project service area and viewing the  placement of equipment on subscribers’ property.  3.  Final project closeout inspections: As part of the closeout process,  RUS requires GFRs to conduct a final inspection to ensure that  service is available throughout the approved service area. RUS  instructs GFRs to test service throughout the service area, including  areas difficult to reach, and to interview local residents and  businesses regarding the service. If GFRs find any problems with  service coverage, they will investigate other areas within the service  area and bring any issues to the attention of RUS management. RUS  officials told us that as of April 2014, they had conducted  approximately 25 closeout inspections out of about 40 completed  projects. GFRs we spoke to described various ways they plan to verify  the service availability in the approved service area. For example, one  GFR told us he will test the availability of wireless service by using a  smart phone to test the signal strength in multiple locations within the  service area. Another GFR told us he will proactively reach out to  residents in the service area to solicit feedback on service quality and  availability to ensure service was being provided at the level indicated  in the awarded application.

As mentioned above, RUS officials said they did not allow changes to  project service areas although they did allow other types of changes,  such as changes in technology. However, we were unable to verify this  because RUS did not provide us with any information about these  changes. According to RUS officials, awardees could request project  changes, which RUS engineers reviewed and approved on a case-by- case basis. RUS engineers told us they evaluated requested changes  based on the approved application and budget, with a focus on whether  the proposed change affected the access to or speed of broadband  service. RUS documented project change decisions in letters to  awardees. However, RUS does not have policies on the types of changes  allowed or a master list of changes considered, and did not provide us  with a list of projects with approved changes. As a result, we could not  evaluate these changes. According to RUS officials, less than 15 projects  made significant changes for reasons such as updates in technology. For  example, representatives from one awardee told us they changed their  project because the equipment specified in their application was no  longer available. Representatives from another awardee said they  changed the design of their project to include one less wireless tower to  provide the same level of service at a lower cost than was proposed in  their application.

section_title: Challenges to RUS’s Oversight Processes
paragraphs: Despite these oversight processes, RUS faces challenges ensuring that  all projects are completed as approved for the following reasons.  1.  Reduced RUS Staffing: RUS staffing resources have been reduced  while BIP projects are ongoing, and as a result, staff workload has  increased. In 2009 and 2010, we found that RUS’s ability to oversee  BIP projects faced challenges because it lacked sufficient staff and  resources, among other reasons. RUS officials stated that they did  not request or receive additional funds to cover administrative costs  beyond funding appropriated by the Recovery Act. Furthermore, most  of the eight temporary GFRs RUS hired to assist with BIP oversight  left when their terms ended in September 2013, while some were  hired as permanent GFRs, according to RUS officials. RUS now has  approximately the same number of GFRs as before the Recovery Act  was enacted, but has an increased workload given that 216 BIP  projects were still ongoing as of March 2014. Specifically, RUS  officials report that there were 26 GFRs in fiscal year 2008 before BIP  implementation, and that as of April 2014, RUS had 25 GFRs and 2  vacancies. GFRs are now responsible for BIP projects previously  overseen by temporary GFRs, in addition to the other projects they  oversee, such as projects from the Community Connect Grant  Program and the Rural Broadband Access Loan and Loan Guarantee  Program.  2.  Reduced Travel Funds: RUS has also faced challenges overseeing  BIP projects with reduced travel funds. At a minimum, RUS requires  GFRs to conduct visits quarterly, which can be conducted in-person or  remotely through a teleconference. In-person visits can take place at  the project’s service area location or at the awardee’s offices or  headquarters when the offices are in a different location from the  project. GFRs we spoke to overseeing six of the seven projects we  examined noted that reduced travel funds have been a challenge.  GFRs noted reduced travel funds resulted in fewer in-person visits to  the project than on a quarterly basis in some cases. For example,  GFRs overseeing one of the seven projects in our sample had  conducted visits with the awardees’ headquarters, but had not yet  conducted an in-person inspection of the project service areas. A  senior RUS official said that although funding has been limited at  times throughout BIP implementation, such as the end of budget  cycles, RUS is not concerned about there being sufficient travel funds  to conduct the needed BIP closeout visits.  3.  Scope of Work Remaining: Given that BIP projects must be  completed within one year, RUS faces challenges in completing its  oversight processes, including a final in-person closeout inspection to  verify service availability, for all projects as they finish construction. As  mentioned previously, RUS officials said that as of April 2014, RUS  had completed about 25 closeout inspections among approximately  40 completed projects. Given that an additional 216 BIP infrastructure  projects were ongoing (under construction or partially operational) as  of March 2014, GFRs will have numerous closeout inspections to  complete in a short time frame. A RUS senior official noted that GFRs  will likely continue conducting closeout inspections beyond the 2015  deadline.

