Distance Learning and Telemedicine Loan and Grant Program

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1703

RIN 0572-AB31

Distance Learning and Telemedicine Loan and Grant Program

AGENCY: Rural Utilities Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: The Rural Utilities Service (RUS) is proposing to amend its

regulation concerning the Distance Learning and Telemedicine Grant

Program. This proposed rule will promulgate regulations for a new loan

program that will provide both loans and grants for distance learning

and telemedicine projects benefiting rural areas. The regulation is

necessary to implement a new loan program mandated by the Federal

Agriculture Improvement and Reform Act of 1996. The regulation will

establish, among other things, RUS' policy, the method of selecting

projects to receive loans and grants and allocating the available

funds, and the requirements for submitting an application for financial

assistance.

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

equivalent not later than May 16, 1997.

ADDRESSES: Submit written comments to Robert Peters, Assistant

Administrator, Telecommunications Program, Rural Utilities Service,

1400 Independence Ave., SW, STOP 1590, Room 4056, South Building,

Washington, DC 20250-1590. RUS requests a signed original and three

copies of all comments (7 CFR part 1700). All comments received will be

made available for public inspection at Room 4034, South Building, U.S.

Department of Agriculture, Washington, DC, 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,

STOP 1590, Room 4056, South Building, U.S. Department of Agriculture,

Washington, DC 20250-1590. Telephone number (202) 720-9554.

SUPPLEMENTARY INFORMATION:

Classification

This proposed rule has been determined to be significant and was

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

Order 12866.

Civil Justice Reform

This proposed rule has been reviewed under Executive Order 12988,

Civil Justice Reform. RUS has determined that this proposed rule meets

the applicable standards provided in Sec. 3. of the Executive Order.

Regulatory Flexibility Act Certification

In accordance with the requirements of the Regulatory Flexibility

Act (5 U.S.C. 601 et seq.), the following analysis of regulatory

options that would minimize any significant impact on small businesses

is provided. Title VII, section 704, of the Federal Agriculture

Improvement and Reform Act of 1996 (FAIR Act) (Public Law 104-127)

amended Chapter 1 of subtitle D of title XXIII of the Food,

Agriculture, Conservation, and Trade Act of 1990 by authorizing the

Secretary of Agriculture to make loans for distance learning and

telemedicine services in rural areas. This proposed rule would amend 7

CFR part 1703 to set forth the rules for this new loan program to be

administered by the RUS. The objectives of the proposed rule are to

encourage and improve telemedicine and distance learning services in

rural areas through the use of telecommunications, computer networks,

and related advanced technologies by students, teachers, medical

professionals, and rural residents.

The new RUS Distance Learning and Telemedicine loan program would

assist in providing modern telecommunication interconnectivity to

educational and medical facilities in rural America. Through 4 years of

Distance Learning and Telemedicine grant program activity,

approximately 704 rural schools, serving hundreds of thousands of rural

students, will gain access to improved educational resources through

the information superhighway by sharing limited teaching resources and

gaining access to libraries, training centers, vocational schools, and

other institutions located in metropolitan centers. For telemedicine,

approximately 500 rural medical facilities will gain access to improved

medical care through linkage with other rural hospitals and major urban

medical centers for clinical interactive video consultation, distance

training of rural health care providers, management and transport of

patient information, and access to medical expertise or library

resources.

This proposed regulation would set forth the rules for the new loan

program which would provide supplementary funding for distance learning

and telemedicine services in rural areas. The proposed regulation would

optimize the use of a limited source of grant and loan funding by

setting forth certain criteria which enables the Agency to distribute

the amount of funding available among the greatest number of applicants

in an economical, efficient, and orderly manner. The regulatory

alternative would be to not publish a regulation; however, the desired

regulatory purposes, to improve the access of people residing in rural

areas to improved educational, learning, training, and health care

services and to achieve the maximum use of funds available, would not

be achieved.

Entities eligible for assistance under this proposed rule would be

those entities that provide, or would provide, educational or health

care services or the facilities needed to provide these services

through the use of advanced telecommunications in rural areas. There is

no good estimate, at this time, of the number of entities that would be

affected by the proposed rule since the regulatory requirements would

apply to only those entities which choose to apply for the financial

assistance. However, RUS is estimating between 250 and 300 applications

would be submitted annually under this program and of those applicants,

between 30 and 50 grants and 100 and 120 loans or combination thereof

would be awarded. RUS' existing Distance Learning and Telemedicine

Grant Program, since its inception in 1993, has received nearly 900

applications for grant funding.

The various reporting and compliance requirements contained in this

proposed rule for applicants are necessary to determine such factors

as: eligibility; funding purposes; compliance with other Federal

regulations; project costs and alternative funding sources; project

feasibility; and need for educational and/or telemedicine services.

Those reporting requirements imposed on recipients of financial

assistance are necessary to ensure proper use of financing for approved

purposes. Some of the required reporting documents include information

generally maintained by certain types of entities (i.e., patients or

students served, financial statements, contracts, audits, etc.). The

information collected is in a format designed to minimize the paperwork

burden on small businesses and other small entities. The information

collected is the minimum needed by the Agency to approve financial

assistance and monitor the grantee or borrower performance.

The impact on small entities would be limited to the reporting and

compliance regulations which were designed to minimize the burden in

order to

[[Page 18679]]

encourage applicants. Even the compliance regulations are designed to

only assure the Agency that the financial assistance was utilized for

Act purposes and also are regulations for already imposed Government-

wide financial assistance of any kind.

Information Collection and Recordkeeping Requirements

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.

Chapter 35, as amended) RUS is requesting comments on the information

collection incorporated in this proposed rule.

Comments on this information collection must be received by June

16, 1997.

Comments are invited on: (a) Whether the proposed collection of

information is necessary for the proper performance of the functions of

the agency, including whether the information will have practical

utility; (b) The accuracy of the agency's estimate of the burden of the

proposed collection of information; (c) Ways to enhance the quality,

utility and clarity of the information to be collected; and (d) Ways to

minimize the burden of the collection of information on respondents,

including through the use of automated collection techniques or other

forms of information technology.

For further information contact Jonathan Claffey, Acting Deputy

Director, Advanced Telecommunications Services Staff, Rural Utilities

Service. Telephone: (202) 720-0530. Fax: (202) 720-2734.

Title: Distance Learning and Telemedicine Loan and Grant Program.

OMB Number: 0572-0096.

Type of Request: Revision of a previously approved information

collection.

Abstract: The RUS currently implements a program that provides

grants to rural community facilities, such as schools, hospitals, and

medical centers, to encourage, improve, and make affordable the use of

advanced telecommunications and computer networks to provide

educational and medical benefits to people living in rural areas and to

improve rural access to reliable facsimile, document and data

transmission, multi-frequency tone signaling services, 911 emergency

service with automatic number identification, interactive audio and

visual transmissions, voice mail services designed to record, store,

and retrieve voice messages, and other advanced telecommunications

services. RUS currently awards grants and is proposing to also award

loan funds to projects that will improve the quality of life of people

residing in rural areas by improving their access to improved

educational, training, and medical services; and, their access to

opportunities that rely on these advanced communication and information

technologies to provide such services. For grants, RUS funds up to 70

percent of any project selected, and requires at least a 30 percent

matching contribution from the grant applicant. For applicants who

voluntarily request loans, RUS proposes to fund up to 90 percent of any

project selected, and requires at least a 10 percent matching

contribution from the loan applicant.

