Distance Learning and Telemedicine Loan and Grant Program

Federal RegisterMar 25, 1999

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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: Direct final rule.

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SUMMARY: The Rural Utilities Service (RUS) is amending its regulations

for its Distance Learning and Telemedicine (DLT) Loan and Grant

Program. These amendments will clarify the requirements for the

different types of financial assistance offered; streamline policies

and procedures for obtaining loans and expanding the purposes for which

loan funds can be used; and award grants on a competitive basis.

DATES: This rule will become effective on May 10, 1999, unless we

receive written adverse comments or notice of intent to submit adverse

comments on or before April 26, 1999. Written comments must be received

by RUS not later than April 26, 1999. If we receive such comment or

notice, we will publish a document in the Federal Register prior to the

effective date withdrawing the direct final rule.

ADDRESSES: Submit any written comments or notice of intent to submit

adverse comments to Roberta D. Purcell, Assistant Administrator,

Telecommunications Program, Rural Utilities Service, 1400 Independence

Ave., SW., STOP 1590, Room 4056, South Building, Washington, DC 20250-

1590. RUS requires 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 4056, 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)). Telephone number (202) 720-9554.

FOR FURTHER INFORMATION CONTACT: Jonathan P. Claffey, Deputy Assistant

Administrator, Telecommunications Program, Rural Utilities Service,

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

Washington, DC 20250-1590. Telephone number (202) 720-9556.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be not significant and, therefore,

has not been reviewed by the Office of Management and Budget (OMB)

under Executive Order 12866.

Executive Order 12988

This rule has been reviewed under Executive Order 12988, Civil

Justice Reform. RUS has determined that this rule meets the applicable

standards provided in section 3 of that Executive Order. In addition,

all State and local laws and regulations that are in conflict with this

rule will be preempted; no retroactive effect will be given to this

rule; and administrative appeal procedures, if any, are required to be

exhausted prior to initiating litigation against the Department (7

U.S.C. 6912(e)).

Regulatory Flexibility Act Certification

RUS has determined that this final rule will not have a significant

economic impact on a substantial number of small entities, as defined

by the Regulatory Flexibility Act (5 U.S.C. Sec. 601 et seq.). The RUS

DLT Loan and Grant Program provides recipients with grants and with

loans at interest rates and terms that are more favorable than those

generally available from the private sector. Recipients, as a result of

obtaining federal financing, receive economic benefits that exceed any

direct cost associated with complying with RUS regulations and

requirements.

Information Collection and Recordkeeping Requirements

The reporting and recordkeeping burdens contained in this rule were

approved by the Office of Management and Budget (OMB) pursuant to the

Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35, as amended)

under control number 0572-0096.

Send questions or comments regarding this burden or any other

aspect of these collections of information, including suggestions for

reducing the burden to F. Lamont Heppe, Director, Program Development

and Regulatory Analysis, Rural Utilities Service, 1400 Independence

Avenue, SW., Room 4034--South Building, Washington D.C. 20250-1522.

National Environmental Policy Act Certification

The Administrator of RUS has determined that this rule will not

significantly affect the quality of the human environment as defined by

the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).

Therefore, this action does not require an environmental impact

statement or assessment.

Catalog of Federal Domestic Assistance

The program described by this 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-

9325.

Executive Order 12372

This program is subject to the provisions of Executive Order 12372

that requires intergovernmental consultation with State and local

officials.

Unfunded Mandates

This rule contains no Federal mandates (under the regulatory

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

local, and tribal governments or the private sector. Thus, this rule is

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

Mandates Reform Act of 1995.

Background

RUS is amending its regulations for the Distance Learning and

Telemedicine Loan and Grant Program (DLT program). These amendments

will (1) clarify the requirements for the different types of financial

assistance offered; (2) streamline policies and procedures for

obtaining loans and expanding purposes for which loans can be used; (3)

award grants on a competitive basis; and (4) provide applicants with

additional

[[Page 14356]]

offices to submit applications. Currently, the regulations covering the

administration of the DLT program are contained in one subpart. This

amendment will revise subpart D to address all criteria related to the

overall program and add three subparts that address specifically the

different types of financing options offered by the DLT program.

Subpart E addresses applications for grants. Subpart F addresses

applications for a combination loan and grant. Subpart G addresses

applications for loans.

The current regulations implemented the provisions of the Federal

Agriculture Improvement Act of 1996 (1996 Act, 7 U.S.C. 950aaa et seq.)

which added a loan program component to the grant program. During its

first two years, the loan program has struggled to effectively utilize

its available loan funds, in part because applicants seeking financial

assistance were either unable to enter into loan agreements or could

not pay back a loan. The amendments to the regulations will seek to

retarget available loan funds to entities that are capable of

supporting debt service payments for the purpose of providing distance

learning and telemedicine services in rural areas.

This rule establishes three application processes to finance

necessary equipment and telecommunications facilities that will enable

schools and libraries and rural medical clinics to offer the best

services possible: (1) grants, contained in subpart E; (2) combination

loan and grant, contained in subpart F; and (3) loans, contained in

subpart G. The three application processes by which applicants can

request consideration for financial assistance will enable the

government to more effectively and efficiently utilize the limited

financial assistance available. By segregating the three different

application processes, RUS will be able to target entities that qualify

for the different types of financial assistance. The rule seeks to

assure repayment to the government of any loan.

Grants will be awarded to the neediest applicants on a competitive

basis subject to the availability of funds. Instead of ``categorizing''

applicants based on the percentage of students eligible to participate

in the National School Lunch Program (NSLP), RUS will instead use the

NSLP eligibility levels as an indicator of poverty and award points

based on the percentage of the students eligible to participate located

in the proposed end user sites of the project (higher eligibility

percentages will receive more points). In addition, applicants will be

able to submit for consideration additional indicators which address

the economic disparity of the community the project will serve. All

eligible applications for grants will be scored and ranked in

accordance with the provisions of subpart E. Grants will be awarded on

a competitive basis to applications receiving the highest number of

points.

Loans and combination loans and grants will be made to applicants

able to enter into a loan agreement, execute a note for more than one

year, demonstrate loan feasibility, and otherwise qualify under

subparts F and G. RUS will determine the specific amounts to be made

available for a combination loan and grant, generally at a ratio of 10

to 1, loans to grants, respectively (e.g., $100,000 of grant funds for

every $1,000,000 of loan funds). Loans and combination loan and grant

applications will generally be processed on a first-in, first-out

basis, based on the amount of funding available for the fiscal year and

the number of applications received. RUS believes that sufficient

funding is generally available to fund all eligible combination loan

and grant and loan applications received during the fiscal year, and

therefore will process and approve each application as it is received.

However, if RUS determines that the amount of combination loan and

grant and loan funds available for funding is insufficient to process

all eligible applications, RUS may prioritize such applications using

evaluation criteria similar to that set forth for processing grants.

The purposes for which loans can be used will be expanded to allow for

the financing of purposes and facilities that are restricted under

approved grant purposes in this rule and under any financing purpose in

the current rule. For example, in some instances, loans may be used to

cover initial operating start-up costs or for the construction of

buildings and purchase of land necessary for the delivery of

educational and health care services to rural areas. Loans afford

applicants the most flexibility in terms of the types of approved

purposes for financial assistance and provide the highest amount of

financial assistance available per applicant.

In addition to establishing three distinct financial assistance

application processes, this rule will amend several of the scoring

criteria used to rank grant applications.

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, 7 CFR Chapter XVII is

amended as follows:

PART 1703--RURAL DEVELOPMENT

1. The authority citation for part 1703 is revised to read as

follows:

Authority: 7 U.S.C. 901 et seq. and 950aaa et seq.

2. In part 1703, subpart E is redesignated as subpart H, subpart D

is revised, and new subparts E, F, and G are added to read as follows:

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

General

Sec.