GFR on-site inspections are RUS’s key oversight mechanism for ensuring  that remote areas are built out as planned and that Recovery Act funds  reach hard-to-serve rural areas. We have previously concluded that  companies may have an incentive to build first where they have the most  opportunity for profit and leave the more remote parts of their projects for  last in order to achieve the highest number of subscribers as possible.

As the deadline for the BIP program nears, some awardees may be  stretched to complete remaining construction. While awardees try to  complete their projects before the Recovery Act BIP appropriation is  closed, RUS may likewise be stretched to complete close out inspections  with fewer staff than when the Recovery Act was enacted and with limited  travel funds to visit projects throughout their territories, which can cover  thousands of miles and multiple states. To help address these  challenges, RUS plans to monitor projects beyond the 2015 deadline to  ensure service is provided throughout the approved service area. RUS  officials stated that they are currently working with their Office of General  Counsel to explore options to take regarding awardees that have not  provided service throughout the approved service area by the September  2015 deadline.

section_title: RUS Collects BIP’s Performance Information but Provides Limited Reporting of Program’s Impact
subsections: section_title: RUS Collects and Has Provided Limited Reporting of BIP Performance Information despite Efforts to Improve Reliability
paragraphs: Although RUS collects performance information to measure BIP’s impact  on broadband subscribership, it has provided limited reporting of this  information. OMB’s Recovery Act guidance required federal agencies to  measure specific program outcomes, supported by corresponding  quantifiable output measures. To this end, RUS requires awardees to  submit quarterly BCAS reports on the number of households, businesses,  educational providers, libraries, health care providers, and public safety  providers subscribing to new or improved broadband service through BIP.

Although RUS has met the Recovery Act reporting requirements, it has  provided limited reporting on BIP program status and results during  project implementation. However, it plans to now publish reports quarterly  until at least September 2015. The Recovery Act required that RUS  submit quarterly reports to Congress on the use of BIP funds until all  funds were obligated. Further, OMB guidance calls for federal agencies  to report the public benefits of Recovery Act funds clearly, accurately, and  in a timely manner. As required by the Recovery Act, RUS provided  quarterly reports to Congress during the period while BIP’s funding was  being obligated. From May 2009 through December 2010, RUS published  seven quarterly reports on its website. These quarterly reports detailed  RUS’s actions to obligate BIP funds, including information on the funding  announcements and obligated awards. Since then, RUS status reporting  has been limited and inconsistent. Specifically, since December 2010,  RUS has issued three status reports, reporting data as of April 3, 2013;  August 26, 2013; and March 31, 2014. These reports have included  performance results, including the number of households, businesses,  educational providers, libraries, health care providers, and public safety  providers subscribing to new or improved broadband service through BIP.  Beginning with the March 2014 report, RUS intends to publish reports  quarterly until the end of fiscal year 2015, according to a senior official.  This official noted that if BIP does not appear to have met its  subscribership goals by then, RUS may consider continuing to publish  quarterly reports given that projects will continue to add, and awardees  will continue to report, BIP subscribers for at least 5 years after projects  are completed. A senior RUS official previously noted that projects will  continue to add subscribers for years after completing construction.