In order for the public to receive the benefits of the new loan

program, they need to submit an application and the supporting

information for RUS to determine if they meet the eligibility

requirements. The Distance Learning and Telemedicine Loan and Grant

Program regulations (7 CFR 1703, subpart D), establish the method of

selecting projects to receive grants and loans, the method of

allocating the available funds, the method of determining the

beneficiaries of the program, and the requirements for the application

to be submitted to RUS, the method of notifying potential applicants of

maximum and minimum amounts of grant and loan funds that will be

considered for a single application.

Estimate of Burden: Public reporting burden for this collection of

information is estimated to average 2 hours per response.

Respondents: Business or other for profit and non-profit

institutions.

Estimated Number of Respondents: 300.

Estimated Number of Responses per Respondent: 29.

Estimated Total Annual Burden on Respondents: 18,248.

Copies of this information collection can be obtained from Dawn

Wolfgang, Program Support and Regulatory Analysis, Rural Utilities

Service. Telephone: (202) 720-0812.

Send comments regarding this information collection requirement, to

the Office of Information and Regulatory Affairs, Office of Management

and Budget, ATTN: Desk Officer, USDA, Room 10102, New Executive Office

Building, Washington, DC 20503, and to F. Lamont Heppe, Jr., Director,

Program Support and Regulatory Analysis, Rural Utilities Service, 1400

Independence Ave., SW., STOP 1522, Room 4034, South Building,

Washington, DC 20250-1522.

Comments are best assured of having full effect if OMB receives

them within 30 days of publication in the Federal Register. All

comments will become a matter of public record.

National Environmental Policy Act Certification

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.

Program Affected

The program described by this proposed rule is listed in the

Catalog of Federal Domestic Assistance programs under number 10.855,

Distance Learning and Telemedicine Loan and Grant Program. This catalog

is available on a subscription basis from the Superintendent of

Documents, the United States Government Printing Office, Washington, DC

20402.

Intergovernmental Review

This program is subject to the provisions of Executive Order 12372

that requires intergovernmental consultation with State and local

officials.

Unfunded Mandate

This rule contains no Federal mandates (under the regulatory

provisions of Title II of the Unfunded Mandate Reform Act) for State,

local, and tribal governments or the private sector. Thus today's rule

is not subject to the requirements of sections 202 and 205 of the

Unfunded Mandate Reform Act.

Background

Title 7, CFR part 1703, subpart D, was originally published in the

Federal Register February 26, 1993, (58 FR 11507), and became effective

March 29, 1993. The Agriculture Improvement and Reform Act of 1996

(FAIR Act) modified the Distance Learning and Telemedicine (DLT) grant

program by creating a loan component. The regulation was modified and

published as a final rule in the Federal Register on June 27, 1996, (61

FR 33622), to incorporate the changes to the grant program mandated by

the FAIR Act, excluding those provisions for administering a loan

program since funds appropriated in fiscal year 1996 could only be used

for grants. This proposed rule, while based in part on the existing

rule, will (1) establish criteria for loan and grant eligibility, (2)

simplify the determination for the comparative rurality calculation,

and (3) place

[[Page 18680]]

greater emphasis on the need for distance learning or telemedicine

services in the scoring criteria.

Criteria for Loan and Grant Eligibility

The Administrator determines the portion of the financial

assistance provided to a recipient that consists of grants and the

portion that consists of cost of money loans so as to result in the

maximum feasible repayment to the government of the financial

assistance, based on the recipient's ability to repay and the full

utilization of the funds available.

RUS proposes to use the National School Lunch Program (NSLP) to

assist in determining the mix of grants, loans, and loan-grant

combinations for applicants requesting financial assistance. The extent

of participation by residents of an area in the NSLP is a widely

accepted measure of the relative well-being of the area. RUS believes

that using NSLP ratings in the allocation of grant and loan funds

furthers the FAIR Act's purpose of providing modern DLT services in the

most needy parts of rural America. A high rate of eligibility for

school lunch assistance indicates a low relative income in the area and

less ability to repay loans. Grants will be made available to only

those otherwise eligible applicants determined by the Administrator,

after review of the financial information furnished by the applicant,

to have the least ability to repay the full amount of the assistance.

RUS is proposing to use a subjective method to score, up to 45

points, documentation submitted to support ``the need for services and

benefits derived from services'' [see 1703.117(b)(1)]. RUS believes

that the need for services and the benefits derived from the services

should be a critical factor in determining which application will be

successful in obtaining financial assistance. RUS could not determine

an objective method to use in scoring this particular criterion due to

the nature of some of the benefits to be derived that are priceless,

such as lives saved, students attending higher education institutions,

etc. RUS would like to receive suggestions from commentors on any

objective method that could be used or indications from commentors that

the subjective method is acceptable.

The 1995 statistics for the NSLP indicate that the percentages to

be used to establish eligibility for loans and grants will result in

financial assistance in the form of loans for approximately 75 percent

of qualifying applications. However, before an applicant may be awarded

a loan, the applicant must be able to show that the loan will be repaid

within the repayment period and at the interest rate under which

financial assistance is offered. In addition, this proposed rule allows

for third party guarantees as evidence of an applicant's ability to

repay a loan. RUS believes that the use of third party secured loan

guarantees will provide adequate loan security and will increase the

number of successful applications for the loan program.

Rurality Calculation

The rurality calculation used in the existing regulation was based

on a scale which looked at the characteristics of an entire county

instead of the sites in which financial assistance being requested was

to be used. This methodology placed certain areas with ``rural''

characteristics, yet located in semi-urban counties, at a disadvantage.

The proposed methodology will address this situation by being more

``site'' specific when determining rural needs and characteristics. For

purposes of this determination, an area shall be considered rural if it

is included within the boundaries of any incorporated or unincorporated

city, village, or borough having a population not in excess of 10,000

inhabitants.

Need for Services

More emphasis has been placed on the need for services and benefits

derived from those services in the scoring criteria in this proposed

rule versus the existing rule. In seeking support for this criterion,

applicants may submit documentation explaining (1) the economic,

education or health care challenges facing the community, (2) proposed

plans to address those challenges, and (3) how financial assistance

will help and how the project could not be accomplished without RUS

funding. This scoring criterion seeks to measure the true ``outcomes''

of a proposed project and its derived benefits and therefore RUS

believes it merits increased scoring value. The points available for

this scoring criterion have been increased to represent 26 percent of

the total possible points available for any project.

List of Subjects in 7 CFR Part 1703

Community development, Grant programs--education, Grant programs--

health care, Grant programs--housing and community development, Loan

programs--education, Loan programs--health care, Loan 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 part 1703 continues to read as

follows:

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

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

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

Subpart D--Distance Learning and Telemedicine Loan and Grant Program

Sec.

