[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
H.R. 1343, A BILL TO CLARIFY NTIA AND RUS AUTHORITY TO RETURN RECLAIMED
STIMULUS FUNDS TO THE U.S. TREASURY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
APRIL 1, 2011
__________
Serial No. 112-30
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas HENRY A. WAXMAN, California
Chairman Emeritus Ranking Member
CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania EDOLPHUS TOWNS, New York
MARY BONO MACK, California FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska MICHAEL F. DOYLE, Pennsylvania
MIKE ROGERS, Michigan ANNA G. ESHOO, California
SUE WILKINS MYRICK, North Carolina ELIOT L. ENGEL, New York
Vice Chair GENE GREEN, Texas
JOHN SULLIVAN, Oklahoma DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania LOIS CAPPS, California
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana ANTHONY D. WEINER, New York
ROBERT E. LATTA, Ohio JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi JOHN BARROW, Georgia
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
BILL CASSIDY, Louisiana DONNA M. CHRISTENSEN, Virgin
BRETT GUTHRIE, Kentucky Islands
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia
_____
Subcommittee on Communications and Technology
GREG WALDEN, Oregon
Chairman
LEE TERRY, Nebraska ANNA G. ESHOO, California
Vice Chairman Ranking Member
CLIFF STEARNS, Florida EDWARD J. MARKEY, Massachusetts
JOHN SHIMKUS, Illinois MICHAEL F. DOYLE, Pennsylvania
MARY BONO MACK, California DORIS O. MATSUI, California
MIKE ROGERS, Michigan JOHN BARROW, Georgia
BRIAN P. BILBRAY, California DONNA M. CHRISTENSEN, Virgin
CHARLES F. BASS, New Hampshire Islands
MARSHA BLACKBURN, Tennessee EDOLPHUS TOWNS, New York
PHIL GINGREY, Georgia FRANK PALLONE, Jr., New Jersey
STEVE SCALISE, Louisiana BOBBY L. RUSH, Illinois
ROBERT E. LATTA, Ohio DIANA DeGETTE, Colorado
BRETT GUTHRIE, Kentucky JOHN D. DINGELL, Michigan
ADAM KINZINGER, Illinois HENRY A. WAXMAN, California (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio)
(ii)
C O N T E N T S
----------
Page
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 1
Prepared statement........................................... 2
Hon. Anna G. Eshoo, a Representative in Congress from the State
of California, prepared statement.............................. 5
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 10
Hon. Fred Upton a Representative in Congress from the State of
Michigan, prepared statement................................... 47
Hon. Joe Barton, a Representative in Congress from the State of
Texas, prepared statement...................................... 49
Witnesses
Lawrence E. Strickling, Assistant Secretary for Communications
and Information, National Telecommunications and Information
Administration, Department of Commerce......................... 11
Prepared statement........................................... 15
Answers to submitted questions............................... 51
Jonathan Adelstein, Administrator, Rural Utilities Service....... 29
Prepared statement........................................... 32
Answers to submitted questions............................... 54
Submitted Material
Letter, dated March 31, 2011, from Steve Traylor, Executive
Director/General Counsel, National Association of
Telecommunications Officers and Advisors, to subcommittee
leadership..................................................... 8
H.R. 1343, A BILL TO CLARIFY NTIA AND RUS AUTHORITY TO RETURN RECLAIMED
STIMULUS FUNDS TO THE U.S. TREASURY
----------
FRIDAY, APRIL 1, 2011
House of Representatives,
Subcommittee on Communications and Technology,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:32 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Greg
Walden (chairman of the subcommittee) presiding.
Members present: Representatives Walden, Terry, Blackburn,
Bass, Latta, Guthrie, Eshoo, Doyle, Matsui, Christensen,
Barrow, Towns and Waxman (ex officio).