GAO-12-937.

RUS lacked adequate controls to ensure the reliability of the data.  USDA’s OIG recommended that RUS revise the BCAS guidance for  awardees and staff and provide detailed and clear instructions on the  entry and review of BIP performance data in BCAS. In response to this  recommendation, according to a senior RUS official and USDA OIG  officials, RUS is developing guidance and anticipates this corrective  action will be implemented in June 2014. This could improve the reliability  of subsequent reports.

In addition, RUS does not track subscribership by rural area and, as a  result, is not able to show the impact of the BIP program on rural  broadband availability. The OIG previously found that RUS’s performance  information makes it impossible to measure BIP’s impact in rural areas  because the information was not collected by rural area. The Recovery  Act required that BIP service areas be at least 75 percent rural without  sufficient access to high-speed broadband service to facilitate economic  development. The rest of the project area may not be rural. According to  a RUS official, very little of projects’ service areas were non-rural. Despite  this, BIP awardees may potentially attract subscribers disproportionately  in the non-rural areas of the service area. Therefore, BIP’s subscribership  measures do not indicate the extent to which Recovery Act funding was  used to deploy broadband access in rural areas. To address this gap,  OIG recommended that RUS report performance data that directly  measure the impact of each award on the expansion of broadband  service in rural areas. In its response to OIG, RUS reported it that cannot  report this level of detailed information because it was not specified that  way in RUS’s agreements with its awardees. RUS further indicated that  since BIP is a one-time program, it does not believe using taxpayers’  funding to make substantial changes to its reporting system in order to  collect subscribership information in rural areas would be appropriate. In  response, USDA’s OIG accepted RUS’s management decision.

section_title: USDA Annual Performance Reports Do Not Track BIP’s Performance against a Related Goal
paragraphs: In addition, USDA has missed opportunities to report on BIP’s impact.  Over the life of the BIP program, USDA’s annual performance reports  have not tracked BIP’s performance results against a goal. The GPRA  Modernization Act requires that each year agencies establish  performance goals in performance plans and provide an update by  comparing actual performance achieved against performance goals in  annual performance reports. Regarding a goal related to BIP, although  USDA performance reports identified expanding broadband access as a  goal, they did not include BIP. For example, USDA’s most recent annual  performance report, from fiscal year 2013, and its most recent  performance plan, for fiscal year 2015, listed the “number of  borrowers/subscribers receiving new or improved telecommunications  services” as a performance goal. This goal was listed under a strategic  objective to “enhance rural prosperity.” The numbers reported under this  annual performance goal did not include BIP and instead included other  RUS programs, such as the Rural Broadband Access Loan and Loan  Guarantee program. A USDA official told us that BIP performance was  not included in USDA’s annual performance report because it was part of  the Recovery Act reports. However, as mentioned previously, RUS is no  longer required under the Recovery Act to provide reports. Regarding  reporting on BIP performance, instead of reporting actual results, RUS  reported its performance goal, or estimate of BIP subscribership, as  results. Specifically, in fiscal year 2010, USDA reported the 847,239  subscribers that it anticipates will receive new or improved broadband  service as results. As previously reported by the USDA OIG, RUS  officials said the results were reported in fiscal year 2010 because that  was the year the funds were obligated. As we found in 2012, this total did  not reflect actual program results, because it was calculated by RUS  using estimates contained in applications and developed prior to the   Further, the estimated number of  execution of the funded projects.subscribers to receive new or improved service through BIP that RUS  reported in fiscal year 2010—847,239—is now out of date given that as of  March 31, 2014, RUS reduced this estimate to 728,733, as we explained  earlier in this report.