1703.100 Purpose.

1703.101 Policy.

1703.102 Definitions.

1703.103 Applicant eligibility and allocation of funds.

1703.104 Allowable grant and loan funding percentage.

1703.105 Grant and loan purposes.

1703.106 In-kind matching provisions.

1703.107 Ineligible loan and grant purposes.

1703.108 Maximum and minimum sizes of a grant and a loan.

1703.109 The funding application.

1703.110 Conflict of interest.

1708.111 [Reserved]

1703.112 Determination of types of funding.

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 provisions.

1703.119 Appeal provisions.

1703.120--1703.121 [Reserved]

1703.122 Further processing of selected applications.

1703.123--1703.125 [Reserved]

1703.126 Disbursement of loan and grant funds.

1703.127 Reporting and oversight requirements.

1703.128 Audit requirements.

1703.129 Repayment of loans.

1703.130--1703.134 [Reserved]

1703.135 Grant and loan administration.

1703.136 Changes in project objectives or scope.

1703.137 Grant and loan termination provisions.

1703.138--1703.139 [Reserved]

1703.140 Expedited telecommunications loans.

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

Subpart D--Distance Learning and Telemedicine Loan and Grant

Program

Sec. 1703.100 Purpose.

The purpose of this subpart is to encourage and improve

telemedicine services and distance learning services in rural areas

through the use of telecommunications, computer networks, and related

advanced

[[Page 18681]]

technologies by students, teachers, medical professionals, and rural

residents.

Sec. 1703.101 Policy.

(a) RUS recognizes that the transmission of information is vital to

the economic development, education, and health of rural Americans. To

further this objective, RUS will award loans and grants under this

subpart to distance learning and telemedicine projects that will

improve the access of people residing in rural areas to improved

educational, learning, training, and health care services. Unless a

distinction is made in the various sections of this subpart, all

aspects of this subpart will apply to all funding requests.

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

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

distance learning and telemedicine services. RUS believes that

generally the need is greatest in economically challenged areas and

those requiring high costs to serve. This program is consistent with

provisions of the 1996 Telecommunications Act (Public Law 104-104, 110

Stat. 56) that designates telecommunications service discounts for

schools, libraries, and rural health care providers providing benefits

to rural end-users. RUS will take into consideration the community's

involvement in the project and the applicant's ability to leverage

grant funds based on its access to capital.

(c) RUS believes that the residents of rural areas and their local

institutions which 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.

(d) All rural institutions are encouraged to cooperate with each

other and with applicants and end users in promoting the program being

implemented under this subpart.

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

applicants in rural areas of the program being implemented under this

subpart.

(f) Financial assistance under this subpart will consist of grants

or cost of money loans, or both. The Administrator shall determine the

portion of the financial assistance provided to a recipient that

consists of grants and the portion that consists of cost of money loans

so as to result in the maximum feasible repayment to the Federal

Government of the financial assistance, based on the ability of the

recipient to repay and with the full utilization of funds made

available to carry out this subpart.

(g) The Administrator may provide a cost of money loan to entities

using telemedicine and distance learning services, and, to entities

providing or proposing to provide telemedicine service or distance

learning service to other persons at rates calculated to ensure that

the benefit of the financial assistance is passed through to the other

persons.

(h) The Administrator may provide a cost of money loan under this

subpart to a borrower of a telecommunications or electric loan under

the Rural Electrification Act of 1936. A borrower receiving a cost of

money loan under this subpart shall:

(1) Make the funds provided available, under any terms it so

chooses as long as the terms are no more stringent than the terms under

which it received the funding, to entities that qualify as distance

learning and/or telemedicine projects satisfying the requirements of

this subpart.

(2) Use the funds provided to acquire, install, improve, or extend

a system referred to in this subpart.

Sec. 1703.102 Definitions.

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

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

Administrator means the Administrator of the Rural Utilities

Service or his or her designee.

Applicant means an eligible organization which applies for funding

under this subpart.

Champion community means any community or area so designated under

the proper procedures.

Completed application means an application that includes all those

items specified in Sec. 1703.109 in form and substance satisfactory to

the Administrator.

Comprehensive rural telecommunications plan means the plan

submitted by an applicant in accordance with Sec. 1703.109(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 for which the distance learning and

telemedicine funding is provided. Each consortium shall be composed of

a minimum of two eligible entities that meet the requirements of

Sec. 1703.103.

Construct means to acquire, construct, extend, improve, or install

a facility or system.

Cost of money loan. The term cost of money loan means a loan made

under Title XXIII bearing interest at a rate equal to the then current

cost of money to the Federal Government, at the time the feasibility

study is completed, for loans of similar maturity not to exceed 10

years.

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 one area, whether rural or not, to students and/or

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.

DLT borrower means an entity that has outstanding loans under the

provisions of Title XXIII.

Economic useful life as applied to facilities financed under Title

XXIII means the number of years resulting from dividing 100 percent by

the depreciation rate (expressed as a percent) based on Internal

Revenue Service depreciation rules or recognized telecommunications

industry guidelines.

Eligible equipment means computer hardware and software, audio and

visual equipment, computer network components, telecommunications

terminal equipment, telecommunications transmission facilities, data

terminal equipment, inside wiring, interactive video equipment, or

other facilities that would further telemedicine services or distance

learning services. Land, buildings, or building construction are not

considered eligible equipment (see Sec. 1703.107(a)(10)).

Eligible organization means an incorporated entity that meets the

requirements of Sec. 1703.103.

Empowerment Zone and Enterprise Community (EZ/EC) means any

community whose designation as such

[[Page 18682]]

pursuant to 26 U.S.C. 1391 et seq. is in effect at the time RUS agrees

to provide financial assistance.

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, vocational and

adult training and education centers, libraries, 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 rural telemedicine program

through a project funded under this subpart.

End user site means a facility that is part of a network or

telecommunications system that is utilized by end users.

Financial assistance shall consist of grants, cost of money loans,

or both, made under Title XXIII.

Grant documents means the letter of agreement, including any

amendments and supplements thereto, between RUS and the grant

recipient.

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

purposes of Title XXIII.

Hub means control center of a network or telecommunications system.

Instructional programming means educational material, including

computer software, which would be used for educational purposes in

connection with eligible equipment but does not include salaries,

benefits, and overhead of medical or educational personnel.

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 orally

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.

Loan documents mean the loan agreement, note, and security

agreement, including any amendments and supplements thereto, between

RUS and the DLT or Telecommunications/Electric borrower.

Local exchange carrier means a commercial, cooperative or mutual-

type association, or public body that is engaged in the provision of

telephone exchange service or exchange access.

Matching funds means the applicant's funding contribution for

allowable purposes.

National School Lunch Program (NSLP) means the federally assisted

meal program established under the National School Lunch Act of 1946

(42 U.S.C. 1751).

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.

Rural community facilities means facilities such as schools,

libraries, learning centers, training facilities, hospitals, medical

centers, or similar facilities, primarily used by residents of rural

areas, that will use a telecommunications, computer network, or related

advanced technology system to provide educational and/or health care

benefits primarily to residents of rural areas.