Staff present: Neil Fried, Chief Counsel, Communications
and Technology; Brian McCullough, Senior Professional Staff
Member, Commerce, Manufacturing, and Trade; Ray Baum, Senior
Policy Advisor/Director of Coalitions; Paul Cancienne, Policy
Coordinator, Commerce, Manufacturing, and Trade; Peter Kielty,
Senior Legislative Analyst; Debbee Keller, Press Secretary;
Katie Novaria, Legislative Clerk; David Redl, Counsel,
Communications and Technology; Jim Barnette, General Counsel;
Mike Bloomquist, Deputy General Counsel; Phil Barnett, Democrat
Staff Director; Shawn Chang, Democratic Counsel; Jeff Cohen,
FCC Detailee; Sarah Fisher, Democratic Policy Analyst; and
Roger Sherman, Democratic Chief Counsel, Communications and
Technology.
Mr. Walden. Good morning. The Subcommittee on
Communications and Technology will come to order.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Welcome. Today is the subcommittee's second hearing
concerning the broadband stimulus programs administered by NTIA
and the Rural Utilities Service. We will be discussing
oversight of the programs and legislation to address risks and
ambiguities highlighted by the Inspectors General at our last
hearing. We are pleased to have Assistant Secretary Strickling
here and Administrator Adelstein, and I want to thank both of
you and your staffs for working with us on this legislation,
and we appreciate your testimony, your comments and your
counsel.
The NTIA and RUS have awarded $7 billion covering 553
awards in a very short period of time as required by the law.
The dust is still settling, but as we heard during the February
hearing, it is logical to expect that issues of fraud, waste
and abuse will start popping up now that the money is beginning
to flow.
So far, award recipients have spent nearly 5 percent of the
funds. Approximately a dozen recipients have decided not to
pursue their projects and returned their awards worth $70
million. Some have cited the economy and their inability to
fulfill their obligations if they moved forward. With 95
percent of the funding yet to be disbursed, the question is how
many programs will run into hiccups down the road.
As stewards of the taxpayers' money, I know we all want to
prevent misspent funds and fraud. So when the Inspectors
General, Comptroller General or Administrators identify issues,
it is important they are able to quickly determine whether
there is a problem and take appropriate action. It is also
important that Congress be apprised of such developments in a
timely fashion and be made aware of the decisions the
Administrators make.
While we are not seeking to change the programs, we will
continue to ask the important questions, including what
criteria are used to determine when it is time to terminate an
award. Out of fairness to the applicants who were denied
stimulus money, the successful applicants that are abiding by
the terms of their awards, and most importantly, the American
taxpayers, if an award recipient does not comply with the terms
of the award, it should be terminated.
I believe the legislation we are considering accomplishes
these goals. Working with the minority and stakeholders, we
have improved the language and addressed a number of concerns.
I am sure if it needs further refinement, and we are aware of
some of those suggestions, we plan to work with the minority
and all of you to get it right and fix those things as we get
up to the full committee.
The legislation clarifies the Administrators'
responsibility to deobligate funds when there is cause to
terminate the award. Additionally, it institutes a new
reporting requirement that will keep Congress apprised of
relevant developments regarding awards.
I thank Mr. Bass for taking leadership on this effort, of
this modest but necessary legislation. I know this is not earth
shattering, OK? We are going to move on to earth shattering in
the future. This is a housekeeping effort we are trying to get
done.
And on that note, I would also like to suggest that given
the schedule today and a number of votes that are going to
occur on the floor, we probably only have about 40, 45 minutes
to work through this. My goal would be, with the support of the
subcommittee, is to move through the testimony as rapidly as
possible, and if we can get into the markup on the
subcommittee, recognizing I think there are only a few minor
things we need to work out between here and full committee,
which we could do, so that we pass this on to the full
committee.
[The prepared statement of Mr. Walden follows:]
Prepared Statement of Hon. Greg Walden
Welcome. Today is the Subcommittee's second hearing
concerning the broadband stimulus programs administered by NTIA
and the Rural Utility Service. We will be discussing oversight
of the programs and legislation to address risks and
ambiguities highlighted by the Inspectors General at our last
hearing. We are pleased to have Assistant Secretary Stickling
and Administrator Adelstein with us here today, and I want to
thank them and their staffs for their help with the bill.