1703.100 Purpose.

1703.101 Policy.

1703.102 Definitions.

1703.103 Applicant eligibility and allocation of funds.

1703.104 [Reserved]

1703.105 Processing of selected applications.

1703.106 Disbursement of loans and grants.

1703.107 Reporting and oversight requirements.

1073.108 Audit requirements.

1703.109 Grant and loan administration.

1703.110 Changes in project objectives or scope.

1703.111 Grant and loan termination.

1703.112 Expedited telecommunications loans.

1703.113-1703.119 [Reserved]

Subpart E--Distance Learning and Telemedicine Grant Program

1703.120 Use of grants.

1703.121 Approved purposes for grants.

1703.122 Matching contributions.

1703.123 Nonapproved purposes for grants.

1703.124 Maximum and minimum grant amounts.

1703.125 Completed application.

1703.126 Criteria for scoring grant applications.

1703.127 Application selection provisions.

1703.128 Submission of applications.

1703.129 Appeals.

Subpart F--Distance Learning and Telemedicine Combination Loan and

Grant Program

1703.130 Use of combination loan and grant.

1703.131 Approved purposes for a combination loan and grant.

1703.132 Nonapproved purposes for a combination loan and grant.

[[Page 14357]]

1703.133 Maximum and minimum amounts.

1703.134 Completed application.

1703.135 Application selection provisions.

1703.136 Submission of applications.

1703.137 Appeals.

1703.138-1703.139 [Reserved]

Subpart G--Distance Learning and Telemedicine Loan Program

1703.140 Use of loan funds.

1703.141 Approved purposes for loans.

1703.142 Nonapproved purposes for loans.

1703.143 Maximum and minimum amounts.

1703.144 Completed application.

1703.145 Application selection provisions.

1703.146 Submission of applications.

1703.147 Appeals.

Subpart D--Distance Learning and Telemedicine Loan and Grant

Program--General

Sec. 1703.100 Purpose.

The purpose of the Distance Learning and Telemedicine (DLT) Loan

and Grant Program is to encourage and improve telemedicine services 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. This subpart describes the general policies for

administering the DLT program. Subpart E contains the policies and

procedures related to grants; subpart F contains the policies and

procedures related to a combination loan and grant; and subpart G

contains the policies and procedures related to loans.

Sec. 1703.101 Policy.

(a) The transmission of information is vital to the economic

development, education, and health of rural Americans. To further this

objective, RUS will provide financial assistance to distance learning

and telemedicine projects that will improve the access of people

residing in rural areas to educational, learning, training, and health

care services.

(b) In providing financial assistance, RUS will give priority to

rural areas that it believes have the greatest need for distance

learning and telemedicine services. RUS believes that generally the

need is greatest in areas that are economically challenged, costly to

serve, and experiencing outward migration. This program is consistent

with the provisions of the Telecommunications Act of 1996 that

designate telecommunications service discounts for schools, libraries,

and rural health care centers. RUS will take into consideration the

community's involvement in the proposed project and the applicant's

ability to leverage grant funds.

the use of one particular technology over another.

(d) Rural institutions are encouraged to cooperate with each other,

with applicants, and with end-users to promote the program being

implemented under this subpart.

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

applicants in rural areas of the programs being implemented under this

subpart.

(f) The Administrator will provide only loans under this subpart to

any entity that has received a telecommunications or electric loan

under the Rural Electrification Act of 1936. Telecommunications and

Electric borrowers are encouraged to seek a loan under this subpart to

bolster educational and health care opportunities in the rural

communities they serve. A borrower receiving a loan shall:

(1) Make the loan available to entities that qualify as distance

learning or telemedicine projects satisfying the requirements of this

subpart, under any terms it so chooses as long as the terms are no more

stringent than the terms under which it received the financial

assistance.

(2) Use the loan to acquire, install, improve, or extend a distance

learning or telemedicine system referred to in this subpart.

(g) The Administrator will allocate funds that are appropriated

each fiscal year for the subparts E, F, and G, of this part

respectively. Not more than 30 days before the end of the fiscal year,

the Administrator may transfer any funds not committed to grants in the

combination loan and grant program to the grant program.

(h) Financial assistance may be provided for end user sites.

Financial assistance may also be provided for hubs located in rural or

non-rural areas if they are necessary to provide distance learning or

telemedicine services to rural residents at end user sites.

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

a notice in the Federal Register of all applications receiving

financial assistance under this subpart. Subject to the provisions of

the Freedom of Information Act, (5 U.S.C. 552), applications will be

available for public inspection at the U.S. Department of Agriculture,

1400 Independence Avenue, SW., Washington, D.C., 20250.

Sec. 1703.102 Definitions.

1996 Act means the Federal Agriculture Improvement Act of 1996.

Act means the Rural Electrification Act of 1936 (7 U.S.C. 901 et

seq.).

Administrator means the Administrator of the Rural Utilities

Service, or designee or successor.

Applicant means an eligible organization that applies for financial

assistance under this subpart.

Approved purposes means project purposes for which grant, loan, or

combination loan and grant financial assistance may be expended.

Champion community means any community that submitted a valid

application to become a USDA Empowerment Zone/Enterprise Community (EZ/

EC) area, that met the requirements to be designated an EZ/EC area, but

not chosen because their score was not high enough to be selected.

Combination loan and grant means a grant in combination with a loan

made under the DLT program.

Completed application means an application that includes all those

items specified in Secs. 1703.125, 1703.134, and 1703.144 in form and

substance satisfactory to the Administrator.

Computer networks mean 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 financial assistance is provided. Each consortium shall be

composed of a minimum of one eligible organization that meets the

requirements of Sec. 1703.103.

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

a facility or system.

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

[[Page 14358]]

in one area, whether rural or not, to students and teachers who are

located in rural areas; or

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

teachers and students that are located in a different rural area.

DLT borrower means an entity that has an outstanding loan under the

provisions of the DLT program.

DLT program means the Distance Learning and Telemedicine Loan and

Grant Program administered by RUS.

Economic useful life as applied to equipment and facilities

financed under the DLT program 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 or

video equipment, computer network components, telecommunications

terminal equipment, data terminal equipment, inside wiring, interactive

video equipment, or other facilities that would further telemedicine

services or distance learning services.

Eligible facilities means land, buildings, or building construction

needed to carry out an eligible distance learning or telemedicine

project for loan financial assistance only.

Eligible organization means an entity that meets the requirements

of Sec. 1703.103.

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

community whose designation as such by USDA pursuant to 26 U.S.C. 1391

et seq., is in effect at the time RUS agrees to provide financial

assistance.

End user is one or more of the following:

(1) Rural elementary, secondary schools, and 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, nursing homes, 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; and

(3) Other rural community facilities, institutions, or entities

that receive distance learning or telemedicine services.

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

telecommunications system that is utilized by end users.

Financial assistance means a grant, combination loan and grant, or

loan.

GFR means RUS telecommunications program General Field

Representative.

Grant documents means the grant agreement, including any amendments

and supplements thereto, between RUS and the grantee.

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

purposes of the DLT program.

Guarantee means a guarantee for a loan provided by a RUS borrower

or other qualified third party.

Hub means a facility that is part of a network or

telecommunications system that provides educational or medical services

to end user sites.

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 equipment means equipment used to produce and prepare

for transmission audio and visual signals from at least two distant

locations so 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.

Loan means a loan made under the DLT program bearing interest at a

rate equal to the then current cost-of-money to the government.

Loan documents mean the loan agreement, note, and security

instrument, including any amendments and supplements thereto, between

RUS and the DLT 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 contribution means the applicant's contribution for

approved 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 approved purposes for which financial assistance has

been provided.

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.

