Distance Learning and Telemedicine Grant Program

Federal RegisterApr 16, 1996

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SUMMARY: The Rural Utilities Service proposes to revise its regulations

on the distance learning and telemedicine grant program that would

provide grants for distance learning and telemedicine projects

benefiting rural areas. The regulation would revise RUS's method in

which applications will be reviewed by RUS and scored. This proposed

rule incorporates changes in the distance learning and telemedicine

grant program as revised by the Federal Agriculture Improvement and

Reform Act of 1996.

DATES: Written comments must be received by RUS or carry a postmark or

equivalent not later than May 16, 1996.

ADDRESSES: Submit written comments to Barbara L. Eddy, Deputy Assistant

Administrator, Telecommunications Program, Rural Utilities Service,

room 4056-S, AG Box 1590, U.S. Department of Agriculture, 14th and

Independence Avenue, SW., Washington, DC 20250. RUS requests an

original and three copies of all comments (7 CFR part 1700). All

comments received will be made available for public inspection at room

2234, South Building, U.S. Department of Agriculture, Washington, DC

20250 between 8:00 a.m. and 4:00 p.m. (7 CFR part 1.27(b)).

FOR FURTHER INFORMATION CONTACT: Barbara L. Eddy, Deputy Assistant

Administrator, Telecommunications Program, Rural Utilities Service,

room 4056-S, AG Box 1590, U.S. Department of Agriculture, Washington,

DC 20250, telephone number (202) 720-9549.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be significant and was

reviewed by the Office of Management and Budget (OMB) under Executive

Order 12866.

Executive Order 12778

This proposed rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This proposed rule will not: (1) Preempt any

State or local laws, regulations, or policies, unless they present an

irreconcilable conflict with this rule; (2) Have any retroactive

effect; and (3) Require administrative proceedings before parties may

file suit challenging the provisions of this rule.

Regulatory Flexibility Act Certification

RUS has determined that this proposed rule will not have a

significant economic impact on a substantial number of small entities,

as defined in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

Information Collection and Recordkeeping Requirements

The reporting and recordkeeping requirements contained in the

proposed rule have been submitted to OMB for approval in accordance

with the Paperwork Reduction Act of 1995 ( 44 U.S.C. Chapter 35, as

amended). A separate 60-day notice soliciting comments on the

information collection requirements was prepared and published at 60 FR

54332, October 23, 1995.

Send questions or comments regarding these requirements to Barbara

L. Eddy, Deputy Assistant Administrator, Telecommunications Program,

Rural Utilities Service, AG Box 1590, Washington, DC 20250.

National Environmental Policy Act Certification

The Administrator of RUS has determined that this proposed rule

will not significantly affect the quality of the human environment as

defined by the National Environmental Policy Act of 1969 (42 U.S.C.

4321 et seq.). Therefore, this action does not require an environmental

impact statement or assessment.

Catalog of Federal Domestic Assistance

The program described by this proposed rule is listed in the

Catalog of Federal Domestic Assistance programs under number 10.855,

Distance Learning and Medical Link Grants. This catalog is available on

a subscription basis from the Superintendent of Documents, the United

States Government Printing Office, Washington, DC 20402.

Executive Order 12372

This program is subject to the provisions of Executive Order 12372

that requires intergovernmental consultation with State and local

officials.

Background

Subpart D of 7 CFR 1703 was originally published in the Federal

RUS has awarded grants in each of the last 3 years at a single specific

time in each of those years. The program has been extraordinarily

popular with distance learning and telemedicine providers. This

popularity, and the corresponding large number of applications for a

very limited amount of grant funds, has caused the agency to review its

existing policies and procedures with the intent of simplifying them.

The proposed regulation is issued to carry out the Distance Learning

and Medical Link Grant Program under the Rural Economic Development Act

of 1990, subtitle D, section 2331-35 (7 U.S.C. 950aaa through 950aaa-

4). This proposed regulation, while based in part on the existing one,

is largely rewritten, and therefore is being published in whole rather

than just noting where changes were made. Nearly all the changes

concern obtaining a grant, rather than in requirements that apply after

a grant is awarded.

The major change is the method in which applicants will be reviewed

by RUS and scored. There will be six major criteria for scoring

applications: (1) The financial need of the community and the project;

(2) the financial composition of the project; (3) the comparative

rurality of the proposed project service area; (4) the documented need

for services; (5) connectivity with outside networks, and (6) the cost

effectiveness of the design. Additionally, several sections of the

regulation were moved or restructured to make it more understandable.

Primarily, the changes in the regulation should make it easier to

apply for a grant. Furthermore, with a clearer scoring method, the

approval process should be sped up.

RUS has determined that unless a 30 day comment period is used it

is unlikely that much if any of the Fiscal Year 1996 authorization for

the Distance Learning and Telemedicine Grant Program will be available

for use by grantees before the authorization lapses.

RUS has incorporated into this proposed regulation changes in the

Distance Learning and Telemedicine grant program as a result of the

Federal Agriculture Improvement and Reform Act of 1996; however, this

regulation does not address the new loan program inasmuch as funding is

not available for a Distance Learning and Telemedicine loan program for

fiscal year 1996. It is expected that RUS will publish proposed

regulations for the loan program within 180 days. In addition, the

appeal procedures outlined in Section 1703.118 are for the purposes of

fiscal year 1996 funding. We anticipate two types of rejections of loan

and grant

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applications; namely, (1) The rejection by RUS of an application

because it is incomplete or proposes facilities or equipment that are

not allowable under this program; or (2) nonselection of a loan and/or

grant application because of insufficient grant or loan funding.

Comments and suggestions are solicited on the best methodology to

employ for the appeals procedure so as to assure timely loan and grant

approvals.

List of Subjects in 7 CFR Part 1703

Community development, Grant programs-education, Grant programs-

health care, Grant programs-housing and community development,

Reporting and recordkeeping requirements, Rural areas.

For the reasons set forth in the preamble, chapter XVII of title 7

of the Code of Federal Regulations is proposed to be amended as

follows:

PART 1703--RURAL DEVELOPMENT

1. The authority citation for 7 CFR 1703 continues to read as

follows:

Authority: 7 U.S.C. 901 et seq. and 950aaa et seq.; Pub. L. 103-

354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).

2. Subpart D of part 1703 is revised to read as follows:

Subpart D--Distance Learning and Telemedicine Grant Program

Sec.

1703.100 Purpose.

1703.101 Policy.

1703.102 Definitions.

1703.103 Applicant eligibility.

1703.104 Allowable grant funding percentage, grant purposes, and

in-kind matching provisions.

1703.105 Ineligible grant purposes.

1703.106 Maximum and minimum sizes of a grant.

1703.107 The grant application

1703.108 Conflict of interest.

1708.109 Determining what is rural.

1703.110-1703.112 [Reserved]

1703.113 Application filing dates, location, processing, and public

notification.

1703.114-1703.116 [Reserved]

1703.117 Criteria for scoring applications.

1703.118 Other application selection and appeal provisions.

1703.119-1703.121 [Reserved]

1703.122 Further processing of selected applications.

1703.123-1703.125 [Reserved]

1703.126 Disbursement of grant funds.

1703.127 Reporting and oversight requirements.

1703.128 Audit requirements.

1703.129-1703.134 [Reserved]

1703.135 Grant administration.

1703.136 Changes in project objectives or scope

1703.137 Grant termination provisions.

1703.138-1703.139 [Reserved]

1703.140 Expedited telecommunications loans.

Appendix A to Subpart D of Part 1703--ERS Rural--Urban Continuum

Scale.

Appendix B to Subpart D of Part 1703--Rurality Calculation Table.

Appendix C to Subpart D of Part 1703--Environmental Questionnaire.

Subpart D--Distance Learning and Telemedicine Grant Program

Sec. 1703.100 Purpose.

The grants provided under this subpart D are to encourage, improve,

and make affordable the use of advanced telecommunications, computer

networks, and related advanced technologies to provide educational and

medical benefits through distance learning and telemedicine projects to

people living in rural areas and to improve rural opportunities.

Sec. 1703.101 Policy.

(a) RUS recognizes that the transmission of communications and

information is a vital component of the infrastructure of rural areas

and is necessary to promote rural development. Enhancing communication

and information transmission by making affordable advanced

telecommunications, computer networks, and related advanced

technologies more widely available in rural areas will improve rural

opportunities, promote rural economic growth, and enhance the quality

of life of rural residents. To further this objective, RUS will award

grants under this subpart to distance learning and telemedicine

projects that will improve the access of people residing in rural areas

to improved educational, training, and medical services, and to

opportunities that rely on advanced communication and information

technologies to provide such services.

(b) In providing assistance under this subpart, RUS will give

priority to rural areas that it believes have the greatest need of

enhanced communications. RUS believes that generally the need is

greatest: in the most sparsely populated rural areas; and in rural

areas that are experiencing economic hardship. RUS will take into

consideration the community's involvement in the project and the

applicant's ability to leverage grant funds based on its access to

capital.

institutions which serve them can best determine what are the most

appropriate communications or information systems for use in their

respective communities. Therefore, in administering this subpart, RUS

will not favor or mandate the use of one particular technology over

another. RUS does believe that it is generally desirable to use

technology that would incidentally allow other providers or developers

to purchase the elemental functions or access so other users, in

addition to educational and medical users, may benefit from any

transmission facilities receiving funding under this subpart. In

addition, RUS believes it is generally desirable for the project to use

products and technologies that are considered open systems. Further,

RUS believes that it is desirable to use products and technologies that

employ or adhere to nationally recognized standards that will permit

equipment from various companies to be connected to the system, and

permit the system to be connected to other systems or networks.