The NTIA and RUS have awarded $7 billion covering 533
awards in a very short time. The dust is still settling, but as
we heard during the February hearing, it is logical to expect
that issues of fraud, waste and abuse will start popping up now
that the money is beginning to flow.
So far, award recipients have spent approximately 5 percent
of the funds. Approximately a dozen recipients have decided not
to pursue their projects and returned their awards worth
approximately $70 million. Some have cited the economy and
their inability to fulfill their obligations if they moved
forward. With 95 percent of the funding yet to be disbursed,
the question is how many programs will run into hiccups down
the road.
As stewards of the taxpayers' money, I know we all want to
prevent misspent funds and fraud. So when the Inspectors
General, Comptroller General, or Administrators identify
issues, it is important they are able to quickly determine
whether there is a problem and take appropriate action. It is
also important Congress be apprised of such developments in a
timely fashion and be made aware of the decisions the
Administrators make.
While we are not seeking to change the programs, we will
continue to ask the important questions, including what
criteria is used to determine when it's time to terminate an
award. Out of fairness to the applicants who were denied
stimulus money, the successful applicants that are abiding by
the terms of their awards, and most importantly the taxpayer,
if an award recipient doesn't comply with the terms of the
award, it should be terminated.
I believe the legislation we are considering accomplishes
these goals. Working with the minority and all stakeholders, we
have improved the language and addressed a number of concerns.
I am sure if it needs further refinement we can address any
remaining concerns before Full Committee consideration.
The legislation clarifies the Administrators'
responsibility to deobligate funds when there is cause to
terminate the award. Additionally, it institutes a new
reporting requirement that will keep Congress apprised of
relevant developments regarding awards.
I thank Mr. Bass for taking leadership of this modest but
necessary legislation. I hope we can work expeditiously in a
bipartisan manner to move this out of Committee and turn to a
number of legislative issues that will consume more of our time
and resources.
Mr. Walden. With that, I would recognize my friend, the
ranking member from California, Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman, and good morning to
you, to all the members of the committee and to our guests. I
want to extend a warm welcome to Assistant Secretary Strickling
and to Administrator Adelstein, whom we have the pleasure of
working together for a number of years where he served with
distinction at the FCC.
I am going to ask that my----
Mr. Walden. Without objection.
Ms. Eshoo (continuing). Magnificent opening statement be--
--
Mr. Walden. Extraordinary.
Ms. Eshoo (continuing). Inserted into the record in the
interest of time, and we want to work with you, Mr. Chairman,
because I think that what I raised earlier about tweaking the
legislation because there is a sensitivity about the OIG and
DOJ. We do not want to pour cold water over cases that have the
potential for being prosecuted relative to fraud or abuse.
I just want to say that this will be the second time that I
am voting on the same thing, and so you are right, this is not
earth-shattering. In fact, I really do with all due respect
think it is a waste of time. Effective oversight is very
important in terms of the program and I welcome that.
So with that, I am going to place my comments in the
record, and also ask that the letter from the NATOA, the
National Association of Telecommunications Officers and
Advisors, be placed in the record. Thank you.
[The prepared statement of Ms. Eshoo follows:]
Mr. Walden. Without objection.
[The information follows:]
Mr. Walden. Thank you. Does anyone else want to make
opening comments? Mr. Waxman.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, for holding this hearing.
It is an important area for us to look at, and I want to
welcome Assistant Secretary Strickling and Administrator
Adelstein back to the committee. We appreciate the
extraordinary efforts that you and your colleagues have put
into establishing these programs and I look forward to your
testimony.
When Congress passed the landmark Recovery Act, we built
oversight into the very structure of these programs. We knew it
was imperative to provide the Departments of Commerce and
Agriculture with the tools necessary to conduct vigorous
oversight of approximately $7 billion in broadband spending,
and the Commerce Department Inspector General was allocated $16
million and the Agriculture Department Inspector General $22.5
million to oversee and audit it. With billions of dollars
invested in hundreds of broadband projects throughout the
nation, Congress must not skimp on oversight funding.