Recipient means a grantee, borrower, or both of a DLT program

grant, loan or combination loan and grant.

Rural community facilities mean facilities such as schools,

libraries, learning centers, training facilities, hospitals, medical

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

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

advanced technology system to provide educational 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, successor to the Rural

Electrification Administration.

Secretary means the Secretary of Agriculture.

Technical assistance means:

(1) Assistance in learning to manage, operate, or use equipment or

systems; and

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

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

information.

Telecommunications carrier means any provider of telecommunications

services.

Telecommunications or electric borrower means an entity that has

outstanding RUS or Rural Telephone Bank electric or telecommunications

loans or loan guarantees under the provisions of the Act.

Telecommunications systems plan means the plan submitted by an

applicant in accordance with Sec. 1703.125 for grants, Sec. 1703.134

for a combination loan and grant, or Sec. 1703.144 for loans.

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 facilities that receive or

transmit 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 voice, video, or data between the

telecommunications terminal equipment at each end of the

telecommunications circuit or path. Such facilities include microwave

antennae, relay stations and towers,

[[Page 14359]]

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.

Sec. 1703.103 Applicant eligibility and allocation of funds.

(a) To be eligible to receive financial assistance 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 political

subdivision of a State government, other than a political subdivision

of a State government 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 political subdivision of a State government is only eligible

if the political subdivision of the State government operates a rural

community facility; or

(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 and

to obtain the applicable financial assistance. If a partnership or

consortium lacks the capacity to contract, each individual entity must

contract with RUS on its own behalf.

only.

Sec. 1703.104 [Reserved]

Sec. 1703.105 Processing of selected applications.

(a) During the period between the submission of an application and

the execution of documents, the applicant must inform RUS if the

project is no longer viable or the applicant no longer is requesting

financial assistance for the project. When the applicant so informs

RUS, the selection will be rescinded or the application withdrawn and

written notice to that effect sent to the applicant.

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

project changes substantially, the applicant may be required to submit

a new application to RUS for review and consideration depending on the

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

accordance with this subpart. The financial assistance may not be

transferred by the applicant for use for another project.

project under the intergovernmental review process that are not

resolved within 90 days of the Administrator's selection of the

application, the Administrator will rescind the selection and written

notice to that effect will be sent to the applicant. The Administrator,

in his sole discretion may extend the 90 day period if it appears

resolution is eminent.

(d) RUS may request additional information to complete the

appropriate documents covering financial assistance.

(e) Financial assistance documents. (1) The documents will include

a grant agreement for grants; loan documents, including third party

guarantees, notes and security instruments for loans; or any other

legal documents the Administrator deems appropriate, including

suggested forms of certifications and legal opinions.

(2) The grant agreement and the loan documents will include, 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 financial assistance, supplemental funds required for the

project, and certain agreements or commitments the applicant may have

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

contain covenants and conditions the Administrator deems necessary or

desirable to provide additional assurance that loans 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 RUS and must, before

receiving any advance of loan funds, provide security that is adequate,

in the opinion of RUS, to assure repayment, within the time agreed, of

all loans to the borrower under the DLT program. This assurance will

generally be provided by a first lien upon all facilities and equipment

financed by the loan. RUS may require additional security as it deems

necessary.

(4) Adequate security may also be provided by third-party

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

security satisfactory to RUS.

(5) The security instrument and other loan documents required by

RUS in connection with a loan under the DLT program shall contain such

pledges, covenants, and other provisions as may, in the opinion of RUS,

be required to secure repayment of the loan.

(6) If the project does not constitute a complete operating system,

the DLT borrower shall provide evidence, in form and substance

satisfactory to RUS, demonstrating that the borrower has sufficient

contractual, financing, or other arrangements to assure that the

project will provide adequate and efficient service.

(f) Prior to the execution of a grant and loan document, RUS

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

documents covering the project to protect the integrity of the DLT

program and the interests of the government.

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

the date of RUS' selection of an application, all of the information

that RUS determines to be necessary to prepare legal documents and

satisfy other requirements of this subpart, RUS may rescind the

selection of the application.

Sec. 1703.106 Disbursement of loans and grants.

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

disbursement of a grant and a loan, the recipient, if it is not a unit

of government, will provide evidence of fidelity bond coverage as

required by 7 CFR part 3019.

(b) Grants and loans will be disbursed to recipients on a

reimbursement basis,

[[Page 14360]]

or with unpaid invoices for the eligible purposes contained 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) RUS will review the SF 270 for accuracy when received and will

schedule payment if the form is satisfactory. Payment will ordinarily

be made within 30 days; and

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

1999, funds will be advanced in accordance with 7 CFR 1744.69.

disbursed in advance of the loan and grant, or if the recipient agrees,

on a pro rata distribution basis with financial assistance during the

disbursement period. Recipients will not be permitted to provide their

contributions at the end of the project.

(d) A combination loan and grant will be disbursed on a pro rata

basis based on the respective amounts of financial assistance provided.

Sec. 1703.107 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 expended by the applicant.

(b) A final project performance report must be provided by the

recipient. 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.

assure that projects are completed in accordance with the approved

scope of work and that the financial assistance is 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 project

performance reports, including, but not 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. 1703.108 Audit requirements.

A recipient of financial assistance shall provide RUS with an audit

for each year, beginning with the year in which a portion of the

financial assistance is expended, in accordance with the following:

(a) If the recipient is a for-profit entity, a Telecommunications

or Electric borrower, or any other entity not covered by the preceding

paragraph, the recipient shall provide an independent audit report in

accordance with 7 CFR part 1773, ``Policy on Audits of RUS Borrowers.''

(b) If the recipient is a State or local government, or non-profit

organization, the recipient shall provide an audit in accordance with 7

CFR part 3052, ``Audits of States, Local Governments, and Non-Profit

Organizations.''

Sec. 1703.109 Grant and loan administration.

RUS will conduct reviews as necessary to determine whether the

financial assistance was expended for approved purposes. The recipient

is responsible for ensuring that the project complies with all

applicable regulations, and that the grants and loans are 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 RUS, 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 official conducting an audit of the recipient's

financial statements or records, and program performance for the grants

and loans made under this subpart. The recipient shall permit RUS to

inspect and copy any records and documents that pertain to the project.

Sec. 1703.110 Changes in project objectives or scope.

The recipient shall obtain prior written approval by RUS for any

material change to the scope or objectives of the project, including

any changes to the scope of work or the budget submitted to RUS. Any

material change shall be contained in a revised scope of work plan to

be prepared by the recipient, submitted to, and approved by RUS in

writing.

Sec. 1703.111 Grant and loan termination.

(a) The financial assistance may be terminated when RUS and the

recipient agree upon the conditions of the termination, the effective

date of the termination, and, in the case of a partial termination of

the financial assistance, any unadvanced portion of the financial

assistance to be terminated and any advanced portion of the financial

assistance to be returned.

(b) The recipient may terminate the financial assistance by written

notification to RUS, providing the reasons for such termination, the

effective date, and, in the case of a partial termination, the portion

of the financial assistance to be terminated. In the case of a partial

termination, if RUS believes that the remaining portion of the

financial assistance will not accomplish the approved purposes, then,

RUS may terminate the financial assistance in its entirety, pursuant to

the provisions of paragraph (a) of this section.

Sec. 1703.112 Expedited telecommunications loans

RUS will expedite consideration and determination of an application

submitted by an RUS telecommunications borrower for a loan under the

Act or an advance of such loan funds to be used in conjunction with

financial assistance under subparts E, F, or G of this part. See 7 CFR

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

section.