(d) Applicants, if they are to be successful in obtaining grant

funds must:

(1) Explain the problem that the applicant is intending to solve

using grant funds;

(2) Explain how the applicant will use the grant as well as other

funds to solve the problem and why this is the best solution;

(3) Explain why RUS grant funds are needed for the project to be

successful;

(4) Explain how the grant will be leveraged using funds from the

applicant, and local and non-Federal sources;

(5) Show that rural areas are the primary beneficiaries; and,

(6) Show that the project will be sustainable without additional

grant funds.

(e) RUS electric and telecommunications borrowers are encouraged to

cooperate with each other and with applicants and end users in

promoting the program being implemented under this subpart.

(f) RUS staff will make diligent efforts to inform potential

applicants in rural areas of the program being implemented under this

subpart.

(g) The applicant must check with the Rural Development State

Director, U.S. Department of Agriculture, before submitting the

application to RUS in order to explore any funding sources that may be

available at the state or local level. Evidence of this consultation is

a requirement of the grant application.

Sec. 1703.102 Definitions.

Act means Title XXIII, subtitle D, chapter 1, of the Rural Economic

Development Act of 1990 (7 U.S.C. 950aaa through 950aaa-4).

[[Page 16686]]

Administrator means the Administrator of the Rural Utilities

Service or his or her designee.

Applicant means an eligible organization which applies for a grant

under this subpart.

Approved purpose means a purpose that RUS has specifically approved

in the letter of agreement and scope of work covering the use of RUS

grant funds provided to the grantee.

Borrower means any organization which has an outstanding loan made

by RUS or RTB, or guaranteed by RUS, or which is seeking such

financing.

Communication satellite ground station complex means transmitters,

receivers, and communications antennas at the earth station site

together with the interconnecting terrestrial transmission facilities

(cables, line, or microwave facilities) and modulating and demodulating

equipment necessary for processing traffic received from the

terrestrial distribution system prior to transmission via satellite and

the traffic received from the satellite prior to transfer to

terrestrial distribution systems.

Comprehensive rural telecommunications plan means the plan

submitted by an applicant in accordance with Sec. 1703.107(a).

Computer networks means computer hardware and software, terminals,

signal conversion equipment including both modulators and demodulators,

or related devices, used to communicate with other computers to process

and exchange data through a telecommunication network in which signals

are generated, modified, or prepared for transmission, or received, via

telecommunications terminal equipment and telecommunications

transmission facilities.

Consortium means a combination or group of eligible entities formed

to undertake the purposes of which the distance learning and

telemedicine grant is provided. Each consortium shall be composed of

the following:

(1) A tertiary care facility, rural referral center, medical

teaching institution, or educational institution accredited by the

State;

(2) Any number of institutions that provide health care services or

educational services; and,

(3) Not less than three rural hospitals, clinics, community health

centers, migrant health centers, local health departments, or similar

facilities, or not less than three educational institutions accredited

by the State.

Data terminal equipment means equipment that converts user

information into data signals for transmission, or reconverts the

received data signals into user information, and is normally found on

the terminal of a circuit and on the premises of the end user.

Distance learning means a telecommunications link to an end user

through the use of eligible equipment to:

(1) Provide educational programs, instruction, or information

originating in nonrural areas to students and teachers who are located

in rural areas; or

(2) Connect teachers and/or students, located in one rural area

with teachers and/or students that are located in a different rural

area.

Eligible equipment means a communication satellite ground station

complex, computer networks, data terminal equipment, fiber-optic cable,

interactive video equipment, microwave transmission equipment,

telecommunications transmission facilities, and telecommunications

terminal equipment.

Eligible organization means an incorporated entity that meets the

requirements of Sec. 1703.103.

End user means either or both of the following:

(1) Rural elementary or secondary schools or other educational

institutions, such as institutions of higher education, county

extension services, vocational and adult training and education

centers, and teacher training centers, and students, teachers and

instructors using such rural educational facilities, that participate

in a rural distance learning telecommunications program through a

project funded under this subpart;

(2) Rural hospitals, primary care centers or facilities, such as

medical centers and clinics, and physicians and staff using such rural

medical facilities, that participate in a telemedicine

telecommunications program through a project funded under this subpart.

End user site means a facility located in a rural area that is part

of a network or telecommunications system that is utilized by end

users.

ERS means the Economic Research Service, an agency of the United

States Department of Agriculture.

Grantee means a recipient of a grant from RUS to carry out the

purposes of this subpart.

Hub means originating source of a network or telecommunications

system.

Instructional programming means educational programming, including

computer software, which would be used for tutorial purposes in

connection with eligible equipment.

Interactive video equipment means equipment used to produce and

prepare for transmission audio and visual signals from at least two

distant locations such that individuals at such locations can verbally

and visually communicate with each other. Such equipment includes

monitors, other display devices, cameras or other recording devices,

audio pickup devices, and other related equipment.

Letter of agreement means a legal document executed by RUS and the

grantee that contains specific terms, conditions, requirements, and

understandings applicable to a particular grant.

Local exchange carrier means a commercial, cooperative or mutual-

type association, or public body that provides telecommunications

service, through a local central switching office, to the subscribers

within its designated service area, and between the local subscribers

and the toll network.

Project means an undertaking to provide or improve distance

learning or telemedicine by using financial assistance from RUS under

this subpart.

Project service area means the area in which at least 90 percent of

the persons to be served by the project are likely to reside.

RE Act means the Rural Electrification Act of 1936, as amended (7

U.S.C. 901 et seq.).

REA means the Rural Electrification Administration, formerly an

agency of the United States Department of Agriculture, and predecessor

agency to RUS with respect to administering certain electric and

telecommunications loan programs.

Rural means any area of the country that meets the determining

criteria in Sec. 1703.109.

Rural community facilities mean facilities such as schools,

libraries, hospitals, medical centers, or similar facilities, located

in rural areas, or primarily used by residents of rural areas, that

will use a telecommunications, computer network, or related advanced

technology system to provide educational and/or medical benefits

primarily to residents of rural areas.

RUS means the Rural Utilities Service, an agency of the United

States Department of Agriculture established pursuant to Section 232 of

the Federal Crop Insurance Reform and Department of Agriculture

Reorganization Act of 1994 (Pub.L. 103-354, 108 Stat. 3178), successor

to REA with respect to administering certain electric and

telecommunications programs. See 7 CFR 1700.1.

Scope of work means a detailed plan of work that has been approved

by the Administrator and that will be

[[Page 16687]]

performed by the applicant using funds provided under the grant.

Technical assistance means:

(1) Assistance in learning to operate equipment or systems; and

(2) Studies, analyses, designs, reports, manuals, guides,

literature, or other forms of creating, acquiring, and/or disseminating

information.

Telecommunications terminal equipment means the assembly of

telecommunications equipment at the end of a circuit or path of a

signal, including but not limited to over the air broadcast, satellite,

and microwave, normally located on the premises of the end user, that

interfaces with telecommunications transmission facilities, and that is

used to modify, convert, encode, or otherwise prepare signals to be

transmitted via such telecommunications facilities, or that is used to

modify, reconvert, or carry signals received from such facilities, the

purpose of which is to accomplish the goal for which the circuit or

signal was established.

Telecommunications transmission facilities means facilities that

transmit, receive, or carry data between the telecommunications

terminal equipment at each end of the telecommunications circuit or

path. Such facilities include microwave antennae, relay stations and

towers, other telecommunications antennae, fiber-optic cables and

repeaters, coaxial cables, communication satellite ground station

complexes, copper cable electronic equipment associated with

telecommunications transmissions, and similar items.

Telemedicine means a telecommunications link to an end user through

the use of eligible equipment which electronically links medical

professionals at separate sites in order to exchange medical

information in audio, video, graphic, or other format for the purpose

of providing improved health care services primarily to residents of

rural areas.

Sec. 1703.103 Applicant eligibility.

(a) To be eligible to receive a grant under this subpart, the

applicant must be organized in one of the following corporate

structures:

(1) An incorporated organization, partnership, or other legal

entity which operates, or will operate, a school, college, vocational

training facility, or other educational institution, including a

regional educational laboratory, library, hospital, medical center,

medical clinic or other rural community facility. A state government,

other than a state government entity that operates a rural community

facility, is not considered an eligible applicant. The applicant may be

a private or municipal corporation organized on a for-profit or not-

for-profit basis, or

(2) A consortium, as defined in Sec. 1703.102. A consortium which

includes a state government entity is only eligible if the state

government entity operates a rural community facility, or

(3) An incorporated organization, partnership, or other legal

entity which is providing or proposes to provide telemedicine service

or distance learning service to other legal entities or consortia at

rates calculated to ensure that the economic value and other benefits

of the distance learning or telemedicine grant is passed through to

such other legal entities or consortia.

(b) At least one of the entities of a partnership or consortium

must be eligible individually, and the partnership or consortium must

provide written evidence of its legal capacity to contract with RUS. If

a partnership or consortium lacks the capacity to contract, each

individual entity must contract with RUS on its own behalf.

Sec. 1703.104 Allowable grant funding percentage, grant purposes, and

in-kind matching provisions.