The agencies tell us that they have adequate resources to
conduct effective oversight. However, Congress still needs to
be vigilant, and if unanticipated oversight challenges emerge,
we have to be ready to ensure that agencies and their
independent IGs have adequate resources to oversee these
projects.
It is inevitable in a program of this size and scope that
some of the projects funded will not work out as anticipated.
In fact, a handful of grant recipients have already withdrawn
from the programs. This money was promptly deposited in the
U.S. Treasury, as it should be.
Today we will consider a legislative proposal that directs
NTIA and RUS to do what they are already doing: returning these
deobligated funds to the Treasury. I don't understand why we
are enacting this duplicative legislation, but I am not opposed
to the legislation. What I like most about the legislation
before us today is not the substance, which I think is probably
unnecessary, but the process. Chairman Walden has reached out
to the Democrats to reach a bipartisan consensus on the bill.
Republican staff has included Democratic staff in discussions
about this measure and has sought our input and suggestions,
and I appreciate this effort and hope it is a harbinger of how
we will approach future proposals.
As we consider this bill, we must be careful not to adopt
legislation that inadvertently complicates the ability of the
agencies to oversee these programs effectively and make sure we
do not encourage defunding projects without good cause,
especially now that obligated money has been translated into
real projects with real jobs in every State.
I want to yield the balance of my time to Mr. Doyle from
Pennsylvania, and I am looking forward to the testimony.
Mr. Doyle. Good morning. Thank you, Mr. Chairman, for
holding this hearing, and thank you, Mr. Waxman for yielding.
Happy April Fool's Day to you both.
I agree with the need for today's hearing, and I believe we
should continue our oversight of the parts of the Recovery Act
that will help countless people throughout the country get
online. But that being said, remember the TV show ``Seinfeld''?
If ``Seinfeld'' was a show about nothing, today's markup is
about very little.
While the Senate is about to mark up spectrum legislation,
we are marking up a bill that is already law. I don't oppose
the bill, but it seems to me that it is the legislative version
of the J. Peterman catalog. It is pages of language about
things we don't really need. After all, the Administration is
already returning canceled grants to the Treasury for deficit
reduction. So we really don't need this bill, but as Jerry
would say, not that there is anything wrong with that.
I yield back.
Mr. Waxman. Thank you, Mr. Doyle, and Mr. Chairman, we look
forward to working with you even though we hear some criticism,
but I think that is important that we continue to see where we
can be together.
Mr. Walden. The gentleman returns the balance of his time,
and we love you too.
Ms. Eshoo. Let us not get carried away.
Mr. Walden. All right. I withdraw that statement.
Now we would like to turn to Mr. Strickling. Before I do
that, though, for our members who just came in, just so you
kind of know the lay of the land here, we probably only have
until about 11:15 and then we are going to have a series of
votes. I would prefer to go ahead and see if we can't get in
and out of the markup before we have to go vote. Otherwise we
may have to come back after the votes, which could be in the
afternoon. So with that, Mr. Strickling, thank you for being
here, thanks for your testimony.
STATEMENTS OF LAWRENCE E. STRICKLING, ASSISTANT SECRETARY FOR
COMMUNICATIONS AND INFORMATION, NATIONAL TELECOMMUNICATIONS AND
INFORMATION ADMINISTRATION, DEPARTMENT OF COMMERCE; AND
JONATHAN ADELSTEIN, ADMINISTRATOR, RURAL UTILITIES SERVICE
STATEMENT OF LAWRENCE E. STRICKLING
Mr. Strickling. Thank you, Chairman Walden, and Ranking
Member Eshoo, Vice Chairman Terry, members of the subcommittee,
thanks to all of you for the opportunity to testify today on
behalf of NTIA concerning the administration of our grant
programs.