Secs. 1703.113--1703.119 [Reserved]

Subpart E--Distance Learning and Telemedicine Grant Program

Sec. 1703.120 Use of grants

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

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

amount designated for approved purposes; at least 30 percent of the

project must be funded by matching contributions. For purposes of

determining the applicant's ability to leverage resources in

Sec. 1703.126(b)(4), the minimum matching contribution of 30 percent of

the amount designated for approved purposes equals 42.85 percent of the

grant requested.

(b) Only projected costs for approved grant purposes will be

considered in determining the amount of DLT grant

[[Page 14361]]

eligibility in accordance with paragraph (a) of this section.

considered as matching contributions under this subpart.

Sec. 1703.121 Approved purposes for grants.

Grants shall be expended only for the costs associated with the

initial capital assets associated with the project. The following are

approved grant purposes:

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

in Sec. 1703.102;

(b) Acquiring instructional programming; and

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 grant (this purpose shall not

exceed 10 percent of the grant).

Sec. 1703.122 Matching contributions.

(a) The grant applicant's minimum matching contribution (as

specified in Sec. 1703.120) for approved purposes, generally must be in

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

listed in Sec. 1703.121 may be substituted for cash.

(b) In-kind items listed in Sec. 1703.121 must be non-depreciated

or new assets with established monetary values. Manufacturers' or

service providers' discounts are not considered in-kind matching.

applicant, for facilities or equipment installed, or other services

rendered prior to submission of a completed application, shall not be

considered as an eligible in-kind matching contribution.

(d) Costs incurred for non-approved purposes for grant outlined in

Sec. 1703.123 shall not be used as an in-kind matching contribution.

Sec. 1703.123 Nonapproved purposes for grants.

(a) A grant made under this subpart will not be provided or used:

(1) To cover the costs of installing or constructing

telecommunications transmission facilities, other than those facilities

not available and necessary for the completion of the proposed project

and not otherwise available;

(2) To pay for medical equipment not having telemedicine as its

essential function;

(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 financial

assistance under this program;

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

teachers and students or between 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;

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

cost of recurring or operating expenses for the project; or

(14) For any other purposes not specifically contained in

Sec. 1703.105.

(b) Except as otherwise provided in Sec. 1703.112, grants shall not

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

is dependent upon the receipt of additional financial assistance under

this subpart or is dependent upon the receipt of other financial

assistance that is not assured.

Sec. 1703.124 Maximum and minimum grant amounts.

Applications for grants under this subpart will be subject to

limitations on the proposed amount of grant funds. The Administrator

will establish the maximum amount of a grant 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

sooner than 45 days before the period for accepting applications

begins. The minimum amount of a grant is $50,000.

Sec. 1703.125 Completed application.

The following items are required to be submitted to RUS in support

of an application for grant funds:

(a) An application for Federal Assistance. A completed Standard

Form 424.

(b) An executive summary of the project. The applicant must provide

RUS with a general project overview that addresses the following 8

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, the types of educational or medical services to

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

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

accordance with Sec. 1703.103;

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

of the grant required and the source of matching contribution and other

financial assistance for the remainder of the project;

(5) A statement specifying whether 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 that will be served by the project at

each end user site; and

(8) A certification by the applicant that facilities constructed

with grants do not duplicate adequate established telemedicine or

distance learning services.

address and provide documentation on how it meets each of the scoring

criteria contained in Sec. 1703.126.

(d) A scope of work. The scope of work must include, 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 all capital expenditures reflecting the line item

costs for approved purposes for both the grant funds and other sources

of funds for the project. Separately, the budget must specify any line

item costs that are nonapproved purposes for grants as contained in

Sec. 1703.123.

(e) Financial information. The applicant must provide financial

information to support the need for the financial assistance requested

for the project and the applicant's ability and financial capacity to

carry out the proposed project. It must show its

[[Page 14362]]

financial and other ability to carry out the proposed work. All

institutions participating in a project application (including all

members of a consortium), must include an income statement (or

equivalent revenue and expense reports) and balance sheet reports,

reflecting net worth, for the most recent annual reporting period

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 to

demonstrate feasibility of the project and the financial capability of

the project participants to continue a sustainable project for a

minimum of 10 years after completion of the project. This documentation

should include non-contingent sources of income or revenues that are

sufficient to pay operating expenses including telecommunications

access and toll charges, system maintenance, salaries, training, and

any other general operating expenses, and provide for replacement of

depreciable items.

(2) 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.

(3) 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 those receiving telemedicine or

distance learning services.

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

narrative (not exceeding three single spaced pages) describing its

demonstrated capability and experience, if any, in operating an

educational or health care endeavor and any project similar to the

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

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

provide evidence, in form and substance satisfactory to RUS, that

funding agreements have been obtained to ensure completion of the

project. These agreements shall be sufficient to ensure:

(1) Payment of all proposed expenditures for the project;

(2) All required matching contribution in 1703.120;

(3) any additional matching funding provided in accordance with

Sec. 1703.126(b)(4); and

(4) Any other funds necessary to complete the project.

(h) A telecommunications system plan. A telecommunications system

plan consisting of the following:

(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 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.

(i) Compliance with other Federal statutes. The applicant must

provide evidence of compliance with other Federal statutes and

regulations including, but not limited to the following:

(1) E.O. 11246, Equal Employment Opportunity, as amended by E.O.

11375 and as supplemented by regulations contained in 41 CFR part 60;

(2) Anti-Kickback Act (18 U.S.C. 874);

(3) Davis Bacon Act (40 U.S.C. 276a-a-7);

(4) Contract Work and Safety Standards Act (40 U.S.C. 327-333);

(5) Clean Air Act (42 U.S.C. 7401, et seq.);

(6) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352);

(7) E.O.s 12549 and 12689, Debarment and Suspension;

(8) Resource Conservation and Recovery Act (42 U.S.C. 6962);

(9) Drug-Free Workplace Act of 1988 (41 U.S.C. 701);

(10) Assistance and Real Property Acquisition Policies Act of 1970;

and

(11) Office of Management and Budget Circulars A-110 and A-102.

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

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

environment and historic preservation. Grants made under this part are

subject to part 1794 of this chapter which contains RUS' policies and

procedures for implementing a variety of Federal statutes, regulations,

and executive orders generally pertaining to the 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) The applicant may use the ``Environmental Questionnaire,''

available from RUS, to assist in complying with the requirements of

this section.

(k) Evidence of legal authority and existence. The applicant must

provide evidence of its legal existence and authority to enter into a

grant agreement with RUS and perform the activities proposed under the

grant application.

(l) Federal debt certification. The applicant must provide a

certification that it is not delinquent on any obligation owed to the

government (7 CFR parts 3016 and 3019).

(m) Consultation with USDA State Director, Rural Development. The

applicant must provide evidence that it 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) State strategic plan conformity. The applicant must provide

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.

[[Page 14363]]

(o) Supplemental information. The applicant should provide any

additional information it considers relevant to the project and likely

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

further the purposes of the 1996 Act.

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

provide any additional information RUS may consider relevant to the

application and necessary to adequately evaluate the application. RUS

may request modifications or changes, including changes in the amount

of financial assistance requested, in any proposal described in an

application submitted under this subpart.

Sec. 1703.126 Criteria for scoring grant applications.

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

score applications that have been determined to be in compliance with

the requirements of this subpart. Applications for grants must meet the

rurality requirements in paragraph (a)(2) of this section and address

each of the following scoring criteria:

(1) The need for services and benefits derived from services (up to

55 points);

(2) The comparative rurality of the project service area (up to 45

points);

(3) The economic need of the applicant's service area as estimated

by the NSLP or other supplemental objective criteria (up to 35 points);

(4) The ability of the applicant to leverage resources (up to 35

points);

(5) Innovativeness of the project (up to 15 points);

(6) The cost effectiveness of the system (up to 35 points);

(7) Project participation in EZ/ECs (Empowerment Zone and

Enterprise Communities) and Champion Communities (up to 15 points).