(a) Grants may be used by eligible organizations for distance

learning and telemedicine projects to finance up to 70 percent of the

cost of allowable grant purposes outlined in paragraph (b) of this

section. The applicant will, therefore, provide matching funding in an

amount no less than 42.85 percent of the RUS grant. (If the grant

covers 70 percent of total project costs, the applicant provides the

other 30 percent of the project costs. Thirty percent of the project

costs is 42.85 percent of the 70 percent, i.e., the minimum amount of

the match.)

(b) Grants for purposes outlined in paragraphs (b)(2) through

(b)(6) of this paragraph shall be limited to costs associated with

initial capital expenses for establishing the project. The following

are allowable grant purposes:

(1) Acquiring, by lease or purchase, eligible equipment as defined

in Sec. 1703.102;

(2) Acquiring, by lease or purchase, software to operate eligible

equipment, including any related software;

(3) Acquiring or developing instructional programming;

(4) Providing technical assistance and instruction for using

eligible equipment, including any related software;

(5) Engineering or environmental studies relating to the

establishment or expansion of the phase of the project that is being

financed with the RUS grant; and

(6) Facilities, equipment, or activities and non-recurring service

charges that are described in a comprehensive rural telecommunications

plan which has been approved by the Administrator.

contribution for allowable grant purposes, i.e., 42.85 percent matching

of the RUS grant, generally is required in the form of cash. However,

certain in-kind contributions may be substituted for cash as follows:

(1) Equipment, activities and facilities as set forth in

Sec. 1703.104(b);

(2) Improvements made to real property necessary to accommodate

eligible equipment;

(3) Facilities constructed to accommodate eligible equipment, such

as buildings in which terminal equipment and/or transmission facilities

would be located;

(4) Real property purchased or acquired for the sole purpose of

accommodating distance learning and telemedicine facilities; or

(5) The present value of long term leases of eligible equipment,

with duration according to recognized industry standards and compatible

with the type of equipment leased.

(d) In kind items furnished in paragraph (c)(1) of this section

must be non-depreciated or new assets with established monetary value

by industry standards. The value of improvements or construction in

paragraphs (c)(2) and (c)(3) of this section must be established by a

qualified independent real property appraiser based on the actual cost

of those improvements. The value of land in paragraph (c)(4) of this

section must be established by a qualified independent real property

appraiser based on a market value appraisal.

(e) In kind contributions can be an integral component of an

approved comprehensive rural telecommunications plan as set forth in

Sec. 1703.107(a).

(f) In kind contributions shall not consist of eligible equipment

which has been subject to depreciation, or for equipment, services and

labor not eligible for grant funding as set forth in Sec. 1703.105.

(g) Funding may be provided for end user sites. Funding may also be

provided for hubs located in rural and non-rural areas, if they are

necessary to provide distance learning and/or telemedicine services to

rural residents at end user sites. However, funding will not be

provided for sites proposed as hubs if it is not demonstrated that they

are an integral part of the proposed

[[Page 16688]]

network and are necessary to transmit distance learning and/or

telemedicine services to end users.

Sec. 1703.105 Ineligible grant purposes.

(a) Grants must not be used:

(1) To fund more than 70 percent of the eligible costs of a project

under this subpart;

(2) To cover the costs of installing or constructing

telecommunications transmission facilities, except as provided in

paragraph (c) of this section;

(3) To pay for medical equipment except medical equipment primarily

used for encoding and decoding data, such as images, for transmission

over a telecommunications or computer network;

(4) To pay salaries, wages, or employee benefits to medical or

educational personnel;

(5) To pay for the salaries or administrative expenses of the

applicant;

(6) To purchase equipment that will be owned by the local exchange

carrier or another telecommunications service provider;

(7) To duplicate services in place on the date the completed

application is received by RUS, or to reimburse the applicant or others

for costs incurred prior to RUS's receipt of the completed application;

(8) To pay costs of preparing the application package for funding

under this program;

(9) To refinance indebtedness incurred prior to receipt of the

completed application by RUS;

(10) For projects whose sole objective is to provide links between

teachers and students or medical professionals who are located at the

same facility;

(11) For site development, the destruction or alteration of

buildings, or other activities that might adversely affect the

environment or limit the choice of reasonable alternatives unless and

until the requirements of Sec. 1703.107(j) have been satisfied;

(12) For projects located in areas covered by the Coastal Barrier

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

(13) For any purpose that the Administrator has not specifically

approved.

(b) Except as otherwise provided in Sec. 1703.140, funds shall not

be used to finance a project in part when success of the project is

dependent upon the receipt of additional funding under this subpart D

or is dependent upon the receipt of other funding that is not assured.

telecommunications transmission facilities if the local exchange

carrier for the project area will install such facilities through the

use of the expedited telecommunications loans made under the RE Act or

through other financing procedures within a reasonable time period and

at a cost that does not destroy the feasibility of the project, as

determined by the Administrator.

(d) Except for leases provided in Sec. 1703.104 (b)(1) and (2),

grants must not be used to pay the cost of recurring or operating

expenses for the project.

Sec. 1703.106 Maximum and minimum sizes of a grant.

Applications for grants to be considered under this subpart will be

subject to limitations on the proposed amount of funding. The maximum

grant amount that will be awarded for any one project in any given

fiscal year will not exceed 10 percent of the appropriated funds

available for all grants during the fiscal year in which the

application for such project is selected. The Administrator may publish

notice of the annual maximum grant amount in the Federal Register. An

applicant submitting an application which exceeds the maximum will be

notified to that effect by RUS and given the opportunity to revise the

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

Sec. 1703.107 The grant application.

The following items comprise the required material that must be

submitted to RUS in support of the grant request:

(a) Comprehensive Rural Telecommunications Plan. A Comprehensive

Rural Telecommunications Plan, consisting of the following is required

only when the applicant is requesting grant funds for

telecommunications transmission facilities:

(1) A detailed explanation of the proposed rural telecommunications

system, how such system is to be funded, and a description of the

intended uses for a grant received under this subpart.

(2) The capabilities of the telecommunications transmission

facilities, including bandwidth, networking topology, switching,

multiplexing, standards and protocols for intra-networking and open

systems architecture (the ability to effectively communicate with other

networks). In addition, the applicant must explain the manner in which

the transmission facilities will deliver the proposed services. For

example, for medical diagnostics, the applicant might indicate whether

or not a guest or other diagnosticians can join the network from

locations off the network. For educational services, indicate whether

or not all hub and end-user sites are able to simultaneously hear in

real-time and see each other or the instructional material in real-

time. The applicant must include detailed cost estimates for operating

and maintaining the network, and include evidence that alternative

delivery methods and systems were evaluated.

Note: if a local exchange carrier is providing the transmission

facilities, the requirements of this paragraph may be omitted from

the Comprehensive Rural Telecommunications Plan.

(3) The capabilities of the telecommunications terminal equipment,

including a description of the specific equipment which will be used to

deliver the proposed service. The applicant must document discussions

with various technical sources which could include consultants,

engineers, product vendors, or internal technical experts, provide

detailed cost estimates for operating and maintaining the end user

equipment and provide evidence that alternative equipment and

technologies were evaluated.

(4) A listing of the proposed purchases or leases of

telecommunications terminal equipment, telecommunications transmission

facilities, data terminal equipment, interactive video equipment,

computer hardware and software systems, and components that process

data for transmission via telecommunications, computer network

components, communication satellite ground station equipment, or any

other elements of the telecommunications system designed to further the

purposes of this subpart, that the applicant intends to build or fund

using the grant funds.

(5) An explanation of the special financial or other needs of the

affected rural communities and of the applicant for such grant

assistance.

(6) An analysis of the relative costs and benefits of proposals for

leasing or purchasing of facilities, equipment, components, hardware

and software, or other items.

(7) A description of the consultations with the appropriate local

exchange carrier or carriers and with a wide variety of additional

telecommunications service providers (including other interexchange

carriers, cable television operators, enhanced service providers,

providers of satellite services and telecommunications equipment

manufacturers and

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distributors) and the anticipated role of such providers in the

proposed telecommunications system.

(b) Proposed scope of work of the project. The proposed scope of

work of the project which includes, at a minimum:

(1) the specific activities to be performed under the project;

(2) who will carry out the activities;

(3) the time-frames for accomplishing the project objectives and

activities;

(4) a budget for capital expenditures reflecting the line item

costs for both the grant funds and other sources of funds for the

project;

(5) information indicating the ability of the applicant to reduce

the size or scope of the project in the event RUS funding, or other

projected sources of funding, were reduced or delayed. The applicant

must indicate the respective components of the project that would

receive the highest priority of funding; and

(6) Information about the potential of the proposed network to

expand its size or scope if additional funding was available.

RUS a general project overview, verification of compliance with the

general requirements of this subpart, and documentation of eligibility.

The executive summary should not exceed eight one-sided double spaced

pages, size 8.5'' x 11'', with a minimum font size of 12 points. The

executive summary shall contain the following 10 categories:

(1) A description of the applicant, documenting eligibility with

Sec. 1703.103.

(2) An explanation of:

(i) the problem the applicant is intending to solve;

(ii) how the applicant will use the grant funds to solve the

problem;

(iii) the amount of RUS grant funds required and why such grant

funds are needed; and

(iv) how the RUS grant funds will be leveraged, including both

amount and source of these additional funds.

(3) A brief economic and demographic description of the proposed

service area, the types of educational and/or medical services to be

offered by the project, and the benefits to the rural residents.