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

States Department of Agriculture formerly known as REA. See 7 CFR

1700.1.

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

by the Administrator to be performed by the applicant using funding

provided under this subpart.

Secretary means the Secretary of Agriculture.

Technical assistance means:

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

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

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

information.

Telecommunications carrier means any provider of telecommunications

services.

Telecommunications/Electric borrower means an entity that has

outstanding electric or telephone RUS and/or Rural Telephone Bank loans

or loan guarantees under the provisions of the Act.

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 health care

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

of providing improved health care services primarily to residents of

rural areas.

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

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

Sec. 1703.103 Applicant eligibility and allocation of funds.

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

applicant must be organized in one of the following corporate

structures:

(1) An incorporated organization, partnership, Indian tribe and

tribal organization as defined in 25 U.S.C. 450b (b) and (c), or other

legal entity, including a municipal corporation or a private

corporation organized on a for-profit or not-for-profit basis, which

operates, or will operate, a school, college, university, learning

center, training facility, or other educational institution, including

a regional educational laboratory, library, hospital, medical center,

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

other than a state government entity that operates a rural community

facility, is not considered an eligible applicant; 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

[[Page 18683]]

(3) An incorporated organization, partnership, Indian tribe and

tribal organization as defined in 25 U.S.C. 450b (b) and (c), 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 in 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.

(c) A borrower of an electric or telecommunications loan under the

Rural Electrification Act of 1936 is eligible for a cost of money loan

only.

(d) All applicants for financial assistance, with the exception of

applicants requesting a loan and having the minimum required score,

will be ranked by the type of application (health care or educational)

and total points scored. Grant funds available for medical and

educational applicants will be allocated based on the total number of

medical and educational applications scoring in the top 50 percent of

all applications received. Applications will be ranked only in one

category based on the predominant use of the project.

Sec. 1703.104 Allowable grant and loan funding percentage.

(a) Financial assistance, except as noted in paragraph (b) of this

section, may be used by eligible organizations for distance learning

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

allowable purposes outlined in Sec. 1703.105 provided that no financial

assistance may exceed the maximum grant or loan amount for the year in

which the grant or loan is made.

(b) Cost of Money Loans requested by an applicant may be used by

eligible organizations for distance learning and telemedicine projects

to finance up to 90 percent of the cost of allowable loan purposes

outlined in Sec. 1703.105, provided that no loan may exceed the maximum

loan amount for the year in which the loan is made. Financial

assistance applications that do not request a loan and qualify for a

loan or combination loan and grant will be funded up to 70 percent of

the cost of allowable purposes.

Sec. 1703.105 Grant and loan purposes.

(a) Grants and loans shall be limited to costs associated with the

initial capital assets associated with the project. Grant and loan

funds as set out in the last sentence of this section shall not exceed

twenty percent (20 percent) of the requested financial assistance. The

following are allowable grant and loan purposes:

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

in Sec. 1703.102;

(b) Acquiring instructional programming; and

(c) Providing technical assistance and instruction for using

eligible equipment, including any related software; developing

instructional programming; providing engineering or environmental

studies relating to the establishment or expansion of the phase of the

project that is being financed with the financial assistance.

Sec. 1703.106 In-kind matching provisions.

(a) In-kind matching, the applicant's minimum funding contribution

(specified in Sec. 1703.104) for allowable purposes, is generally

required in the form of cash. However, in-kind contributions for the

purposes listed in Sec. 1703.105 may be substituted for cash.

(b) In-kind items listed in Sec. 1703.105 must be non-depreciated

or new assets with established monetary value. Manufacturers or service

providers discounts are not considered in-kind matching.

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

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

necessary to provide distance learning and/or telemedicine services to

rural residents at end user sites.

Sec. 1703.107 Ineligible loan and grant purposes.

(a) Without limitation, funding under this subpart will not be

provided:

(1) To cover the costs of installing or constructing

telecommunications transmission facilities, except as provided in

paragraph (c) of this section;

(2) 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;

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

educational personnel;

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

applicant or the project;

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

carrier or another telecommunications service provider;

(6) To duplicate facilities providing distance learning or

telemedicine services in place or to reimburse the applicant or others

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

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

under this program;

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

teachers and students or medical professionals who are located at the

same facility;

(9) For site development and the destruction or alteration of

buildings;

(10) For the purchase of land, buildings, or building construction;

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

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

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

approved; or

(13) Except for leases provided in Sec. 1703.105, to pay the cost

of recurring or operating expenses for the project.

(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.

(c) Loans can be used to cover the costs of telecommunications

transmission facilities if no telecommunications carrier will install

such facilities under the Act or through other financing procedures

within a reasonable time period and at a cost to the applicant that

does not jeopardize the feasibility of the project, as determined by

the Administrator.

Sec. 1703.108 Maximum and minimum sizes of a grant and a loan.

Applications for grants and loans to be considered under this

subpart will be subject to limitations on the proposed amount of

funding. The Administrator may establish the maximum amount of

financial assistance to be made available to an individual recipient

for each fiscal year under this subpart, by publishing notice of the

maximum amount in the Federal Register not more than 45 days after

funds are made available for the fiscal year to carry out this subpart.

The minimum size of a grant and/or loan is $50,000.

Sec. 1703.109 The funding application.

The following items comprise the required material that must be

submitted to RUS in support of the funding request:

[[Page 18684]]

(a) 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; and

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

costs for both the grant and/or loan funds and other sources of funds

for the project.

(b) Executive summary for the project. The applicant must provide

RUS a general project overview, verification of compliance with the

general requirements of this subpart, and documentation of eligibility.

The executive summary shall contain the following 9 categories:

(1) A description of why the project is needed.

(2) An explanation of how the applicant will address the need cited

in paragraph (b)(1) of this section, why the applicant requires

financial assistance and types of educational and/or medical services

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

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

Sec. 1703.103.

(4) An explanation of the total cost of the project including a

breakdown of the RUS funding required and the source of funding for the

remainder of the project.

(5) A statement that the project is either a 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 general overview of the telecommunications system to be

developed, including the types of equipment, technologies, and

facilities used.

(7) 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.

(8) The applicant must certify that facilities using financial

assistance do not duplicate adequate established telemedicine services

or distance learning services. RUS will make the final determination

whether or not financial assistance requested by an applicant will

duplicate such adequate established services.

(9) A listing of the location of each end user site [city, town,

village, borough or rural area plus the state] discussing how the

appropriate National School Lunch Program eligibility percentage was

determined in accordance with Sec. 1703.112. These percentages may be

obtained from the State or local organization that administers the

program and must be certified by that organization as being correct.

(c) Financial Information. The applicant must provide financial

information to support the need for the funding requested for the

project. It must show its financial capacity to carry out the proposed

work, and show project feasibility. For educational institutions

participating in a project application (including all members of a

consortium), the financial data must reflect revenue and expense

reports and balance sheet reports, reflecting net worth, for the most

recent annual reporting period preceding the date of the application.