(b) Scoring criteria:

(1) The need for services and benefits derived from services--Up to

55 Points.

(i) This criterion will be used by RUS to score applications based

on the documentation in support of the need for services, benefits

derived from the services proposed by the project, and local community

involvement in planning, implementing, and financial assistance of the

project. Applicants may receive up to 45 points for documenting the

need for services and benefits derived from service as explained in

this section. Applicants with an average NSLP percentage less than 50

percent as determined in paragraph (b)(3) of this section may receive

up to an additional 10 points based on information submitted that

evidences the economic need of the project's service area. This

determination will be made by RUS based on information submitted by the

applicant under paragraph (b)(1) of this section.

(ii) RUS will consider the extent of the applicant's documentation

explaining the economic, education, or health care challenges facing

the community; the applicant's proposed plan to address these

challenges; how the grant can help; and why the applicant cannot

complete the project without a grant. RUS will also consider the extent

to which the applicant provides evidence that economic, education, or

health care challenges could not be addressed without employing

advanced technology. The Administrator will also consider any support

by recognized experts in the related educational or health care field,

any documentation substantiating the educational or health care

underserved nature of the applicant's proposed service area, and any

justification for specific educational or medical services which are

needed and will provide direct benefits to rural residents.

(A) Some examples of benefits to be provided by the project

include, but are not limited to:

(1) Improved educational opportunities for a specified number of

students;

(2) Travel time and money saved by telemedicine diagnoses;

(3) Number of doctors retained in rural areas;

(4) Number of additional students electing to attend higher

education institutions;

(5) Lives saved due to prompt medical diagnoses and treatment;

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

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

(8) Number of patients receiving telemedicine diagnoses;

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

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

connection to region, nation, and world.

(B) Other matters that will be considered by RUS under this

criterion include:

(1) That rural residents, and other beneficiaries, desire the

educational or medical services to be provided by the project. A strong

indication of need is the willingness of local end users or

institutions, to the extent possible, to contribute to the capital

costs of establishing the project. This could include letters of

financial commitment toward the project from local institutions.

(2) The extent of the project's planning, development, and support

by local residents and institutions. This may include evidence of

community involvement, as exemplified in community meetings, public

forums, and surveys. In addition, applicants should provide evidence of

local residents' participation in the project planning and development.

(3) The extent to which the application addresses the problems of

population out-migration and how the project seeks to slow, halt, or

prevent population loss.

(4) 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 project service area--Up to 45

Points. This criterion will be used to evaluate the relative rurality

of service areas for various projects. Under this system, the end user

sites and hubs (as defined in Sec. 1703.102) contained within the

project service area are identified and given a score according to the

population of the area where the end user sites are located.

(i) 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.

within the boundaries of any incorporated or unincorporated city,

village, or borough having a population over 10,000 and not in excess

of 20,000 inhabitants.

(D) 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 20,000 inhabitants.

(ii) There are a total of 45 possible points for this criterion.

Each end user site will receive points based on its location in

accordance with paragraph (b)(2)(i) of this section. If a hub is

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

site. The applicant will receive points as follows:

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

it will receive 45 points.

[[Page 14364]]

(B) If the end user site is located in a Rural Area, it will

receive 30 points.

receive 15 points.

(D) If the end user site is located in an Urban Area, it will

receive 0 points.

(iii) The total score for this criterion will be based on the

average score for all the end user sites included in the project.

(iv) An application must receive a minimum of 20 points as an

average score for all the end user sites under this criterion to be

eligible for a grant.

(3) The economic need of the applicant's service area as estimated

by NSLP--Up to 35 points. This criterion 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 NSLP for each area to be served

by the end user site. The appropriate State or local organization

administering the program must certify the percentages as being

correct. The applicant must provide RUS with a listing of the location

of each end user site (city, town, village, borough or rural area plus

the State) discussing how the appropriate NSLP percentage was

determined in accordance with this section. 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.

For purposes of this subpart, the NSLP percentage will reflect the

percentage of eligibility rather than the percentage of actual

participation.

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

applicable NSLP percent for a particular application:

(A) Public schools or non-profit private schools of high school

grade or under will use the actual eligibility percentage for that

particular school.

(B) Schools and institutions of higher learning ineligible to

participate in the NSLP 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.

rounded down to the next lowest whole number for fraction of

percentages at or greater than .5 or less than .5, respectively.

(D) The project NSLP percentage will be determined by the average

of the NSLP percentages of the end user sites. 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. 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.

(ii) The applicant will receive points as follows:

(A) NSLP percentage greater than or equal to 75 percent--35 points

(B) NSLP percentage greater than or equal to 50 percent but less

than 75 percent--25 points

than 50 percent--15 points

(D) NSLP percentage less than 25% percent--0 points

(4) The ability of the applicant to leverage resources--Up to 35

points.

This criterion will be used to evaluate the ability of the

applicant to provide a matching contribution for the project using

other non-Federal financial assistance. Documentation submitted in

support of the application should reflect any additional financial

support for the project from non-Federal sources above the applicant's

matching contribution as required by Sec. 1703.120. Based on the

maximum RUS financial assistance percentage of 70 percent of eligible

project costs, the minimum matching as a percentage of the grant

requested is 42.85 percent. The applicant must include evidence from

authorized representatives of the sources that the funds are available

and will be used for the project. The applicant will receive points as

follows:

(i) Matching contribution for a grant for approved purposes greater

than 42.85 percent, but less than or equal to 70 percent of the grant--

0 points.

(ii) Matching contribution for a grant for approved purposes

greater than 70 percent, but less than or equal to 100 percent of the

grant--15 points.

(iii) Matching contribution for a grant for approved purposes

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

grant--25 points.

(iv) Matching contribution for a grant for approved purposes

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

grant--30 points.

(v) Matching contribution for a grant for approved purposes greater

than 200 percent of the grant--35 points.

(5) Innovativeness of the project--Up to 15 points. This criterion

will be used to evaluate the innovativeness of application based on

documentation that shows how the project utilizes advanced

telecommunications in a unique way to address the needs of the

community. Innovativeness should be addressed in the context of how the

project will deliver distance learning or telemedicine services more

effectively or at a lower cost. The following issues may be addressed

to show how the project differs from a typical distance learning and

telemedicine network as follows:

(i) The extent to which the project differs from a technical

standpoint;

(ii) The extent to which the project differs from an educational or

medical programmatic standpoint;

(iii) The extent to which the project reflects a unique adaptation

of technology based on the special needs or circumstances of the

proposed area to be served by the project; and

(iv) The potential of the project to influence or lead changes in

how telecommunications services can be delivered in other areas.

(6) The cost-effectiveness of the project--Up to 35 points. This

criterion will be used to evaluate the cost effectiveness of the

application based on the extent that cost-efficiency is considered in

delivering the services in the project. The following issues should be

addressed under this criterion:

(i) The extent to which the applicant has considered various

technological options for delivering the services. The applicant must

provide sufficient documentation reflecting accepted analytical and

financial methodologies to substantiate its choice of technology as the

most cost-effective option. RUS will consider the applicant's

documentation and analysis comparing various systems and technologies.

(ii) Whether buying or leasing specific equipment is more cost

effective.

(iii) The extent to which the project will utilize other existing

networks at the regional, statewide, national or international levels.

To the extent possible, educational and health care networks should be

designed to utilize the widest practicable number of other networks

that expand the capabilities of the project, thereby affording rural

residents opportunities that may not be available at the local level.

The ability to connect to the Internet alone cannot be used as the sole

basis to fulfill this criteria.

(iv) The extent to which the facilities being constructed with

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 project.