(4) A physical description of the project service area. The

applicant should include information regarding topography and available

transportation and telecommunications infrastructure.

(5) A description of the project as distance learning or

telemedicine facility as defined in Sec. 1703.102. If the project

provides both distance learning and telemedicine services, the

applicant must identify the predominant use of the system.

(6) A list of expected outcomes, benefits or services to be

provided by the project. Some examples include, but are not limited to:

(i) Improved education opportunities for a specified number of

students;

(ii) Travel time and money saved by telemedicine diagnosis;

(iii) Number of doctors retained in rural areas;

(iv) Number of additional students electing to attend higher

education institutions;

(v) Lives saved due to prompt medical diagnosis and treatment;

(vi) New education courses offered, including college level

courses; and

(vii) Expanded use of educational facilities such as night

training.

(7) A general overview of the telecommunications system to be

developed, including the types of equipment, technologies, and

facilities used.

(8) A description of the participating hubs and end user sites and

the number of rural residents which will be served by the proposed

project at each end user site.

(9) A brief narrative describing the project service area to allow

a determination of rural eligibility in accordance with Sec. 1703.109.

The applicant must list all counties located in the proposed service

area, and the Economic Research Service's Rural-Urban Continuum

Category for each county. These categories may be obtained from RUS,

any USDA Rural Development state office or from State Land Grant

University Cooperative Extension Offices.

(10) The applicant must indicate whether or not it is willing to

have its grant application forwarded to other agencies within USDA for

consideration in the event the application is not selected for funding

under this subpart.

(d) A section on compliance with scoring criteria. The applicant

must provide a justification for the number of points the proposed

project will obtain for each of the criteria for scoring applications

set forth in Sec. 1703.117.

(e) Financial information. The applicant must provide financial

information to support the need for the grant funds for the project,

show its financial capacity to carry out the proposed work, and show

project feasibility. The financial information must include the

following:

(1) A current balance sheet from the applicant reflecting its

financial condition. When the applicant is a partnership, company,

corporation or other entity, current balance sheets are needed from

each of the entities that has at least a 20 percent interest in such

partnership, company, corporation or other entity. When the applicant

is a consortium, a current balance sheet is needed from each member of

the consortium and from each of the entities that has at least a 20

percent interest in such member of the consortium. While not required,

an audit report is preferable and must be for a period which ended no

earlier than 12 months preceding the date of the application; and

(2) A pro-forma income and expense statement for each participating

hub and end user site for the project covered by the application. The

pro-forma statements must cover a minimum of 5 years after completion

of the project and reflect that the project is feasible and sustainable

in order to be considered for grant funds. The income and expense

statements must reflect sufficient income to pay cash operating

expenses including telecommunications access and/or toll charges,

system maintenance, salaries, training, and any other general operating

expenses; and provide for replacement of depreciable items.

Depreciation shall be based on Internal Revenue Service depreciation

rules, or other recognized telecommunications industry guidelines. The

applicant shall provide sufficient documentation to substantiate any

depreciation projections.

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

provide reasonable evidence of each source of revenue. If the

projection relies on cost sharing arrangements among hub and end user

sites, the applicant must provide evidence of agreements made among

project participants.

(4) For applicants eligible under Sec. 1703.103(a)(3), an

explanation of the economic analysis justifying the rate structure to

ensure that the benefit of the financial assistance is passed through

to the other persons receiving telemedicine or distance learning

services.

(f) A statement of experience. The applicant must provide a written

narrative (not exceeding three single spaced pages) describing its

demonstrated capability and experience, if any, in operating an

educational or health care endeavor and any project similar to the

proposed project. Experience in a similar project is desirable but not

required.

(g) Funding commitment from other sources. The applicant must

provide evidence of the commitment of funds for the project in addition

to the funds requested under this subpart. Evidence should be from an

authorized

[[Page 16690]]

representative of the source organization that the funds are available

and will be used for the proposed project.

(h) Proposed evaluation methodology. The applicant must provide a

proposed method of evaluating the success of the project in meeting the

objectives of the program as set forth in Secs. 1703.100 and 1703.101

and the proposed scope of work.

(i) Compliance with other Federal statutes and regulations. The

applicant is required to submit evidence that it is in compliance with

other Federal statutes and regulations, as detailed in Sec. 1703.33 as

follows:

(1) Equal opportunity and nondiscrimination requirements;

(2) Architectural barriers;

(3) Flood hazard area precautions;

(4) Uniform Relocation Assistance and Real Property Acquisition for

Federal and Federally Assisted Programs;

(5) Drug-free workplace;

(6) Certification Regarding Debarment, Suspension and Other

Responsibility Matters--Primary Covered Transaction (See 7 CFR

3017.510);

(7) Intergovernmental review of Federal programs; and

(8) Restrictions on lobbying. For an application for a grant in

excess of $100,000, a certification statement, ``Certification

Regarding Lobbying:'' is required. If the applicant is engaged in

lobbying activities, the applicant must submit a completed disclosure

form, ``Disclosure of Lobbying Activities'' (see 7 CFR part 3018).

(j) Environmental impact and historic preservation. The applicant

must provide details of the project's impact on the environment and

historic preservation. Grants made under this part are subject to Part

1794 of this chapter which contains the policies and procedures of RUS

for implementing a variety of Federal statues, regulations and

executive orders generally pertaining to protection of the quality of

the human environment that are listed in Sec. 1794.1 of this chapter.

The application shall contain a separate section entitled

``Environmental Impact of the Project.''

(1) Environmental information. An ``Environmental Questionnaire,''

Appendix C to this subpart, may be used by applicants to assist in

complying with the requirements of this section. Copies of the

Environmental Questionnaire are available from RUS.

(2) Grants for technical assistance projects. For a proposal to

fund a technical assistance project, the only environmental information

normally required is whether or not the proposed project being studied

or analyzed will be located within an area protected under the Coastal

Barrier Resources Act (16 U.S.C. 3501 et seq.). Generally, the use of

Federal funds to promote development on coastal barriers is strictly

limited by the Coastal Barrier Resources Act.

(3) Grants for all other projects. Applications for a grant to fund

a project that is not subject to paragraph (j)(2) of this section must

be accompanied by the information described in this paragraph. The

Administrator will review supporting materials in the application and

initiate an environmental review process pursuant to part 1794 of this

chapter. This process will focus on any environmental concerns or

problems that are associated with the project. The level and scope of

the environmental review will be determined in accordance with the

National Environmental Policy Act of 1969 (NEPA), as amended, (42

U.S.C. 4321 et seq.), the Council on Environmental Policy for

Implementing the Procedural Provisions of NEPA (40 CFR parts 1500-

1508), RUS's Environmental Policies and Procedures (part 1794 of this

chapter) and other relevant Federal environmental laws, regulations and

Executive orders. Activity related to the project that may adversely

affect the environment or limit the choice of reasonable alternatives

shall not be undertaken prior to completion of RUS's environmental

review process.

(4) For a proposed project that only involves internal

modifications or equipment additions to buildings or other structures

(for example, relocating interior walls or adding computer facilities)

and/or external changes or additions to existing buildings, structures

or facilities requiring physical disturbance of less than 0.4 hectare

(0.99 acre) the environmental information normally required is:

(i) A description of the internal modifications or equipment

additions, and the external changes or additions to existing buildings,

structures or facilities being proposed, the size of the site in

hectares, and the general nature of the proposed use of the facilities

once the project is completed, including any hazardous materials to be

used, created or discharged, any substantial amount of air emissions,

wastewater discharge, or solid waste that will be generated.

(k) A completed Standard Form 424, ``Application for Federal

Assistance,'' along with a board of directors resolution authorizing

the grant request.

(l) Evidence of the applicant's legal existence and authority to

enter into a grant agreement with RUS and perform activities proposed

under the grant application.

(m) Evidence that the applicant is not delinquent on any obligation

owed to the Federal government (7 CFR 3015 and 3016).

(n) Evidence that the applicant has consulted with the state

director, RECD, concerning the availability of other sources of funding

available at the state or local level.

(o) Supplemental information. The applicant should provide any

additional information it considers relevant to the project and likely

to be helpful in determining the extent to which the proposed project

would further the purposes of this subpart. This includes RUS Form 479-

A, ``Distance Learning and Telemedicine Technical Questionnaire.''

(p) Additional information requested by RUS. The applicant must

provide any additional information the Administrator may consider

relevant to the application and necessary to adequately evaluate the

application and make grant decisions. The Administrator may also

request modifications or changes, including changes in the amount of

funds requested, in any proposal described in a grant application

submitted under this part.

Sec. 1703.108 Conflict of interest.

At any time prior to the disbursement of a grant awarded under this

subpart, the Administrator may disqualify an otherwise eligible project

whenever, in the judgment of the Administrator, the project would

create a conflict of interest or the appearance of a conflict of

interest. The Administrator will notify the applicant in writing of

his/her intention to disqualify the project under this section and set

forth the basis for his/her determination that a conflict of interest

or appearance exists. Thereafter, the applicant will have 30 days from

the date of such notice to file a written response with the

Administrator. If the Administrator receives the applicant's response

within the 30-day period, the Administrator will consider the

information contained therein before making a final determination

whether to disqualify the project. The Administrator will promptly

notify the applicant of the final determination whether a conflict of

interest or appearance of a conflict exists. If the determination is

affirmative, the notice will also advise the applicant whether the

project is disqualified or conditionally disqualified. If the project

is conditionally disqualified, the notice will state under what

circumstances the project may continue to be eligible for

[[Page 16691]]

assistance under this subpart. The Administrator's decision under this

section will be final.