Given the amount of funding devoted to BIP, having information on BIP’s  actual performance is important for determining the program’s  effectiveness. By not reporting annually on BIP’s actual performance,  USDA is not demonstrating the impact of Recovery Act funds and BIP’s  progress on improving broadband availability. Without this information,  future efforts to expand broadband may lack important information on the  types of projects that were most effective at meeting subscribership  goals, thereby limiting the ability to apply federal resources to programs  with the best likelihood of success.

section_title: Conclusion
paragraphs: BIP represented an unprecedented level of federal investment in  broadband infrastructure, amounting to over eight times the funds RUS  otherwise had available for broadband in the past decade. RUS collects  and is taking steps to improve the reliability of BIP performance  information. However, BIP’s reporting has been limited and is not  reflected in USDA annual performance reports. As a result, RUS has not  shown how the approximately $3 billion in funds awarded to BIP projects  have affected broadband availability. Reporting on and tracking the  number of subscribers receiving service through BIP is particularly  important given that the majority of projects are ongoing and that projects  are to continue to add, and awardees are to continue to report, BIP  subscribers for at least 5 years after construction is completed. Without  reliable and regular information on the results of BIP projects, it will be  difficult for USDA, RUS, and policy makers to determine the impact of  Recovery Act funds and BIP’s progress on improving broadband  availability. Without this information, future efforts to expand broadband  may lack important information on the types of projects that were most  effective at meeting subscribership goals, thereby limiting the ability to  apply federal resources to programs with the best likelihood of success.

section_title: Recommendation
paragraphs: To provide information on the impact of federal investments in expanding  broadband infrastructure, we recommend the Secretary of Agriculture  include BIP performance information as part of the USDA’s annual  performance plan and report by comparing actual results achieved  against the current subscribership goal.

section_title: Agency Comments
paragraphs: We provided a draft of this report to the Secretary of Agriculture for review  and comment. In an email received June 4, 2014, a Management Analyst  with USDA on behalf of USDA Rural Development stated that RUS  generally agreed with the report and its recommendation and will institute  procedures to fully address the recommendation. However, RUS cited  concerns that our discussion of RUS’s requirement to serve the entire  service area in the context of design changes may give the impression  that project service areas were not completely served. RUS stated this is  a mischaracterization and that, although it does not have a master list of  considered project changes or policies on the types of changes allowed, it  does have information on changes that were approved. However, RUS  stated it did not provide us with this information because the effort to  provide it would not be efficient.  In response, we clarified language in the  report to indicate that RUS did not—rather than could not—provide the  information. RUS also provided technical comments, which we  incorporated as appropriate.

We are sending copies of this report to the appropriate congressional  committees and the Secretary of Agriculture. In addition, the report will be  available at no charge on the GAO Web site at http://www.gao.gov  If you or your staffs have any questions, 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. GAO staff that made major contributions to this report are  listed in appendix II.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report discusses (1) how the Rural Utilities Service (RUS) ensures  that funded Broadband Initiatives Program (BIP) projects are completed  within required time frames and as approved, including within designated  service areas and (2) the extent to which RUS is providing information to  show the program’s impact on broadband availability.

To determine how RUS ensures that funded BIP infrastructure projects  are completed within required time frames and as approved, including  within designated service areas, we collected and analyzed documents  from RUS on its monitoring policies and procedures. This information  included RUS policies and guidance on general field representative  (GFR) quarterly visits and monthly reporting, contracting and  disbursement of funds procedures, and awardee Broadband Collection  and Analysis System (BCAS) instructions. We conducted interviews with  RUS officials who oversee loan specialists, engineers, and GFRs with  BIP-related duties. We also reviewed previous reports on BIP oversight  from GAO, US Department of Agriculture’s (USDA) Office of Inspector  General (OIG), and the Congressional Research Service (CRS).