For medical institutions participating in a project application

(including all members of a consortium), the financial data must

include income statement and balance sheet reports, reflecting net

worth, for the most recent completed fiscal year preceding the date of

the application. When the applicant is a partnership, company,

corporation or other entity, current balance sheets, reflecting net

worth, 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,

reflecting net worth, 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.

(1) Applicants must include sufficient pro-forma financial data

which adequately reflects the financial capability of project

participants and the project as a whole to continue a sustainable

project for a minimum of 10 years after completion of the project. This

documentation should include sources of sufficient income or revenues

to pay 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.

(2) For applicants requesting a loan and applicants who qualify for

a loan or a combination loan/grant in accordance with Sec. 1703.112,

the documentation must demonstrate the ability to repay the loan. RUS

will consider a secured loan guarantee by a third party as evidence of

the ability of the applicant to repay a loan.

(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, including cost saving, of the financial

assistance is passed through to the other persons receiving

telemedicine or distance learning services.

(5) For RUS telecommunications and electric borrowers applying for

a cost of money loan, the only financial information required in

support of that application is the respective most recent Annual Report

to RUS (i.e. RUS Form 479, Form 7, or Form 12).

(d) 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.

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

provide evidence, in form and substance satisfactory to the

Administrator, that all funds in addition to funds provided under this

subpart are committed and will be used for the proposed project.

(f) Telecommunications System Plan. A Telecommunications System

Plan, consisting of the following, is required. The items in paragraphs

(f)(4) and (5) of this section are needed only when the applicant is

requesting loan funds for telecommunications transmission facilities:

(1) 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.

(2) 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

[[Page 18685]]

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 RUS

financial assistance.

(3) A description of the consultations with the appropriate

telecommunications carriers (including other interexchange carriers,

cable television operators, enhanced service providers, providers of

satellite services and telecommunications equipment manufacturers and

distributors) and the anticipated role of such providers in the

proposed telecommunications system.

(4) Results of discussion with local exchange carriers serving the

project area addressing concerns in Sec. 1703.107(c).

(5) 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.

(g) 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 Sec. 1703.100 and

Sec. 1703.101 and the proposed scope of work.

(h) Compliance with other Federal statues and regulations. The

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

other Federal statues 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 if clearing

house(s) exists for the state(s) in which project is located; and

(8) Restrictions on lobbying. For an application for funding 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).

(i)(1) Environmental impact and historic preservation. The

applicant must provide details of the project's impact on the

environment and historic preservation. Grants and loans made under this

part are subject to 7 CFR part 1794 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 7 CFR 1794.1.

The application shall contain a separate section entitled

``Environmental Impact of the Project.''

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

appendix A 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.

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

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

the funding request.

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

enter into a grant and/or loan agreement with RUS and perform

activities proposed under the grant or loan application.

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

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

(m) Evidence that the applicant has consulted with the USDA State

Director, Rural Development, concerning the availability of other

sources of funding available at the state or local level.

(n) Evidence from the USDA State Director, Rural Development, that

the application conforms with the State strategic plan as prepared

under section 381D of the Consolidated Farm and Rural Development Act 7

U.S.C. 1921 et seq.). The applicant should indicate if such a plan does

not exist.

(o) A depreciation schedule covering all assets of the project.

Those assets for which financial assistance is being requested should

be clearly indicated.

(p) 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.

(q) 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 funding decisions. The Administrator may also

request modifications or changes, including changes in the amount of

funds requested, in any proposal described in an application submitted

under this subpart.

Sec. 1703.110 Conflict of interest.

At any time prior to the disbursement of a grant or loan awarded

under this subpart, the Administrator may disqualify an otherwise

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

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

conflict of interest. The Administrator will notify the applicant in

writing of his/her intention to disqualify the project under this

section and set forth the basis for his/her determination that a

conflict of interest or appearance exists. Thereafter, the applicant

will have 30 days from the date of such notice to file a written

response with the Administrator. If the Administrator receives the

applicant's response within the 30-day period, the Administrator will

consider the information contained therein before making a final

determination whether to disqualify the project. The Administrator will

promptly notify the applicant of the final determination whether a

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

determination is affirmative, the notice will also advise the applicant

whether the project is disqualified or conditionally disqualified. If

the project is conditionally disqualified, the notice will state under

what circumstances the project may continue to be eligible for

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

section will be final.

Sec. 1703.111 [Reserved]

Sec. 1703.112 Determination of types of funding.

(a) To maximize the use of available funding and to obtain the

maximum repayment to the Federal Government, RUS will determine if an

applicant will

[[Page 18686]]

be awarded a grant, loan or a combination of both loans and grants

based upon the following:

(1) The percentage of students eligible to participate in the

National School Lunch Program in the areas where the end user sites

comprising the project are located; and

(2) The applicant's ability to pay for the project.

(b) The methodology contained in this section will be used to

evaluate the relative financial need of the applicant, community, and

project. All applicants are required to provide the applicable

percentage of students eligible to participate in the National School

Lunch Program for each end user site which must be certified as being

correct by the appropriate State or local organization administering

the program. The type of financial assistance will be determined as

follows:

(1) If the end user site(s) for the project have, or are located in

school districts which have, from 0-32 percent student eligibility in

the National School Lunch Program, the project qualifies for a loan.

(2) If the end user site(s) for the project have, or are located in

school districts which have, from 33-60 percent student eligibility in

the National School Lunch Program, the project qualifies for a loan and

may be eligible for some grant funds.

(3) If the end user site(s) for the project have, or are located in

school districts which have, from 61-100 percent student eligibility in

the National School Lunch Program, the project qualifies for a grant.

The applicant may indicate its desire to be considered for a loan or a

combination loan and grant if denied a grant provided the financial

data required in Sec. 1703.109(c) indicates the ability to repay a

loan. Grant applicants should indicate if they desire to be considered

for a loan.

(c) The following guidelines will be used to determine the

applicable National School Lunch Program eligibility percent for a

particular end user site:

(1) Public schools or non profit private schools of high school

grade or under will use the actual eligibility percentage for that

particular school.

(2) Schools and institutions of higher learning ineligible to

participate in the National School Lunch Program and non-school end

user sites (medical facilities, libraries, etc.) will use the

eligibility percentage of all students in the school district where the

end user will be located.

(d) If all the end user sites in a proposed network or system fall

within the same percentile category, the project will be eligible for

the type of financial assistance set forth in paragraph (b) of this

section.

(e) If end user sites fall within different percentile categories

the eligibility percentages associated with each end user site will be

averaged to determine the percentile category and type of financial

assistance the applicant is eligible for. For purposes of averaging, if

a hub is also utilized as an end user site, the hub will be considered

as an end user site.

(f) For those applicants which qualify for a combination loan/

grant, the Administrator will determine the amount of grant funding the

applicant will receive, if any, based upon analysis of the financial

condition of the applicant as reflected by the information submitted

under Sec. 1703.109(c). The minimum amount of grant funding will be

$5,000.