Sec. 1703.109 Determining what is rural.

The RUS Administrator shall determine whether a project service

area possesses sufficient characteristics to be considered a rural area

for purposes of this subpart. The Administrator shall make such

determination on the following basis:

(a) The project service area is located within nonmetropolitan

counties included in one of the lowest four categories (6-9) of the ERS

Rural-Urban Continuum Scale (rural-urban continuum) as set forth in

Appendix A to this subpart. Those categories are as follows:

(1) Aggregate urban population (sum of cities, towns, villages or

other incorporated communities of 2,500 or more) of less than 20,000,

adjacent to a metropolitan area (category 6);

(2) Urban population of less than 20,000, not adjacent to a

metropolitan area (category 7);

(3) Completely rural (no cities, towns, villages or other

incorporated areas of 2,500 or greater) adjacent to a metropolitan area

(category 8);

(4) Completely rural, not adjacent to a metropolitan area (category

9).

(b) In the case of project service areas not categorized as rural

areas under paragraph (a) of this section, consideration will be given

to the degree of rurality the area possesses taking into account such

factors as:

(1) Whether the project service area is located within the

boundaries of an incorporated community of 2,500 persons or more as

determined by the U.S. Census Bureau;

(2) Where the county or counties in which the project service area

is located rank on the rural-urban continuum;

(3) Whether natural geographic barriers or an absence of roads may

impede access from the project service area to metropolitan areas;

(4) Whether the county is a spatially large county and the project

service area is not within the commuting area of an urbanized area; and

(5) Whether the economy of the project service area centers on

natural resource-based activities such as farming, ranching, mining, or

timber production, or is highly specialized.

more than one county, at least one of which is not categorized as rural

under paragraph (a) of this section, RUS will determine the rurality of

the project service area case-by-case using factors such as those

identified in paragraph (b) of this section. To the extent practicable,

in the case of a project that is expected to benefit residents of urban

areas as well as residents of rural areas, instead of rejecting an

application because it benefits areas that are not rural, RUS may

allocate the grant accordingly to assure that grant funds primarily

benefit only residents of rural areas.

(d) If a determination made under this section results in the

denial of an application, the applicant may appeal such determination

to the Administrator in writing setting forth the reasons why it

disagrees. Thereafter, the Administrator will review the determination

and decide in writing whether to sustain, reverse or modify the

original determination. The Administrator's determination will be

final. A copy of the Administrator's decision will be furnished

promptly to the applicant.

Secs. 1703.110-1703.112 [Reserved]

Sec. 1703.113 Application filing dates, location, processing, and

public notification.

(a) Applications for funding under this subpart shall be submitted

to the Administrator, Rural Utilities Service, U.S. Department of

Agriculture, 14th and Independence Avenue, SW., Washington, DC 20250-

1500. Applications should be marked ``Attention: Assistant

Administrator, Telecommunications Program''.

(b) Applications will be reviewed for eligibility and considered

for funding on a quarterly or annual basis. The Administrator will

publish a notice in the Federal Register indicating the deadline(s) for

application submissions and the amount of available grant funds.

with Secs. 1703.107 and 1703.114, and notify the applicant, within 15

working days of the receipt of the application, of the results of this

review, citing any information which is incomplete. To be considered,

the applicant must submit the remaining information postmarked no later

than the application filing deadline set forth in paragraph (b) of this

section, or 15 working days from the receipt of RUS's letter, whichever

is the later date. If the applicant fails to submit such information to

complete the application in accordance with Sec. 1703.107, the

application shall be denied and returned to the applicant.

(d) After receipt of all completed applications, the Administrator

will publish notice in the Federal Register of all completed

applications received for funding under this subpart. The Administrator

will also make those applications available for public inspection at

the U.S. Department of Agriculture, 14th and Independence Avenue, SW.,

Washington, DC. For purposes of this paragraph, applications include

any information not protected by the Privacy Act of 1974, 5 U.S.C.

552a, and any other information that has not been designated as

proprietary information by the applicant.

(e) For instances where multiple applicants are necessary to carry

out a project due to project feasibility or applicant authorities,

multiple applications may be submitted jointly by the applicants. The

applicants must clearly mark or otherwise identify any information in

the application it deems proprietary.

(f) The applicant must submit an original and three copies of a

completed application. The applicant must also submit a copy of the

application to the State government point of contact at the same time

it submits an application to RUS. All applications must include the

information described in Sec. 1703.107.

Secs. 1703.114-1703.116 [Reserved]

Sec. 1703.117 Criteria for scoring applications.

(a) Criteria. The criteria in this section will be used by the

Administrator to score applications that have been determined to be in

compliance with the requirements of this subpart. There are six major

criteria for scoring applications:

(1) the financial need of the community and the project;

(2) the financial composition of the project;

(3) the comparative rurality of the proposed project service area;

(4) the documented need for services;

(5) connectivity with outside networks; and

(6) the cost effectiveness of the design.

(b) Selection. Applications will be selected for funding based on

scores, availability of funds, and the provisions of Sec. 1703.118. The

Administrator will make determinations regarding the reasonableness of

all numbers; dollar levels; rates; the nature of the project; cost;

location; and other characteristics of the application and the proposed

project to determine the number of points assigned to an application

for all selection criteria. Joint applications submitted by multiple

applicants as set forth in Sec. 1703.114 will be rated as a single

application.

per capita personal income in the county or counties where the project

or the beneficiaries are located to the national

[[Page 16692]]

per capita personal income levels--up to 80 points.

(1) If the per capita personal income level in the county where the

grant beneficiaries will be located:

(i) Is less than or equal to 80 percent of the national per capita

personal income level, 80 points, the maximum number of points;

(ii) Is greater than 80 percent and less than or equal to 90

percent of the national per capita personal income level--60 points;

(iii) Is greater than 90 percent and less than or equal to 100

percent of the national per capita personal income level--30 points;

(iv) Is greater than 100 percent and less than or equal to 110

percent of the national per capita personal income level--5 points;

(v) Exceeds the national per capita personal income level by 110

percent--0 points.

(2) If the project will serve grant beneficiaries in several

counties, the Administrator will use an unweighted mean of the counties

for the comparison.

(3) RUS will use the most recent annual per capita personal income

levels it has obtained from the Bureau of Economic Analysis, U. S.

Department of Commerce, or other government sources and processed into

a suitable format.

(d) Financial composition of project. A comparison of the ability

of the applicant to contribute financially to the project, and to

secure other non-Federal sources of funding. Criteria include:

(1) Evidence of additional financial support for the project from

non-Federal sources above the applicant's required 42.85 percent

matching of the RUS grant as set forth in Sec. 1703.104; the applicant

must include evidence from authorized representatives of the sources

that the funds are available and will be used for the proposed

project--up to 60 points.

(i) Matching for allowable grant purposes less than or equal to 50

percent of the RUS grant--0 points;

(ii) Matching for allowable grant purposes greater than 50 percent,

but less than or equal to 100 percent of the RUS grant--10 points;

(iii) Matching for allowable grant purposes greater than 100

percent, but less than or equal to 150 percent of the RUS grant--20

points;

(iv) Matching for allowable grant purposes greater than 150

percent, but less than or equal to 200 percent of the RUS grant--30

points;

(v) Matching for allowable grant purposes greater than 200 percent,

but less than or equal to 250 percent of the RUS grant--40 points;

(vi) Matching for allowable grant purposes greater than 250

percent, but less than or equal to 300 percent of the RUS grant--50

points;

(vii) Matching for allowable grant purposes greater than 300

percent of the RUS grant--60 points;

(2) Bonus Points For Community Involvement. In addition to the

points allocated under Sec. 1703.117(d)(1), bonus points will be scored

for funding supplied by local sources. Criteria include:

(i) Proportion of non-Federal sources of funding supplied by local

sources above the applicant's required 42.85 percent matching of the

RUS grant. For purposes of this paragraph, local funding sources shall

constitute any for-profit or non-profit entity or entities which derive

income from the area to be served by the proposed project, and any

village, town, county, regional, or other local governmental or public

entity whose jurisdiction includes at least part of the proposed

project service area. A local funding source shall not include a state

or Federal governmental entity. The applicant shall provide evidence

from authorized local representatives that the funds are available and

will be used for the proposed project--up to 20 points.

(A) Less than or equal to 50 percent of the RUS grant supplied by

local funding sources--0 points;

(B) Greater than 50 percent, but less than or equal to 100 percent

of the RUS grant supplied by local funding sources--5 points;

of the RUS grant supplied by local funding sources--10 points;

(D) Greater than 150 percent, but less than or equal to 200 percent

of the RUS grant supplied by local funding sources--15 points;

(E) Greater than 200 percent of the RUS grant supplied by local

funding sources--20 points, the maximum number of points;

(e) The Comparative Rurality of the Proposed Project Service Area.

(1) This criterion is used after a project service area has been

determined eligible in accordance with Sec. 1703.109. The methodology

contained in this section is used to evaluate the relative rurality

(i.e., population and isolation) of service areas for various projects.