(v) The extent to which the project utilizes existing

telecommunications transmission facilities that could provide the

transmission path for the needed services. For projects that do not

utilize existing transmission facilities, RUS will consider

documentation explaining the necessity of this option. RUS will also

consider any agreements

[[Page 14365]]

between the applicant and other entities for sharing transmission

facilities to lower the fixed costs of such facilities.

(7) Project participation in EZ/ECs and champion communities--(Up

to 15 Points). This criterion will be used by RUS to score applications

based on the number of end user sites within an EZ/EC and Champion

Community. Ten (10) points will be assigned if at least one end user

site is located in an EZ/EC. Five (5) points will be assigned if at

least one end user site is located in a Champion Community.

Sec. 1703.127 Application selection provisions.

(a) Applications will be selected for approval based on scores

assigned, availability of funds, and the provisions of this section.

RUS will make determinations regarding the reasonableness of all

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

costs; location; and other characteristics of the application and the

project to determine the number of points assigned to a grant

application for all selection criteria.

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

accordance with Sec. 1703.126, 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. In

this case, however, the Administrator will provide the applicant of the

higher scoring application the opportunity to reduce the amount of its

grant request to the amount of funds available. If the applicant agrees

to lower its grant request, it must certify that the purposes of the

project can be met, and the Administrator must determine the project is

financially feasible at the lower amount in accordance with

Sec. 1703.125(e)(1). An applicant or multiple applicants affected under

this paragraph will have the opportunity to be considered for loan

financing in accordance with subparts F and G of this part.

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

feasibility or is not sustainable in accordance with the requirements

of Sec. 1703.115(e)(1);

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

the opinion of RUS, would prevent successful implementation, operation,

or sustainability of the project;

(3) Other applications would provide more benefit to rural America

based on a review of the financial and technical information submitted

in accordance of Sec. 1703.125(e).

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

adequately address any requirement of this subpart or contains

inadequacies which would, in the opinion of RUS, undermine the ability

of the project to meet the general purpose of this subpart or comply

with policies of the DLT Program contained in Sec. 1703.101.

(d) Grant applications will be ranked by the type of application

(health care or educational) and total points scored. Grants available

for medical and educational applicants may be allocated based on the

total number of medical and educational applications scoring in the top

50 percent of all applications received for that fiscal year. Based on

the number and type of applications received, applications may be

ranked only in one category based on the predominant use of the

project.

(e) RUS may reduce the amount of the applicant's grant based on

insufficient program funding for the fiscal year in which the project

is reviewed. 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 (f) of this section.

(f) RUS will provide the applicant with an explanation of any

determinations made with regard to paragraphs (c)(1) through (c)(4) of

this section prior to making final project selections for the year. The

applicant will be provided 15 days from the date of RUS' 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. 1703.129.

(g) Grantees shall comply with all applicable provisions of 7 CFR

parts 3015, 3016, and 3019.

Sec. 1703.128 Submission of applications.

(a) Applications for grants shall be submitted to the RUS, 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 must be submitted to RUS postmarked not later than

the application filing deadline established by the Administrator if the

applications are to be considered during the period for which the

application was submitted. The deadline for submission of applications

each fiscal year will be published, and provided through other notices,

by RUS in the Federal Register, at least 30 days before the deadline

occurs. It is suggested that applications be submitted prior to the

respective deadline to ensure they can be reviewed and considered

complete by the deadline. RUS will review each application for

completeness in accordance with Sec. 1703.125, and notify the

applicant, within 15 working days of the receipt of the application, of

the results of this review, citing any information that is incomplete.

To be considered for a grant, the applicant must submit the information

to complete the application within 15 working days of the date of RUS'

written response. If the applicant has submitted an application prior

to the application filing deadline, the applicant will have 15 working

days from RUS' response or until the application filing deadline to

submit information, whichever provides the applicant more time. If the

applicant fails to submit such information by the appropriate deadline,

the application will be considered during the next established

application period.

completed application. Applicants 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 required by

Sec. 1703.125.

Sec. 1703.129 Appeals.

All qualifying applications under this subpart will be scored based

on the criteria contained in Sec. 1703.126. Awards will be made by RUS

based on the highest ranking applications and the amount of financial

assistance available for grants. 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

[[Page 14366]]

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, that 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, RUS, 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.

Subpart F--Distance Learning and Telemedicine Combination Loan and

Grant Program

Sec. 1703.130 Use of combination loan and grant.

(a) A combination loan and grant may be used by eligible

organizations as defined in Sec. 1703.103 for distance learning and

telemedicine projects to finance 100 percent of the cost of approved

purposes contained in Sec. 1703.131 provided that no financial

assistance may exceed the maximum amount for the year in which the

combination loan and grant is made.

(b) Applicants must meet the minimum eligibility requirement for

determining the extent to which the project serves rural areas as

determined in Sec. 1703.126(b)(2) (the applicant must receive at least

20 points to be eligible to receive financial assistance under this

subpart).

Sec. 1703.131 Approved purposes for a combination loan and grant.

The approved purposes for a combination loan and grant are:

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

facilities as defined in Sec. 1703.102;

(b) Acquiring instructional programming;

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 a combination loan and grant (this

purpose shall not exceed 10 percent of the total requested financial

assistance);

(d) Paying for medical or educational equipment and facilities that

are shown to be necessary to implement the project, including vehicles

utilizing distance learning and telemedicine technology to deliver

educational and health care services. The applicant must demonstrate

that such items are necessary to meet the purposes under this subpart

and financial assistance for such equipment and facilities is not

available from other sources at a cost which would not adversely affect

the economic viability of the project;

(e) Providing links between teachers and students or medical

professionals who are located at the same facility, provided that such

facility receives or provides distance learning or telemedicine

services as part of a distance learning or telemedicine network which

meets the purposes of this subpart;

(f) Providing for site development and alteration of buildings in

order to meet the purposes of this subpart. Financial assistance for

this purpose must be necessary and incidental to the total amount of

financial assistance requested;

(g) Purchasing of land, buildings, or building construction

determined by RUS to be necessary and incidental to the project. The

applicant must demonstrate that financial assistance funding from other

sources is not available at a cost that does not adversely impact the

economic viability of the project as determined by the Administrator.

Financial assistance for this purpose must be necessary and incidental

to the total amount of financial assistance requested; and

(h) Acquiring telecommunications transmission facilities provided

that no telecommunications carrier will install such facilities under

the Act or through other financial procedures within a reasonable time

period and at a cost to the applicant that does not impact the economic

viability of the project, as determined by the Administrator.

Sec. 1703.132 Nonapproved purposes for a combination loan and grant.

(a) Without limitation, a combination loan and grant made under

this subpart shall not be expended:

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

educational personnel;

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

applicant or the project;

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

carrier or another telecommunications service provider, unless the

applicant is the local exchange carrier or other telecommunications

service provider;

(4) 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;

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

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

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

approved;

(7) Except for leases (see Sec. 1703.131), to pay the cost of

recurring or operating expenses for the project; or,

(8) For any other purposes not specifically outlined in

Sec. 1703.131.

(b) Except as otherwise provided in Sec. 1703.112, funds shall not

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

is dependent upon the receipt of additional financial assistance under

this subpart or is dependent upon the receipt of other funding that is

not assured.

Sec. 1703.133 Maximum and minimum amounts.

Applications for a combination loan and grant under this subpart

will be subject to limitations on the proposed amount of loans and

grants. The Administrator will establish the maximum amount of loans

and grants and the portion of grant funds as a percentage of total

assistance for each project 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 before the beginning of

the fiscal year to carry out this subpart. The minimum amount of a

combination loan and grant is $50,000.

Sec. 1703.134 Completed application.

The following items are required to be submitted to RUS in support

of an application for a combination loan and grant:

(a) An application for federal assistance: A completed Standard

Form 424.