(g) RUS will submit a letter to those applicants being offered

financial assistance in the form of a loan, or a combination of a loan

and grant, outlining terms and conditions of such assistance. The

applicant will have 15 days from the date of the letter to accept the

terms and conditions in the letter. If the applicant fails to respond

within this time the Administrator may withdraw the offer of financial

assistance and the applicant will have no right to appeal the

withdrawal.

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, 1400 Independence Avenue, SW., STOP 1590, Washington, DC

20250-1590. Applications should be marked ``Attention: Assistant

Administrator, Telecommunications Program''.

(b) Applications for loans can be submitted at any time. RUS will

review each application for completeness in accordance with

Sec. 1703.109, 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 for loan funds during

the fiscal year (FY) that the application is submitted, the applicant

must submit any information needed to complete the application by June

30. If this review concludes that a loan is feasible and the

application receives the required minimum number of points as

determined using the scoring criteria in Sec. 1703.117, the

Administrator will immediately process the application. The minimum

number of points required for a loan application to be immediately

processed will be published in the Federal Register each fiscal year.

(c) Applications requesting grant funds must be submitted to RUS to

arrive not later than May 31, 1997, if the applications are to be

considered during FY 1997. Beyond FY 1997, all applications requesting

grant funds must be submitted to RUS to arrive not later than April 30

if the applications are to be considered during the fiscal year the

application is submitted. It is suggested that applications be

submitted prior to the above deadline to ensure they can be reviewed

and considered complete by the deadline. RUS will review each

application for completeness in accordance with Sec. 1703.109, 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 for grant funds, the applicant

must submit the information to complete the application by May 31 in FY

97 and April 30 beyond FY 97. If the applicant fails to submit such

information by the appropriate deadline, the application will be

considered during the next fiscal year.

(d) The Administrator will publish, at the end of each fiscal year,

a notice in the Federal Register of all completed applications

receiving funding under this subpart. The Administrator will also make

those applications available for public inspection at the U.S.

Department of Agriculture, 1400 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) All applicants must submit an original and two copies of a

completed application. A grant applicant must also submit a copy of the

application to the State government point of contact, if one has been

designated for the state, at the same time it submits an application to

RUS. All applications must include the information described in

Sec. 1703.109.

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.

[[Page 18687]]

Applicants shall address the following criteria:

(1) The need for services and benefits derived from services;

(2) The comparative rurality of the proposed project service area;

(3) The ability to leverage resources;

(4) Innovativeness of design;

(5) Connectivity with outside networks;

(6) The cost effectiveness of the design;

(7) Project participation in EZ/EC (Empowerment Zone and Enterprise

Communities); and

(8) Project participation in Champion communities.

(b) Scoring criteria--(1) The need for services and benefits

derived from services. (i) This criterion will be used by the

Administrator to score applications based on the documentation

submitted in the support of the funding application that reflects the

need for services and benefits derived from the services proposed by

the project. Up to 45 points can be assigned to this criterion.

(ii) The Administrator will consider the extent of the applicant's

documentation explaining the economic, education or health care

challenges facing the community; the applicants proposed plan to

address these challenges; how the financial assistance can help; and

why the applicant cannot complete the project without a loan or grant.

The Administrator will also consider any support by recognized experts

in the related educational or health care field, any documentation

substantiating the educational and/or health care underserved nature of

the applicant's proposed service area, and any justification for

specific educational and/or medical services which are needed and will

provide direct benefits to rural residents. Some examples of benefits

to be provided by the project include, but are not limited to:

(A) Improved education opportunities for a specified number of

students;

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

(C) Number of doctors retained in rural areas;

(D) Number of additional students electing to attend higher

education institutions;

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

(F) New education courses offered, including college level courses;

(G) Expanded use of educational facilities such as night training;

(H) Number of patients receiving telemedicine diagnosis;

(I) Provision of training, information resources, library assets,

adult education, lifetime learning, community use of technology, jobs,

connection to region, nation, and world.

(iii) 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).

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

local residents and institutions.

(v) The extent to which the application is consistent with the

State strategic plan prepared by the Rural Development State Director

of the United States Department of Agriculture.

(2) The comparative rurality of the proposed project service area.

(i) The methodology contained in this section is used to evaluate the

relative rurality (i.e. population) 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, those locations are given a score according to the

population of the area where the end user sites are located. Up to 35

points can be assigned to this criterion.

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

rurality:

(A) Exceptionally Rural Area means any area of the United States

not included within the boundaries of any incorporated or

unincorporated city, village, or borough having a population in excess

of 5,000 inhabitants.

(B) Rural Area means any area of the United States included within

the boundaries of any incorporated or unincorporated city, village, or

borough having a population over 5,000 and not in excess of 10,000

inhabitants.

(C) Urban Area means any area of the United States included within

the boundaries of any incorporated or unincorporated city, village, or

borough having a population in excess of 10,000 inhabitants.

(iii) The applicant will receive points as follows:

(A) There are a total of 35 possible points for this criterion. The

maximum number of points each end user site can receive is determined

by dividing the total possible points for this criterion, 35, by the

total number of end user sites. If a hub is utilized as an end user

site, the hub will be considered as an end user site.

(B) If the end user site is located in an Exceptionally Rural Area,

it will receive the maximum number of points each end user site. If the

end user site is located in a Mid-Rural Area, it will receive 50

percent of the maximum number of points each end user site. If the end

user site is located in an Urban Area, it will receive 0 percent of the

maximum number of points each end user of the applicant can receive.

(C) The total points for each end user site will be added to reach

a final point total for the project.

(D) An application must receive a minimum of 18 points under this

criterion to be eligible for any financial assistance.

(3) The ability to leverage resources. (i) This section is used to

evaluate the ability of the applicant to contribute financially to the

project and to secure other non-Federal sources of funding.

Documentation submitted in the support of the funding application

should reflect any additional financial support for the project from

non-Federal sources above the applicant's required percent matching of

the RUS financial assistance 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 35 points.

(ii) The applicant will receive points as follows:

(A) Matching for allowable financial assistance purposes greater

than 30 percent, but less than or equal to 50 percent of the RUS

financial assistance--10 points.

(B) Matching for allowable financial assistance purposes greater

than 50 percent, but less than or equal to 100 percent of the RUS

financial assistance--20 points.

(C) Matching for allowable financial assistance purposes greater

than 100 percent, but less than or equal to 150 percent of the RUS

financial assistance--25 points.

(D) Matching for allowable financial assistance purposes greater

than 150 percent, but less than or equal to 200 percent of the RUS

financial assistance --30 points.

(E) Matching for allowable financial assistance purposes greater

than 200 percent of the RUS financial assistance--35 points.

(4) Innovativeness of project. This criterion will be used by the

Administrator to score applications based on the documentation

submitted in the support of the funding application that reflects the

innovative nature of the project. The applicant should explain the

extent to which, if any, the project is an innovative approach to

either delivering or using telecommunications to address the needs of

the community, and how the project differs in approach from the

[[Page 18688]]

typical educational or health care application of technology. Up to 20

points can be assigned to this criterion.

(5) Connectivity with outside networks. (i) This criterion will be

used by the Administrator to score applications based on the

documentation submitted in support of the funding application that

reflects the extent to which the proposed project can be connected to

other educational and/or health care networks. Up to 20 points can be

assigned to this criterion.