Under this system, the end user sites and hubs (as defined in

Sec. 1703.102) contained within the proposed project service area are

identified. Then, that service area is given a score according to the

characteristics of the county(ies) in which the end user sites are

located. Evaluation is based on the population of the county or

counties, and the location of the county or counties relative to

metropolitan statistical areas. This system incorporates a framework

based on the classification of nonmetropolitan counties by urbanization

and proximity to metropolitan areas, developed by analysts and

demographers at the USDA Economic Research Service (ERS), as set forth

in Appendix A to this subpart.

(2) The following definitions are used in the evaluation of

rurality:

(i) Metropolitan statistical area (MSA)--as defined by the Office

of Management and Budget (OMB), an MSA includes core counties

containing a city of 50,000 or greater population or containing several

smaller cities totaling 50,000 or greater population in an urbanized

area and a total population of at least 100,000. Additional contiguous

counties are included in the MSA if they are economically and socially

integrated with the core county.

(ii) Metropolitan County--as defined by OMB, a metropolitan county

is part of an MSA and contains a place, or two adjoining places,

totaling at least 50,000 in population, and has residents who are

economically and socially integrated with a metropolitan core.

(iii) Adjacency to Metropolitan area--the proximity of a county to

an MSA measured by a shared boundary with an MSA, and having at least 2

percent of employed county residents commuting to MSA's for employment.

(3) If the end user site(s) for the project are located in a

nonmetropolitan county or counties (ERS Rural--Urban Continuum Scale

categories 4-9 as set forth in Appendix A to this subpart), the

applicant will receive points as follows:

(i) With an ERS category of 9--60 points, the maximum number of

points;

(ii) With an ERS category of 8--55 points;

(iii) With an ERS category of 7--40 points;

(iv) With an ERS category of 6--35 points;

(v) With an ERS category of 5--20 points;

(vi) With an ERS category of 4--15 points; or

(vii) With an ERS category of 0 through 3 (metropolitan counties)--

0 points.

(4) If all the end user sites in a proposed network or system are

located in a single county or in multiple counties which have the same

characteristics, a score will be assigned directly from one of the

categories set forth in Sec. 1703.117(e).

(5) If end user sites are located in multiple counties with

different characteristics, a weighted average will

[[Page 16693]]

be calculated using the methodology set forth in Appendix B to this

subpart.

(6) The applicant shall use the ``Rurality Calculation Table,'' a

facsimile of which is attached as Appendix B to this subpart. Copies of

the Rurality Calculation Table may be obtained from the Assistant

Administrator, Telecommunications Program, RUS, in Washington, DC, or

at the RECD state office. The ERS Rural--Urban Continuum Scale is

available on the Internet; see the address in Appendix B to this

subpart.

(f) Documented need for services. (1) This criterion will be used

by the Administrator to score applications based on the documentation

submitted in the support of the grant application that reflects the

need for the services proposed by the project. The applicant should

indicate whether or not the proposed services could be provided if RUS

grant funds were not available. Up to 60 points can be assigned to this

criterion.

(2) The Administrator will consider the extent to which the need

for improved educational or medical services in the proposed rural area

compares to other regions. RUS will also consider any support by

recognized experts in the related educational or medical field, and

documentation substantiating the educationally and/or medically

underserved nature of the applicant's proposed service area. The

Administrator will consider the extent of the applicant's documentation

showing:

(i) the justification for specific educational and/or medical

services which are needed and will provide direct benefits to rural

residents;

(ii) that rural residents, and other beneficiaries, desire the

educational and/or medical services to be provided by the project (a

strong indication of need is the willingness of local end users or

institutions to pay, to the extent possible, for proposed services);

(iii) the applicant's inability to pay for the proposed project

without grant funds, given the financial strength of the applicant, its

partners, or subsidiaries, as described in Sec. 1703.107(e)(1);

(iv) the projected outcomes as set forth in the Executive Summary

detailed in Sec. 1703.107; and

(v) the project's development and support based on input from the

local residents and institutions.

(vi) the extent to which the application is consistent with the

State strategic plan prepared by the Rural Development State Director

of the United States Department of Agriculture.

(3) Examples of the need for medical services could include rural

physicians and medical professionals inability to access support

functions, such as consulting with others on a diagnosis or access to

the latest recommendations in treatment procedures and techniques, up-

to-date health-care research, or continuing medical studies. Other

medical needs could be to retain more patients at the local hospital or

medical facility in order to prevent the closure of the rural hospital

or medical facility.

(g) Connectivity with outside networks. (1) This criterion will be

used by the Administrator to score applications based on the

documentation submitted in support of the grant application that

reflects the connectivity of the proposed projects with other

educational and/or medical networks. Up to 25 points can be assigned to

this criterion.

(2) Consideration will be given to the extent that the proposed

project will interconnect with other existing networks at the regional,

statewide or national levels. RUS believes that to the extent possible,

educational and medical networks should be designed to connect to the

widest practicable number of other networks that expand the

capabilities of the proposed project, thereby affording rural residents

opportunities that may not be available at the local level.

(3) Consideration will also be given to facilities constructed with

federal financial assistance, particularly financial assistance under

this Chapter provided to entities other than the applicant, will be

utilized to extend or enhance the benefits of the proposed project.

(h) Cost effective design. (1) This criterion will be used by the

Administrator to score applications based on the documentation

submitted in the support of the grant application that reflects the

cost efficiency of the project design. Up to 15 points can be assigned

to this criterion.

(2) Consideration will be given to the extent that the proposed

technology or technologies for delivering the proposed educational and/

or medical services for the project service area are the most cost

effective for the type of project proposed. The Administrator will

consider the applicant's documentation comparing various systems and

technologies, and the choice of the applicant's system as being the

most cost-effective system. The Administrator will also consider the

applicant's documentation relating to buying or leasing options for

specific equipment. The application must contain information necessary

for the Administrator to use accepted analytical and financial

methodologies to determine whether the applicant is proposing the most

cost-effective option.

Sec. 1703.118 Other application selection and appeal provisions.

(a) Regardless of the number of points an application receives in

accordance with Sec. 1703.117, the Administrator may, based on his/her

review of the applications in accordance with the requirements of this

part:

(1) Limit the number of applications selected for projects located

in any one state during a fiscal year;

(2) Limit the number of selected applications for a particular

project; and

(3) Select an application receiving fewer points than another

higher scoring application if there are insufficient funds during a

particular funding period to select the higher scoring application;

provided, however, the Administrator may ask the applicant of the

higher scoring application if it desires to reduce the amount of its

application to the amount of funds available if, notwithstanding the

lower grant amount, the Administrator determines the project is

financially feasible in accordance with Sec. 1703.107(h) at the lower

amount.

(b) The Administrator will not approve a grant application if he/

she determines that:

(1) The applicant's proposal does not indicate financial

feasibility or is not sustainable in accordance with the requirements

of Sec. 1703.107(e)(1) and (2);

(2) The applicant's proposal indicates technical flaws, which, in

the opinion of the Administrator, would prevent successful

implementation, operation, or sustainability of the proposed project;

(3) Any other aspects of the applicant's proposal fails to

adequately address any requirements of this subpart or contains

inadequacies which would, in the opinion of the Administrator,

undermine the ability of the project to meet the general purpose of

this part or comply with policies of the Distance Learning and

Telemedicine Grant Program set forth in Sec. 1703.101.

grant award based on insufficient program funding for the fiscal year

in which the project is reviewed if the Administrator determines that,

notwithstanding a lower grant award, the project will show financial

feasibility in accordance with Sec. 1703.107(e), and the program

purposes set forth in Sec. 1703.100 can be met. RUS will discuss its

findings informally with the applicant and make every effort to

[[Page 16694]]

reach a mutually acceptable agreement with the applicant. Any

discussions with the applicant and agreements made with regard to a

reduced grant amount will be confirmed in writing, and these actions

shall be deemed to have met the notification requirements set forth in

paragraph (d) of this section.

(d) The Administrator will provide the applicant an explanation of

any determinations made with regard to paragraphs (b)(1) through (b)(3)

of this section prior to making final project funding selections for

the year. The applicant will be provided 15 days from the date of the

Administrator's letter to respond, provide clarification, or make any

adjustments or corrections to the project. If, in the opinion of the

Administrator, the applicant fails to adequately respond to any

determinations or other findings made by the Administrator, the project

will not be funded, and the applicant will be notified of this

determination.

(e) For Fiscal Year 1996 grant applications, RUS will notify all

grant applicants of the numerical scoring each complete grant

application received and the cutoff points needed to receive funding

for Fiscal Year 1996. If the grant application numerical scoring is

below the score necessary to obtain funding, the applicant may appeal

the numerical scoring to the Secretary in writing not later than 10

days after the applicant is notified of the scoring level. The

applicant must state the reason it is appealing the numerical scoring

and submit the reasons the application should be reconsidered. RUS will

allow 14 days after the close of the appeal period to make the final

grant selections for Fiscal Year 1996.

(f) RUS reserves the right to use other data it considers most

appropriate if ``county'' data is unavailable for a particular area. In

those cases, the Administrator will use data compiled on a basis of the

equivalent of a county in the state, such as a parish, or on another

basis that most approximates ``county'' level data.

Secs. 1703.119-1703.121 [Reserved]

Sec. 1703.122 Further processing of selected applications.

(a) During the period between the selection of the application and

the execution of implementing documents, the applicant must inform the

Administrator if the project is no longer viable or the applicant no

longer desires a grant for the project. If the applicant so informs the

Administrator, the selection will be rescinded and written notice to

that effect shall be sent promptly to the applicant.