(b) An executive summary of the project: The applicant must provide

RUS with a general project overview that addresses each of the

following 9 categories:

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

[[Page 14367]]

(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, the types of educational or medical services to

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

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

accordance with Sec. 1703.103;

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

of the combination loan and grant required and the source of funding,

if applicable, for the remainder of the project;

(5) A statement specifying whether the project provides

predominantly distance learning or telemedicine services 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 that will be served by the project at

each end user site;

(8) A certification by the applicant that facilities constructed

with a combination loan and grant do not duplicate adequately

established telemedicine or distance learning services.

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

village, borough, or rural area plus the State).

(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 combination loan and grant and any other sources of

funds for the project.

(d) Financial information. The applicant must show its financial

ability to complete the project; show project feasibility; and provide

evidence that it can execute a note for a loan with a maturity period

greater than one year. 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

that 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 and repay the loan portion of the

combination loan and grant. This documentation should include sources

of sufficient income or revenues to pay operating expenses including

telecommunications access and toll charges, system maintenance,

salaries, training, and any other general operating expenses, provide

for replacement of depreciable items, and show repayment of interest

and principal for the loan portion of the combination loan and grant.

(2) A list of property which will be used as collateral to secure

repayment of the loan. The applicant shall purchase and own collateral

that secures the loan free from liens or security interests and take

all actions necessary to perfect a security interest in the collateral

that secures the loan. RUS considers as adequate security for a loan, a

guarantee by a RUS telecommunications or electric borrower or by

another qualified party. Additional forms of security, including

letters of credit, real estate, or any other items will be considered.

RUS will determine the adequacy of the security offered.

(3) As applicable, a depreciation schedule covering all assets of

the project. Those assets for which a combination loan and grant are

being requested should be clearly indicated.

(4) 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.

(5) 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.

(e) 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 similar to the project. Experience

in a similar project is desirable but not required.

(f) A telecommunications system plan. A telecommunications system

plan, consisting of the following (the items in paragraphs (f)(4) and

(f)(5) of this section are required only when the applicant is

requesting a combination loan and grant 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 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 a combination loan and grant.

(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 discussions with local exchange carriers serving the

project area addressing the concerns contained in Sec. 1703.131(h).

(5) The capabilities of the telecommunications transmission

[[Page 14368]]

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) Compliance with other Federal statutes. The applicant must

provide evidence of compliance with other federal statutes and

regulations including, but not limited to the following:

(1) E.O. 11246, Equal Employment Opportunity, as amended by E.O.

11375, and as supplemented by regulations contained in 41 CFR part 60;

(2) Anti-Kickback Act (18 U.S.C. 874);

(3) Davis Bacon Act (40 U.S.C. 276a-a-7);

(4) Contract Work and Safety Standards Act (40 U.S.C. 327-333);

(5) Clean Air Act (42 U.S.C. 7401, et seq.);

(6) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352);

(7) E.Os 12549 and 12689, Debarment and Suspension;

(8) Resource Conservation and Recovery Act (42 U.S.C. 6962);

(9) Drug-Free Workplace Act of 1988 (41 U.S.C. 701);

(10) Assistance and Real Property Acquisition Policies Act of 1970;

and

(11) Office of Management and Budget Circulars A-110 and A-102.

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

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

environment and historic preservation. Loans and grants made under this

part are subject to 7 CFR part 1794 which contains RUS' policies and

procedures for implementing a variety of Federal statutes, regulations,

and Executive orders generally pertaining to the 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) The applicant may use the ``Environmental Questionnaire,''

available from RUS, to assist in complying with the requirements of

this section.

(i) Evidence of legal authority and existence. The applicant must

provide evidence of its legal existence and authority to enter into a

grant and incur debt with RUS.

(j) Federal debt certification. The applicant must provide evidence

that it is not delinquent on any obligation owed to the government.

(k) 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 project would

further the purposes of this subpart.

(l) Additional information required by RUS. The applicant must

provide any additional RUS may consider relevant to the application and

necessary to adequately evaluate the application. RUS 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. 1703.135 Application selection provisions.

(a) A combination loan and grant will be approved based on

availability of funds, the financial feasibility of the project in

accordance with Sec. 1703.134(d), the services to be provided which

demonstrate that the project meets the general requirements of this

subpart, the design of the project; costs; location; and other

characteristics of the application.

(b) RUS will determine, from the information submitted with each

application for a combination loan and grant, whether the application

achieves sufficient priority, based on the criteria set forth in the

1996 Act, to receive a combination loan and grant from funds available

for the fiscal year. If such priority is achieved, RUS will process the

combination loan and grant application on a first-in, first-out basis,

provided that the total amount of applications on-hand for combination

loans and grants does not exceed 90 percent of the total loan and grant

funding available for the fiscal year. At such time as the total amount

of applications eligible for combination loans and grants, if such

applications were approved, exceeds 90 percent of amount of combination

loan and grant funding available, RUS will process the remaining

applications using the evaluation criteria set forth in Sec. 1703.126.

determines that:

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

feasibility, or will not be adequately secured in accordance with the

requirements contained in Sec. 1703.134(d);

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

the opinion of RUS, would prevent successful implementation, or

operation of the 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 RUS, undermine the ability

of the project to meet the general purpose of this subpart or comply

with policies of the DLT program contained in Sec. 1703.101.

(d) RUS will provide the applicant with a statement of any

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

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

RUS' 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. 1703.137.

Sec. 1703.136 Submission of applications.

(a) RUS will accept applications for a combination loan and grant

submitted by RUS telecommunications General Field representatives

(GFRs), by Rural Development State Directors, or by applicants

themselves. Applications for a combination loan and grant under this

subpart may be filed at any time and will be evaluated as received.

(b) Applications submitted to the State Director, Rural

Development, in the State serving the headquarters of the project will

be evaluated as they are submitted. All applicants must submit an

original and two copies of a completed application. The 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 the State Director. The State Director will:

(1) Review each application for completeness in accordance with

Sec. 1703.134, and notify the applicant, within 15 working days of

receiving the application, of the results of this review,

[[Page 14369]]

acknowledging a complete application, or citing any information that is

incomplete. To be considered for a combination loan and grant, the

applicant must submit any additional information requested to complete

the application within 15 working days of the date of the State

Director's written response. If the applicant fails to submit such

information, the application will be returned to the applicant.

(2) Within 30 days of the determination of a completed application

in accordance with paragraph (b)(1) of this section, review the

application to determine suitability for financial assistance in

accordance with Sec. 1703.135, and other requirements of this subpart.

Based on its review, the State Director will work with the applicant to

resolve any questions or obtain any additional information. The

applicant will be notified, in writing, of any additional information

required to allow a financial assistance recommendation and will be

provided a reasonable period of time to furnish the additional

information.

(3) Based on the review in accordance with Sec. 1703.135 and other

requirements of this subpart, make a preliminary determination of

suitability for financial assistance. A combination loan and grant

recommendation will be prepared by the State Director with concurrence

of the RUS telecommunications GFR that addresses the provisions of

sections Sec. 1703.134 and Sec. 1703.135 and other applicable

requirements of this subpart.

(4) If the application is determined suitable for further

consideration by RUS, forward an original and one copy of the

application with a financial assistance recommendation, signed jointly,

to the Assistant Administrator, Telecommunications Program, Rural

Utilities Service, Washington, DC. The applicant will be notified by

letter of this action. Upon receipt of the application from the State

Director, RUS will conduct a review of the application and the

financial assistance recommendation. A final determination will be made

within 15 days. If the Administrator determines that a combination loan

and grant can be approved, the State Director will be notified and the

State Director will notify the applicant. A combination loan and grant

will be processed, approved, and serviced in accordance with

Secs. 1703.105 through 1703.112 of subpart D.