To determine how RUS tracks infrastructure project completion, describes  the status of all infrastructure projects, and characterizes the types of  projects terminated and ongoing, we collected and analyzed data from  RUS on all BIP projects as of December 2013 and summary data as of  March 31, 2014. The data as of December 2013 included the size of  award, completion status, location (state) of designated or approved  service area, whether the awardee had previously received RUS funding,  and amount of funds disbursed. We later updated this information by  collecting summary data from RUS as of March 31, 2014. To determine  the reliability of RUS data, we reviewed relevant documentation— including guidance, descriptions of internal controls, and USDA’s OIG  reviews—and interviewed RUS officials about their databases and  collection practices. Based on this information, we determined that the  data provided to us were sufficiently reliable for our reporting purposes.

To further characterize RUS’s oversight actions, we selected a  nongeneralizable sample of six ongoing infrastructure projects and one  completed project. We selected ongoing projects to understand BIP’s  current oversight activities and one completed project in order to  understand project impact. First, we initially selected two infrastructure  projects, one completed and one ongoing. These projects were selected  based on factors such as the total size of the award, number of premises  proposed to be served, and not covered by previous GAO or USDA’s OIG  audit work. Both projects’ approved service areas were in Michigan. We  then selected an additional five projects that were not substantially  completed, according to RUS’s definition (having received less than 67  percent of BIP funds disbursed), and were not previously sampled by  previous USDA OIG or GAO audit work. We selected case study projects  based on: approved service area location; total award size; percentage of  BIP funds disbursed as of December 2013; type of broadband technology  (wireline or wireless); and awardee type (for example, for-profit company  or state or local government). We selected infrastructure projects  dispersed throughout the US with approved service areas in  Pennsylvania, South Carolina, Iowa, Texas, and Nevada. The sample of  infrastructure projects we chose is not representative of all BIP projects.  For each selected case-study project, we reviewed documentation  provided by RUS such as award applications, grant or loan agreements,  letters documenting project changes (if any), and GFR quarterly visit  reports. In addition, we interviewed GFRs assigned to each case study  project and representatives from the awardee.

To determine the extent to which RUS is providing information to show  the program’s impact on broadband availability, we reviewed publicly  available RUS performance information, such as BIP project directories,  BIP quarterly and status reports, and USDA annual performance plans  and reports. We also reviewed previous GAO, CRS, and USDA OIG  reports on BIP performance measures, including previous  recommendations regarding RUS performance information. To determine  RUS’s policies and procedures for collecting and reporting performance  information and the agency’s actions in response to recommendations  made by USDA OIG, we interviewed officials from RUS and USDA OIG.  We also reviewed RUS’s data collection policies and procedures and  spoke with GFRs from the seven case studies and awardee  representatives from five of the seven, in regard to how they report,  collect, and verify performance information. We also reviewed applicable  criteria related to agency performance measurement and reporting, such  as reporting provisions in the American Recovery and Reinvestment Act  of 2009, associated Office of Management and Budget (OMB) guidance,  and the GPRA Modernization Act of 2010.

We conducted this performance audit from August 2013 to June 2014 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.

section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Teresa Anderson (Assistant  Director), Elizabeth Curda, Lorraine Ettaro, Colin Fallon, Thomas James,  Bert Japikse, Emily Larson, Joshua Ormond, and Carl Potenzieri made  key contributions to this report.


Question-summary annotations: questions: question: What project has the RUS made?
answer: The Rural Utilities Service (RUS) expects most Recovery Act-funded Broadband Initiatives Program (BIP) projects will be completed by the June 2015 deadline and as approved, but RUS faces challenges given the large scope of the program.

question: Why were projects terminated?
answer: As of March 2014, approximately 14 percent (42 of 297) of BIP infrastructure projects were terminated for a variety of reasons according to RUS officials, such as financial difficulties or inability to meet requirements.
child_questions: question: What happened to the projects that were not terminated?
answer: Of the 255 projects remaining, 87 percent were completed (39 projects) or partially operational (184 projects), meaning they provide service to some subscribers.