(b) If an application has been selected and the nature of the

project changes, the applicant may be required to submit a new

application to the Administrator for consideration depending on the

degree of change. A new application will be subject to review in

accordance with this subpart. The selection may not be transferred to

another project.

project under the intergovernmental review process that are not

resolved within 3 months of the Administrator's selection of the

application, the Administrator may rescind the selection and written

notice to that effect will be sent promptly to the applicant.

(d) After an applicant has submitted such additional information,

if any, the Administrator determines is necessary for completing the

grant documents, the Administrator will send the documents to the

applicant to execute and return to RUS.

(1) The grant documents will include a letter of agreement and any

other legal documents the Administrator deems appropriate, including

suggested forms of certifications and legal opinions.

(2) The letter of agreement will, among other things, constitute

the Administrator's approval of funds for the project subject to

certain terms and conditions and include at a minimum, a project

description, approved purposes of the grant, the maximum amount of the

grant, supplemental funds to be provided to the project and certain

agreements or commitments the applicant may have proposed in its

application.

(e) Until the letter of agreement has been executed and delivered

by RUS and by the applicant, the Administrator reserves the right to

require any changes in the project or legal documents covering the

project to protect the integrity of the program and the interests of

the United States Government.

(f) If the applicant fails to submit, within 120 calendar days from

the date of the Administrator's selection of an application, all of the

information that the Administrator determines to be necessary to

prepare legal documents and satisfy other requirements of this subpart,

the Administrator may rescind the selection of the application and

written notice to that effect will be sent promptly to the applicant.

Secs. 1703.123-1703.125 [Reserved]

Sec. 1703.126 Disbursement of grant funds.

(a) For grants of $100,000 or greater, prior to the disbursement of

funds, the grantee, if it is not a unit of government, will provide

evidence of fidelity bond coverage as required by Sec. 3015.17 of this

title.

(b) Grant funds will be disbursed to grantees on a reimbursement

basis, or with unpaid invoices for the eligible purposes set forth in

this subpart, by the following process:

(1) An SF 270, ``Request for Advance or Reimbursement,'' will be

completed by the applicant and submitted to RUS not more frequently

than once a month; and

(2) After receipt of a properly completed SF 270, payment will

ordinarily be made within 30 days.

disbursed in advance of grant funds, or if the grantee agrees, on a pro

rata distribution basis with grant funds during the disbursement

period. Grantee will not be permitted to provide its contribution at

the end of the project.

Sec. 1703.127 Reporting and oversight requirements.

(a) A project performance activity report will be required of all

grantees on a semi-annual basis.

(b) A final project performance report will be required. It must

provide an evaluation of the success of the project in meeting the

objectives of the program. The final report may serve as the last semi-

annual report.

projects are completed in accordance with the approved scope of work

and that funds are expended for approved purposes. Grants made under

this part will be administered under, and are subject to parts 3015

through 3018 of this title.

(d) Grantees shall diligently monitor performance to ensure that

time schedules are being met, projected work by time periods is being

accomplished, and other performance objectives are being achieved.

Grantees are to submit an original and one copy of each report to RUS.

The project performance reports shall include, but not be limited to,

the following:

(1) A comparison of actual accomplishments to the objectives

established for that period;

(2) Reasons why established objectives were not met;

(3) A description of any problems, delays, or adverse conditions

which have occurred, or are anticipated, and which may affect the

attainment of overall project objectives, prevent the meeting of time

schedules or objectives, or preclude the attainment of particular

project work elements during established time periods. This disclosure

shall be accompanied by a

[[Page 16695]]

statement of the action taken or planned to resolve the situation; and

(4) Objectives and timetable established for the next reporting

period.

Sec. 1703.128 Audit requirements.

The grantee will provide an audit report in accordance with part

3015, subpart I, of this title. The audit requirements only apply to

the year(s) in which grant funds are received. Audits must be prepared

in accordance with generally accepted government auditing standards

(GAGAS) using publication, ``Standards for Audit of Governmental

Organization, Programs, Activities and Functions.''

Secs. 1703.129-1703.134 [Reserved]

Sec. 1703.135 Grant administration.

(a) The Administrator will review grantees, as necessary, to

determine whether funds were expended for approved purposes. The

grantee is responsible for ensuring that the project complies with all

applicable regulations, and that the grant funds are expended only for

approved purposes. The grantee is responsible for ensuring that

disbursements and expenditures of funds are properly supported by

invoices, contracts, bills of sale, canceled checks, or other

appropriate forms of evidence, and that such supporting material is

provided to the Administrator, upon request, and is otherwise made

available, at the grantee's premises, for review by the RUS

representatives, grantee's certified public accountant, the office of

Inspector General, U.S. Department of Agriculture, the General

Accounting Office and any other officials conducting an audit of the

grantee's financial statements or records, and program performance

under the grant awarded under this subpart. Grantees will be required

to permit RUS to inspect and copy any records and documents that

pertain to the project.

(b) Grants provided under this program will be administered under,

and are subject to parts 3015 and 3016 of this title, as appropriate.

Parts 3015 and 3016 of this title subject grantees to a number of

requirements which cover, among other things, financial reporting,

accounting records, budget controls, record retention and audits,

bonding and insurance, cash depositories for grant funds, grant related

income, use and disposition of real property and/or equipment purchased

with grant funds, procurement standards, allowable costs for grant

related activities, and grant close-out procedures.

Sec. 1703.136 Changes in project objectives or scope.

The grantee will obtain prior approval for any material change to

the scope or objectives of the approved project, including changes to

the scope of work or budget. Failure to obtain prior approval of

changes can result in suspension or termination of grant funds.

Sec. 1703.137 Grant termination provisions.

(a) Termination for cause. The Administrator may terminate any

grant in whole, or in part, at any time before the date of completion

of grant disbursement, whenever it is determined that the grantee has

failed to comply with the conditions of the grant. The Administrator

will promptly notify the grantee in writing of the determination and

the reasons for the termination, together with the effective date.

(b) Termination for convenience. The Administrator or the grantee

may terminate a grant in whole, or in part, when both parties agree

that the continuation of the project would not produce beneficial

results commensurate with further expenditure of funds. The two parties

will agree upon termination conditions, including the effective date,

and in the case of partial terminations, the portion to be terminated.

The grantee will not incur new obligations for the terminated portion

after the effective date, and will cancel as many outstanding

obligations as possible. The Administrator will allow full credit to

the grantee for the Federal share of the noncancelable obligations,

properly incurred by the grantee prior to termination.

Secs. 1703.138-1703.139 [Reserved]

Sec. 1703.140 Expedited telecommunications loans.

(a) General. (1) The Administrator will afford expedited

consideration and determination to an application for a loan or a

request for advance of funds submitted by a local exchange carrier

pursuant to section 2334(h) of the Act (7 U.S.C. 950aaa et seq.).

(2) Funds obtained through the expedited procedures established by

this section must be used primarily to provide advanced

telecommunications services in rural areas using a telecommunications

project that the Administrator has approved under this subpart.

(3) Only those elements of a telecommunications project that have

not been funded in whole, or in part, with a grant made under this

subpart are eligible for expedited consideration or determination under

this section.

(b) Expedited loan applications. (1) In order to qualify for

expedited consideration or determination under paragraph (a)(1) of this

section, the loan application must:

(i) Be from a local exchange carrier that will use the requested

funds for the purpose set forth in paragraph (a)(2) of this section;

(ii) Be a completed one that complies with the requirements of part

1737, subpart C, of this chapter; and

(iii) Be received concurrently with the related grant application

or within 14 days of the date notice of such application is published

in the Federal Register as set forth in Sec. 1703.113(d).113.

(2) Expedited consideration and determination of a qualifying

application for a loan under this section means that within 45 days of

receipt or 45 days of selection of the related grant application,

whichever occurs later, the Administrator will:

(i) Issue a characteristics letter, as set forth in part 1737,

subpart I, of this chapter, to the loan applicant; or

(ii) Inform the loan applicant that its application for a loan has

been denied.

consideration or determination under paragraph (a)(1) of this section,

the request for advance of funds must:

(i) Be from a local exchange carrier that will use the funds for

the purpose set forth in paragraph (a)(2) of this section;

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

approval pursuant to part 1737, subpart K, of this chapter; and

(iii) Be in compliance with the requirements of part 1744 of this

chapter.

(2) Expedited consideration and determination of a qualifying

request for advance of loan funds under this section means that the

Administrator will advance funds to the borrower within 45 days of

receiving a request which complies with the provision of this section.

Appendix A to Subpart D of Part 1703--ERS Rural--Urban Continuum Scale

ERS Rural--Urban Continuum Codes:

Metropolitan Counties

0--Central counties of metropolitan areas of 1 million

population or more.

1--Fringe counties of metropolitan areas of 1 million population

or more.

2--Counties in metropolitan areas of 250 thousand to 1 million

population.

3--Counties in metropolitan areas of less than 250 thousand

population.

[[Page 16696]]

Nonmetropolitan Counties:

4--Aggregate urban population (sum of cities, towns, villages or

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

adjacent to metropolitan area.

5--Aggregate urban population of 20,000 or more, not adjacent to

a metropolitan area.

6--Aggregate urban population of 2,500 to 19,999, adjacent to a

metropolitan area.

7--Aggregate urban population of 2,500 to 19,999, not adjacent

to a metropolitan area.

8--Completely rural (no cities, towns, villages or other

incorporated areas of 2,500 or greater) adjacent to a metropolitan

area.