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

project will interconnect with other existing networks at the regional,

statewide, national or international levels. RUS believes that to the

extent possible, educational and health care 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. The ability to connect to the internet alone can not be used as

the sole basis to fulfill this criteria.

(iii) Consideration will also be given to the extent that

facilities constructed with federal financial assistance, particularly

financial assistance under this chapter provided to entities other than

the applicant, will be utilized to extend or enhance the benefits of

the proposed project.

(6) Cost effective design. (i) This criterion will be used by the

Administrator to score applications based on the documentation

submitted in the support of the funding application that reflects the

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

to this criterion.

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

technology or technologies for delivering the proposed educational and/

or health care services for the project service area are the most cost

effective for the project proposed. 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. The Administrator will

consider the applicant's documentation comparing various systems and

technologies, whether the applicant's system is the most cost-effective

system, and whether buying or leasing specific equipment is more cost

effective. Points will be deducted from the scores of the applications

that fail to utilize existing telecommunications facilities that could

provide the transmission path for the needed services.

(7) Project participation in EZ/ECs. This criterion will be used by

the Administrator to score applications based on the documentation

submitted in support of the funding application that reflects the

designation of Empowerment Zones and Enterprise Communities (EZ/EC)

included as beneficiaries of the proposed project. Ten (10) points will

be assigned if at least one end user site is located in an EZ/EC.

(8) Project participation in Champion communities. This criterion

will be used by the Administrator to score applications based on the

documentation submitted in support of the funding application that

reflects the designation of Champion communities included as

beneficiaries of the proposed project. Five (5) points will be assigned

if at least one end user site is located in a Champion community.

Sec. 1703.118 Other application selection provisions.

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

scores, availability of funds, and the provisions of this section. The

Administrator will make determinations regarding the reasonableness of

all numbers; dollar levels; rates; the nature and design of the

project; cost; location; and other characteristics of the application

and the proposed project to determine the number of points assigned to

a grant application for all selection criteria. Joint applications

submitted by multiple applicants as set forth in Sec. 1703.113 will be

rated as a single application.

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

accordance with Sec. 1703.117 or the feasibility of the proposed

project, the Administrator may, based on a review of the applications

in accordance with the requirements of this subpart:

(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;

(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. 1703.109(d)(1) at the

lower amount;

(4) Award a grant to an applicant whose application carries out the

priorities listed in the scoring criteria in such a way to make the

application unique; or

(5) Award a grant to an applicant which would normally qualify for

other financial assistance, if the project achieves one or more of the

following:

(i) Utilizes cutting edge technology to provide a solution to a

unique problem;

(ii) Provides services otherwise not possible in an extremely

isolated geographic area; or

(iii) Provides inordinate quantifiable benefit to rural communities

relative to the amount of financial assistance requested.

(c) The Administrator will not approve an application if the

Administrator determines that:

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

feasibility or is not sustainable in accordance with the requirements

of Sec. 1703.109(d)(1);

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

the opinion of the Administrator, would prevent successful

implementation, operation, or sustainability of the proposed project;

or

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

adequately address any requirements of this subpart or contains

inadequacies which would, in the opinion of the Administrator,

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

this subpart or comply with policies of the Distance Learning and

Telemedicine Loan and Grant Program set forth in Sec. 1703.101.

(d) The Administrator may reduce the amount of the applicant's

grant award based on insufficient program funding for the fiscal year

in which the project is reviewed, and/or offer the applicant loan funds

in addition to the grant funds, if the Administrator determines that,

notwithstanding a lower grant award, the project will show financial

feasibility in accordance with Sec. 1703.109(d)(1), and continues to

meet all other provisions of this subpart. RUS will discuss its

findings informally with the applicant and make every effort to reach a

mutually acceptable agreement with the applicant. Any discussions with

the applicant and agreements made with regard to a reduced grant amount

will be confirmed in writing, and these actions shall be deemed to have

met the notification requirements set forth in paragraph (e) of this

section.

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

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

of this section prior to making final project funding selections for

the year. The

[[Page 18689]]

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. If

the applicant does not agree with this finding an appeal may be filed

in accordance with Sec. 1703.119.

Sec. 1703.119 Appeal provisions.

All qualifying applications under this subpart will be scored based

on criteria in section Sec. 1703.117. A determination will be made by

the Administrator based on the highest ranking applications and the

amount of funds available for grants and loans. All applicants will be

notified in writing of the score each application receives, and

included in this notification will be a tentative minimum required

score to receive financial assistance. If the score received by the

applicant could result in the denial of its application, or if its

score, while apparently sufficient to qualify for financial assistance,

may be surpassed by the score awarded to a competing application after

appeal, the applicant may appeal its numerical scoring. Any appeal must

be based on inaccurate scoring of the application by RUS and no new

information or data that was not included in the original application

will be considered. The appeal must be made in writing within 10 days

after the applicant is notified of the scoring results. Appeals shall

be submitted to the Administrator, Rural Utilities Service, U.S.

Department of Agriculture, 1400 Independence Ave., SW, STOP 1590,

Washington, DC 20250-1590. Thereafter, the Administrator will review

the original scoring to determine whether to sustain, reverse or modify

the original scoring determination. Final determinations will be made

after consideration of all appeals. The Administrator's determination

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

promptly to the applicant. An appeal based solely upon the type of

financial assistance the applicant qualifies for will not be

considered.

Secs. 1703.120-1703.121 [Reserved]

Sec. 1703.122 Further processing of selected applications.

(a) During the period between the submission 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 financial assistance for the project. If the applicant

so informs the Administrator, the selection will be rescinded and

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

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

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

application to the Administrator for consideration depending on the

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

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

another project.

(c) If state or local governments raise objections to a proposed

project under the intergovernmental review process that are not

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

application, the Administrator may rescind the selection and written

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

(d) Recipients of financial assistance will be required to submit

RUS Form 479-A, ``Distance Learning and Telemedicine Technical

Questionnaire.''

(e) After an applicant selected for financial assistance has

submitted such additional information, if any, the Administrator

determines is necessary for completing the financial assistance

documents, the Administrator will send the documents to the applicant

to execute and return to RUS.

(1) The financial assistance documents will include a letter of

agreement for grants; loan documents, including third party guarantees,

for loans; or any other legal documents the Administrator deems

appropriate, including suggested forms of certifications and legal

opinions.

(2) The letter of agreement and the loan documents will contain,

among other things, conditions on the release or advance of funds and

include at a minimum, a project description, approved purposes, the

maximum amount of the funding, supplemental funds, required of the

project and certain agreements or commitments the applicant may have

proposed in its application. In addition, the loan documents will

contain covenants and conditions the Administrator deems necessary or

desirable to provide assurance that the loan will be repaid and the

purposes of the loan will be accomplished.

(3) The recipient of a loan will be required to execute a security

instrument in form and substance satisfactory to the Administrator.