question: How are projects monitored?
answer: To monitor projects and ensure they are completed within approved service areas, RUS relies on general field representatives to conduct in-person inspections and report monthly on project status.
child_questions: question: What changes were made as a result of their monitoring?
answer: RUS officials said that they did not allow changes to service areas, but approved other types of changes such as changes in technology. GAO could not confirm this since RUS did not systematically track changes and did not provide GAO with information on project changes.

question: What challenges have an impact on RUS’s project monitoring efforts?
answer: Also, several challenges affect RUS's ability to oversee projects. For example, reduced staffing and travel funding levels during BIP's implementation will challenge RUS to complete inspections given the scope of the program, including 216 ongoing infrastructure projects to be completed by the June 2015 deadline.

questions: question: What has the RUS reported?
answer: RUS has reported limited information on BIP's impact since awarding funds to projects, and BIP results are not tracked in the Department of Agriculture's (USDA) annual performance reporting. Consequently, RUS has not shown how much the program's approximately $3 billion in project funding—an unprecedented level of federal investment in broadband—has affected broadband availability.
child_questions: question: How as the RUS reported in response to the Recovery Act?
answer: RUS met the Recovery Act requirement to report to Congress quarterly until all funds were obligated. However, since the Recovery Act's reporting requirement ended, RUS has provided limited reporting on BIP program status and results during project implementation.
child_questions: question: How does RUS plan to increase the frequency of its reporting?
answer: A senior RUS official says RUS will now issue quarterly status reports until at least September 2015. USDA also has missed opportunities to report on BIP's impact as part of its annual performance plan and report.

question: What does the GPRA Modernization Act require?
answer: The GPRA Modernization Act of 2010 directs agencies to establish performance goals in annual performance plans and report the progress made toward these goals in annual performance reports.
child_questions: question: What shortcomings does the USDA’s annual performance plan have?
answer: USDA's annual performance plan included a performance goal to provide new or improved broadband, but USDA did not include BIP results in its annual performance reports. USDA reported its BIP goal and results for fiscal year 2010 only and used the same estimate of BIP subscribership—developed before project execution—for both.
child_questions: question: Why did RUS officials say they reported the 2010 results?
answer: RUS officials say the results were reported in fiscal year 2010 because that was the year funds were obligated.

question: Why is reporting and tracking BIP results important?
answer: Reporting on and tracking BIP actual results against the updated goal is particularly important given that the majority of projects are ongoing and awardees are to continue to report the number of BIP subscribers added for at least 5 years after construction is completed. Without an updated performance goal and regular information reported on the results of BIP projects, it will be difficult for USDA, RUS, and policy makers to determine the impact of Recovery Act funds or BIP's progress on improving broadband availability.
child_questions: question: More recently, in 2014, what update did RUS report?
answer: More recently, in March 2014, RUS updated the estimated number of subscribers from 847,239 to 728,733 to account for terminated projects.

questions: question: What is vital to economic growth?
answer: Access to affordable broadband is seen as vital to economic growth and improved quality of life, yet its deployment in rural areas can be costly.

question: What did the American Recovery and Reinvestment Act of 2009 do?
answer: The American Recovery and Reinvestment Act of 2009 (Recovery Act) appropriated funding for BIP, a USDA RUS program to fund broadband projects to provide service to end users in mostly rural areas.
child_questions: question: What requirements did the RUS institute as part of the financial contributions?
answer: By 2010, RUS had awarded over $3 billion, primarily to 297 infrastructure projects, and required that projects be completed by June 2015 in approved areas.

questions: question: What did the GAO report address?
answer: GAO was asked to review BIP's results and impact. This report addresses (1) how RUS ensures that projects are completed by the deadline and as approved and (2) the extent to which RUS provides information to show BIP's impact.
child_questions: question: How did the GAO complete this report?
answer: GAO interviewed RUS officials, reviewed policies, and analyzed RUS project data as of March 2014.  GAO also interviewed five awardees from a nongeneralizable sample of seven BIP projects selected in part based on award size and location.