(5) If the State Director determines that the application is not

suitable for further consideration by RUS, notify the applicant with

the reasons for this determination. The applicant may appeal this

determination pursuant to section Sec. 1703.137 of this subpart.

directly by applicants will be evaluated as they are submitted. All

applicants must submit an original and two copies of a completed

application. The 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. RUS

will:

(1) Review each application for completeness in accordance with

Sec. 1703.134, and notify the applicant, within 15 working days of

receiving the application, of the results of this review, acknowledging

a complete application, or citing any information that is incomplete.

To be considered for a combination loan and grant assistance, the

applicant must submit any additional information requested to complete

the application within 15 working days of the date of the RUS written

response. If the applicant fails to submit such information, the

application will be returned to the applicant.

(2) Within 30 days of the determination of a completed application

in accordance with paragraph (c)(1) of this section, review the

application to determine suitability for financial assistance in

accordance with Sec. 1703.135, and other requirements of this subpart.

Based on its review, RUS will work with the applicant to resolve any

questions or obtain any additional information. The applicant will be

notified, in writing, of any additional information required to allow a

financial assistance recommendation and will be provided a reasonable

period of time to furnish the additional information.

(3) If the application is determined suitable for further

consideration by RUS, conduct a review of the application and financial

assistance recommendation. A final determination will be made within 15

days. If the Administrator determines that a combination loan and grant

can be approved, the applicant will be notified. A combination loan and

grant will be processed, approved, and serviced in accordance with

Secs. 1703.105 through 1703.112 of subpart D.

(4) If RUS determines that the application is not suitable for

further consideration, notify the applicant with the reasons for this

determination. The applicant will be able to appeal in accordance with

Sec. 1703.137 of this subpart.

Sec. 1703.137 Appeals.

Any appeal must be made, in writing, within 10 days after the

applicant is notified of the determination to deny the application.

Appeals shall be submitted to the Administrator, RUS, U.S. Department

of Agriculture, 1400 Independence Ave., SW., STOP 1590, Washington, DC

20250-1590. Thereafter, the Administrator will review the appeal to

determine whether to sustain, reverse, or modify the original

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.

Secs. 1703.138--1703.139 [Reserved]

Subpart G--Distance Learning and Telemedicine Loan Program

Sec. 1703.140 Use of loan funds.

Loans may be used to finance 100 percent of the costs of a project.

Entities seeking a loan must be able to provide security and execute a

note with a maturity period greater than one year. The following

entities are eligible for loans under this subpart:

(a) Organizations as defined in Sec. 1703.103. If a RUS

telecommunications borrower is seeking a loan, the borrower does not

need to submit all of the financial security information required by

Sec. 1703.144(d). The borrower's latest financial report (Form 479)

filed with RUS and any additional information relevant to the project,

as determined by RUS, will suffice;

(b) Any non-profit or for-profit entity, public or private entity,

urban or rural institution, or rural educational broadcaster, which

proposes to provide and receive distance learning and telemedicine

services to carry out the purposes of this subpart; or

paragraphs (a) or (b) of this section for constructing distance

learning or telemedicine facilities for the purposes contained in

Sec. 1703.141, except for those purposes in Sec. 1703.141(h).

(d) Applicants must meet the minimum eligibility requirement for

determining the extent to which the project serves rural areas as

contained in Sec. 1703.126(b)(2) (the applicant must receive at least

20 points to be eligible to receive financial assistance under this

subpart).

Sec. 1703.141 Approved purposes for loans.

The following are approved purposes for loans:

[[Page 14370]]

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

facilities as defined in Sec. 1703.102;

(b) Acquiring instructional programming;

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 loan (financial assistance for

this purpose shall not exceed 10 percent of the requested financial

assistance);

(d) Paying for medical or educational equipment and facilities

which are shown to be necessary to implement the project, including

vehicles utilizing distance learning and telemedicine technology to

deliver educational and health care services. The applicant must

demonstrate that such items are necessary to meet the purposes under

this subpart and financial assistance for such equipment and facilities

is not available from other sources at a cost which would not adversely

affect the economic viability of the project;

(e) Providing links between teachers and students or medical

professionals who are located at the same facility, provided that such

facility receives or provides distance learning or telemedicine

services as part of a distance learning or telemedicine network which

meets the purposes of this subpart;

(f) Providing for site development and alteration of buildings in

order to meet the purposes of this subpart. Loans for this purpose must

be necessary and incidental to the total amount of financial assistance

requested;

(g) Purchasing of land, buildings, or building construction, where

such costs are demonstrated necessary to construct distance learning

and telemedicine facilities. The applicant must demonstrate that

funding from other sources is not available at a cost which does not

adversely impact the economic viability of the project as determined by

the Administrator. Financial assistance for this purpose must be

necessary and incidental to the total amount of financial assistance

requested;

(h) Acquiring of telecommunications transmission facilities

provided that no telecommunications carrier will install such

facilities under the Act or through other financial procedures within a

reasonable time period and at a cost to the applicant that does not

impact the economic viability of the project, as determined by the

Administrator;

(i) Any project costs, not included in paragraphs (a) through (h)

of this section, incurred during the first two years of operation after

the financial assistance has been approved. The applicant must show

that financing such costs are necessary for the establishment or

continued operation of the project and that financing is not available

for such costs elsewhere, including from the applicant's financial

resources. The Administrator will determine whether such costs will be

financed based on information submitted by the applicant. Loans shall

not be made exclusively to finance such costs, and financing for such

costs will not exceed 20 percent of the loan provided to a project

under this section; and

(j) All of the costs needed to provide distance learning

broadcasting to rural areas. Loans may be used to cover the costs of

facilities and end-user equipment dedicated to providing educational

broadcasting to rural areas for distance learning purposes. If the

facilities are not 100 percent dedicated to broadcasting, a portion of

the financing may be used to fund such facilities based on a percentage

of use factor that approximates the distance learning broadcasting

portion of use.

Sec. 1703.142 Nonapproved purposes for loan.

(a) Loans made under this subpart will not be provided for any of

the following costs incurred after two years from approval:

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

educational personnel;

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

applicant or the project after two years; or

(3) To pay the cost of recurring or operating expenses for the

project (see Sec. 1703.141).

(b) Loans made under this subpart will not be provided for any of

the following costs:

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

carrier or another telecommunications service provider, unless the

applicant is the local exchange carrier or other telecommunications

service provider;

(2) 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;

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

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

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

approved.

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

is dependent upon the receipt of additional financial assistance under

this subpart G or is dependent upon the receipt of other funding that

is not assured.

Sec. 1703.143 Maximum and minimum amounts.

Applications for loans under this subpart will be subject to

limitations on the proposed amount of loans. The Administrator will

establish the maximum amount of a loan available to an applicant under

this subpart, by publishing notice of the maximum amount in the Federal

amount of a loan is $50,000.

Sec. 1703.144 Completed application.

The following items are required to be submitted in support of an

application for a loan:

(a) An application for federal assistance: A completed standard

form 424.

(b) An executive summary of the project. The applicant must provide

RUS with a general project overview that addresses each of the

following 9 categories:

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

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

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

assistance, the types of educational or medical services to be offered

by the project, and the benefits to the rural residents;

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

accordance with Sec. 1703.103;

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

of the loan required and the source of funding, if applicable, for the

remainder of the project;

(5) A statement specifying whether the project provides

predominantly distance learning or telemedicine services 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 project at

each end user site;

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(8) A certification by the applicant that facilities funded by a

loan do not duplicate adequate established telemedicine or distance

learning services.

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

village, borough, or rural area plus the State).

(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 combination loan and grant and any other sources of

funds for the project.

(d) Financial information. The applicant must show its financial

ability to complete the project; show project feasibility; and provide

evidence that it can execute a note for a loan for a maturity period