9--Completely rural, not adjacent to a metropolitan area.

Notes: Metropolitan status is that announced by the Office of

Management and Budget in June 1993, when the current population

criteria were first applied to results of the 1990 Census. Adjacency

was determined by physical boundary adjacency and a finding that at

least 2 percent of the employed labor force in the nonmetropolitan

county commuted to metropolitan central counties.

Codes prepared in Rural Economy Division, Economic Research

Service, USDA. A listing of counties and corresponding codes are

available from ERS at the following address: Room 337, 1301 New York

Avenue, NW., Washington, DC 20005-4788, Phone: (202) 219-0534, or

through the Internet via the ERS Home Page or directly at the

following Internet address: gopher://usda.mannlib.cornell.edu:70/11/

data-sets/rural/89021

Appendix B to Subpart D of Part 1703--Rurality Calculation Table

Use the following table or similar worksheet to calculate

rurality if end user sites are located in multiple counties with

different characteristics. If more space is needed, use a separate

sheet of paper and attach it to this worksheet. For complete

instructions see Sec. 1703.117(e).

Abbreviations used in this Appendix:

RUCS=Rural--Urban Continuum Scale, as described in Sec. 1703.109 and

Appendix A of this subpart

EUS = End user site

1. List the specific location (city, village, township, etc.) of

each end user site to be funded using the RUS grant. List sites

separately even if sites are located in the same county. (A hub that

serves as an end user site is considered an end user site for

purposes of this rurality calculation. Only under that circumstance

will a hub be counted in the weighted average.)

2. Show the total number of residents to be served by the

project for each of the end user sites indicated above.

3. Divide the number of rural residents served at each end user

site by the total number of rural residents to be served by the

project. Show the result, rounded to the nearest two decimal places.

4. Enter the name of the county in which each end user site is

located.

5. Enter the RUCS code for each end user site. Note: RUCS codes

may be obtained from a variety of sources, including RUS, ERS, the

state office of RECD, the cooperative extension service at the land

grant university in your state, or through the Internet via the ERS

Home Page or directly at the following Internet address: gopher://

usda.mannlib.cornell.edu:70/11/data-sets/rural/89021.

6. Enter the number of points for each RUCS code: RUCS code 9=60

points, 8=55,7=40, 6=35, 5=20, 4=15, 3=0, 2=0, 1=0, 0=0.

7. Multiply the number calculated in step 3 by the points from

step 6. Enter this new number on the worksheet. Show the result,

rounded to the nearest two decimal places.

8. Total the results on line 7 across the end user site columns.

(I.e., add the amounts on line 7 for EUS 1, EUS 2, EUS 3, etc.).

This is the project's weighted average comparative rurality score.

----------------------------------------------------------------------------------------------------------------

EUS 1 EUS 2 EUS 3 EUS 4 EUS 5 EUS 6

----------------------------------------------------------------------------------------------------------------

1. Location of each end user site, listed

separately even if sites are located in the

same county.................................. ......... ......... ......... ......... ......... .........

2. Total number of residents to be served by

the project for each end user site........... ......... ......... ......... ......... ......... .........

3. Number of residents at end user site

divided by total number of residents served

by the project; rounded to nearest two

decimal places............................... ......... ......... ......... ......... ......... .........

4. County in which end user site is located... ......... ......... ......... ......... ......... .........

5. RUCS code for end user site................ ......... ......... ......... ......... ......... .........

6. Points for each RUCS code: 9=60, 8=55,

7=40, 6=35, 5=20, 4=15, 3=0, 2=0 1=O, 0=0.... ......... ......... ......... ......... ......... .........

7. Multiply line 3 by line 6 for each end user

site; rounded to nearest two decimal places.. ......... ......... ......... ......... ......... .........

----------------------------------------------------------------------------------------------------------------

8. Total the results on line 7 across the end user site columns. This is the project's weighted average

comparative rurality score.

Example of Rurality Calculation:

Greenbriar Valley Development Authority has submitted an

application for an interactive classroom network which includes a

hub in a metropolitan area and 3 end user sites, located in 3 rural

counties. The hub is located in a large city and is not utilized as

an end user site, so the hub will not be considered in the

calculation. The project serves a total of 9,000 residents at the 3

end user sites.

The first end user site is located in the town of Midway, in

Greenbriar County, which has an aggregate urban population of less

than 20,000, adjacent to a metropolitan area. Thus, it has a

category of 6 on the ERS Rural--Urban Continuum Scale. This site

serves 1,000 residents.

The second end user site is in Lewistown, in Lewis County, which

has an aggregate urban population of less than 20,000, not adjacent

to a metropolitan area. Thus, it has a category of 7 on the ERS

Rural--Urban Continuum Scale. This site serves 3,000 residents.

The third end user site is in the town of Rocky Creek, in

Fayette County, which has an aggregate urban population of 20,000 or

more, but not adjacent to a metropolitan area. Thus, it has a

category of 5 on the ERS Rural--Urban Continuum Scale. This site

serves 5,000 residents.

Step (1). Calculate the weighted average for each end user site.

Site 1 (Midway site), 1,000/9,000=``.11''; site 2 (Lewistown site),

3,000/9000=``.33''; and site 3 (Rocky Creek site), 5,000/

9,000=``.56'' (rounded to the nearest two decimal places).

Step (2). The counties identified are Greenbriar, Lewis and

Fayette.

Step (3). Greenbriar County, ERS Rural--Urban Continuum Scale

category 6=35 points; Lewis County, ERS Rural--Urban Continuum Scale

category 7=40 points; Fayette County, ERS Rural--Urban Continuum

Scale category 5=20 points.

Step (4). Midway site (Greenbriar County): 35 points x .11=3.85

points. Lewistown site (Lewis County): 40 points x .33=13.20 points.

Rocky Creek (Fayette County) site: 20 points x .56=11.20 points.

Step (5). 3.85+13.20+11.20=28.25 total weighted average score.

Appendix C to Subpart D of Part 1703--Environmental Questionnaire

Note: It is extremely important to respond to all questions

completely to ensure expeditious processing of the Distance Learning

and Telemedicine grant. The information herein is required by

Federal law.

Important: Any activity related to the project that may

adversely affect the environment or limit the choice of reasonable

development alternatives shall not be undertaken prior to the

completion of Rural Utilities Service's environmental review

process.

[[Page 16697]]

Legal Name of Applicant ______________________________-----------------

Signature

(Type/Sign/Date) ______________________________------------------------

The applicant's representative certifies, to the best of his/her

knowledge and belief, that the information contained herein is

accurate. Any false information may result in disqualification for

consideration of the grant or rescission of the grant.

I. Project Description--Detailing construction, including, but

not limited to, internal or external modifications of existing

structures, new building construction, and/or installation of

telecommunications transmission facilities (defined in 7 CFR

1703.102), including satellite uplinks or downlinks, microwave

transmission towers, and cabling.

1. Describe the portion of the project, and site locations

(including legal ownership of real property), involving internal

modifications, or equipment additions to buildings or other

structures (e.g., relocating interior walls or adding computer

facilities) for each site.

2. Describe the portion of the project, and site locations

(including legal ownership or real property) involving external

changes or additions to existing buildings, structures or facilities

requiring physical disturbance of less than .99 acres. List the size

of each individual site in acres and attach a diagram showing the

general layout of the proposed facilities for each site.

3. Describe the portion of the project, and site locations

(including legal ownership or real property), involving construction

of transmission facilities, including cabling, microwave towers,

satellite dishes; or, new construction of buildings; or, disturbance

of property of .99 acres or greater for each project site.

4. Describe the nature of the proposed use of the facilities,

and whether any hazardous materials, air emissions, wastewater

discharge or solid waste will result.

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

properties listed or eligible for listing in the National Register

of Historic Places, and identify any historic properties (The

grantee must supply evidence that the State Historic Preservation

Officer (SHPO) has cleared development regarding any historical

properties).

6. Provide information whether or not any facility(ies) or

site(s) are located in a 100-year floodplain. A National Flood

Insurance Map should be included reflecting the location of the

project site(s).

II. For projects which involve construction of transmission

facilities, including cabling, microwave towers, satellite dishes,

new construction of buildings, or physical disturbance of real

property of .99 acres or greater, the following information must be

submitted (7 CFR 1703.138(b)(2)).

1. A map (preferably a U.S. Geological Survey map) of the area

for each site affected by construction (include as an attachment).

2. A description of the amount of property to be cleared,

excavated, fenced or otherwise disturbed by the project and a

description of the current land use and zoning and any vegetation

for each project site affected by construction.

3. A description of buildings or other structures (i.e.,

transmission facilities), including dimensions, to be constructed or

modified.

4. A description of the presence of wetlands or existing

agricultural operations and/or threatened or endangered species or

critical habitats on or near the project site(s) affected by

construction.

5. Describe any actions taken to mitigate any environmental

impacts resulting from the proposed project (use attachment if

necessary).

Note: The applicant may submit a copy of any environmental

review, study, assessment, report or other document that has been

prepared in connection with obtaining permits, approvals or other

financing for the proposed project from State, local or other

Federal bodies. Such material, to the extent relevant, may be used

to meet the requirements herein.

Dated: March 29, 1996.

Inga Smulkstys,

Acting Under Secretary, Rural Economic and Community Development.

[FR Doc. 96-9294 Filed 4-15-96; 8:45 am]

BILLING CODE 3410-15-P

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.