(4) DLT borrowers must, before receiving any advances of loan

funds, provide security that is adequate, in the opinion of the

Administrator, to assure repayment, within the time agreed, of all

loans to the borrower under Title XXIII. This assurance will generally

be provided by a first lien upon all of the borrower's assets or such

portion thereof as shall be satisfactory to the Administrator. The

Administrator may consider the projected revenues from the facilities

subject to the lien.

(5) Security may also be provided by third-party guarantees,

letters of credit, pledges of revenue or other forms of security

satisfactory to the Administrator.

(6) The mortgage, deed of trust, security agreement and other loan

documents required by the Administrator in connection with loans under

Title XXIII shall contain such pledges, covenants, and other provisions

as may, in the opinion of the Administrator, be necessary or desirable

to secure repayment of the loan.

(7) If the facilities financed do not constitute a complete

operating system, the DLT borrower shall provide evidence

demonstrating, to the Administrator's satisfaction, that the borrower

has sufficient contractual or other arrangements to assure that the

facilities financed will provide adequate and efficient service.

(f) Until the letter of agreement or loan documents have been

executed and delivered by RUS and by the applicant, the Administrator

reserves the right to require any changes in the project or legal

documents covering the project to protect the integrity of the program

and the interests of the United States Government.

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

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

information that the Administrator determines to be necessary to

prepare legal documents and satisfy other requirements of this subpart,

the Administrator may rescind the selection of the application and

written notice of such rescission will be sent promptly to the

applicant.

Secs. 1703.123-1703.125 [Reserved]

Sec. 1703.126 Disbursement of loan and grant funds.

(a) For financial assistance of $100,000 or greater, prior to the

disbursement of funds, the recipient, if it is not a unit of

government, will provide evidence of fidelity bond coverage as required

by 7 CFR 3015.17.

(b) Financial assistance will be disbursed to recipients on a

reimbursement basis, or with unpaid invoices for the eligible purposes

set

[[Page 18690]]

forth in this subpart, by the following process:

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

completed by the recipient and submitted to RUS not more frequently

than once a month;

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

for accuracy and if the form is satisfactory will schedule payment.

Payment will ordinarily be made within 30 days; and

(3) For financial assistance approved during and subsequent to FY

1997, funds will be advanced in accordance to 7 CFR 1744.69.

(c) The recipient's share in the cost of the project will be

disbursed in advance of financial assistance, or if the recipient

agrees, on a pro rata distribution basis with financial assistance

during the disbursement period. Recipient will not be permitted to

provide its contribution at the end of the project.

(d) Concurrent grant and loan funds will be disbursed on a pro rata

distribution basis.

Sec. 1703.127 Reporting and oversight requirements.

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

recipients on an annual basis until the project is complete and the

funds are disbursed by the applicant.

(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

annual report.

(c) RUS will monitor recipients as the Administrator determines

necessary to assure that projects are completed in accordance with the

approved scope of work and that funds are expended for approved

purposes.

(d) Recipients 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.

Recipients are to submit an original and one copy of all reports

submitted 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) A description of any problems, delays, or adverse conditions

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

attainment of overall project objectives, prevent the meeting of time

schedules or objectives, or preclude the attainment of particular

project work elements during established time periods. This disclosure

shall be accompanied by a statement of the action taken or planned to

resolve the situation; and

(3) Objectives and timetable established for the next reporting

period.

Sec. 1703.128 Audit requirements.

The grant and DLT borrower loan recipients will provide an audit

report in accordance with 7 CFR part 3015, subpart I. For grant

recipients the audit requirements only apply to the year(s) in which

grant funds are expended. For DLT borrowers the audit requirements

apply until the loan is repaid. 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.'' RUS Telecommunications/Electric

borrowers receiving cost of money loans will be subject to the same

audit requirements for these loans as are provided for in 7 CFR part

1773.

1703.129 Repayment of loans.

The term of cost of money loans will be based on the life of the

facilities to be financed, not to exceed 10 years. If the recipient

requests, a one year deferment of principal will be included. In

special hardship cases, which the recipient must justify, the

Administrator may approve a two year deferment of principal. Interest

on the loan will be due and payable during the principal deferral

period. RUS will establish uniform debt service payments based on the

total amortization period.

Secs. 1703.130-1703.134 [Reserved]

Sec. 1703.135 Grant and loan administration.

(a) The Administrator will review recipients as necessary to

determine whether funds were expended for approved purposes. The

recipient is responsible for ensuring that the project complies with

all applicable regulations, and that the financial assistance is

expended only for approved purposes. The recipient 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 recipient's premises, for review by the RUS

representatives, the recipient'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 recipient's financial statements or records, and program

performance for the funding awarded under this subpart. The recipient

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 7 CFR parts 3015 through 3018, as appropriate. 7 CFR

parts 3015 and 3016 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 recipient 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 funds.

Sec. 1703.137 Grant and loan termination provisions.

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

financial assistance in whole, or in part, at any time before the date

of completion of funding disbursement, whenever it is determined that

the recipient has failed to comply with the conditions of the financial

assistance. The Administrator will promptly notify the recipient in

writing of the determination and the reasons for the termination,

together with the effective date.

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

may terminate financial assistance 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 recipient 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 applicant for the Federal share of the noncancelable

obligations, properly incurred by the recipient prior to termination.

[[Page 18691]]

Secs. 1703.138-1703.139 [Reserved]

Sec. 1703.140 Expedited telecommunications loans.

General. The Administrator will expedite consideration and

determination of an application for a loan or a request for advance of

funds submitted by an RUS telecommunications borrower that supports the

project seeking financial assistance under this subpart. See 7 CFR part

1737 for loans and 7 CFR part 1744 for advances under this section.

Appendix A 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 application. The information herein is required by

Federal law.

Important: Any activity related to the project that may

adversely affect the environment or limit the choice of reasonable

development alternatives shall not be undertaken prior to the

completion of Rural Utilities Service's environmental review

process.

Legal Name of

Applicant--------------------------------------------------------------

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 modifications of existing structures, 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 construction

of transmission facilities, including cabling, microwave towers,

satellite dishes; or, disturbance of property of .99 acres or

greater for each project site.

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

and whether any hazardous materials, air emissions, wastewater

discharge or solid waste will result.

4. 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

applicant must supply evidence that the State Historic Preservation

Officer (SHPO) has cleared development regarding any historical

properties).

5. 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,

or physical disturbance of real property of .99 acres or greater,

the following information must be submitted (7 CFR 1703.109(i)(3)).

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

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

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

excavated, fenced or otherwise disturbed by the project and a

description of the current land use and zoning and any vegetation

for each project site affected by construction.

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

transmission facilities), including dimensions, to be constructed or

modified.

4. A description of the presence of wetlands or existing

agricultural operations and/or threatened or endangered species or

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

construction.

5. Describe any actions taken to mitigate any environmental

impacts resulting from the proposed project (use attachment if

necessary).

Note: The applicant may submit a copy of any environmental

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

prepared in connection with obtaining permits, approvals or other

financing for the proposed project from State, local or other

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

to meet the requirements herein.

Dated: April 7, 1997.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 97-9422 Filed 4-15-97; 8:45 am]

BILLING CODE 3410-15-P