I also would like to take this opportunity to acknowledge
and commend our Secretary, Secretary Locke who, as you know,
hopefully will be moving on to China but he has played a very
important role in the oversight of this program, and I want to
recognize my colleague, Administrator Adelstein. I guess this
starts our 2011 broadband tour. It was quite a successful tour
back in 2010 as we went to I think seven different committees
to testify about this program.
I welcome the opportunity to comment on the draft
legislation that is the topic of today's hearing. Before I
speak to the draft bill, I would like to provide a quick update
on the status of our programs.
Since we completed our grant awards on time last September,
NTIA has been focused on providing vigorous oversight and high-
quality technical assistance to grantees to ensure that they
complete their projects on schedule, on budget and that they
deliver the promised benefits to the communities that they
serve, and I am pleased to report that our projects have
already made significant progress in achieving those goals. In
the last quarter of 2010, our grant recipients reporting
funding approximately 1,000 jobs. To date, they have installed
more than 4,000 computers for public use. They have provided
over 150,000 hours of broadband training to date to over 65,000
people. In Michigan, North Carolina, Maine and elsewhere, our
infrastructure projects have broken ground and have begun
building fiber and wireless facilities.
Consistent with our philosophy to focus on middle-middle
projects to prime the pump for private investment to serve
homes and businesses, I am also quite pleased to report that
our grantees have already entered into about 90 interconnection
agreements which will allow the existing incumbents and new
entrants to serve last-mile customers.
I would also like to let you know that on February 17th of
this year, we in collaboration with the FCC unveiled the
National Broadband Map. This is the first public searchable
nationwide map of consumer broadband Internet availability in
the United States. The map is the most granular and transparent
data set of broadband availability that has ever been
published, and while we can draw many conclusions from the map,
there are two I want to emphasize this morning.
First, that our data shows that 5 to 10 percent of
Americans do not have access to a level of broadband service
necessary to perform a basic set of Internet applications as
defined by the FCC, and second, the map proves what we knew
during our grant review process, which is that anchor
institutions are greatly underserved across our country. Two-
thirds of the schools that were surveyed subscribe to services
slower than 25 megabits per second and 96 percent of libraries
that were surveyed subscribe at speeds slower than 25 megabits
per second.
Now, protecting the federal funds we are spending is of
paramount importance to us. As the members of the subcommittee
are well aware, achieving these objectives is challenging and
requires us to perform diligent oversight and provide technical
assistance to our awardees. Our large and complex grant program
continues to raise novel issues, some of which have potential
to impact the progress of our projects, and let me just give
you one example. Before our infrastructure grantees can begin
construction, most of them have to complete and submit an
environmental and historic preservation study in compliance
with the National Environmental Policy Act, the National
Historic Preservation Act and the Endangered Species Act. These
processes can take significant time and resources, and we have
worked very hard to find win-win solutions to enable our
projects to move forward in full compliance with these
important laws, and we are committed to working with our
grantees to complete these environmental requirements as
rapidly and as thoroughly as possible.
To solve these and other issues yet maintain the rigorous
implementation schedule demanded of these projects, we have put
into action a program-wide oversight strategy to mitigate
waste, fraud and abuse, to ensure compliance with award
conditions and to monitor the progress of each project toward
its timely completion. The technical assistance that we have
conducted to date includes holding multi-day grantee
conferences on key implementation topics. We have hosted over
40 webinars and drop-in conference calls to provide guidance on
key topics, and by the end of June we will have performed site
inspections for 72 of our projects, representing about half of
the total grant pool. The goal of our program is to identify
issues early in the process and to resolve them as promptly as
we can.
Earlier this week, I notified Congress that we have had two
grantees terminate their awards recently, and while I am
disappointed that these two projects, one in Indiana, the other
in Wisconsin, will not be built, I do believe that our diligent
oversight led to the termination of these projects early on
with only a minimal expenditure of federal taxpayer dollars. As
required by law, we have already returned the full $14 million
of the Indiana grant to the Treasury, and we will promptly
nearly all of the $23 million Wisconsin grant upon completion
of an accounting with the State.
So given that experience, let me turn to the draft
legislation. We support the ultimate goals of the bill, which
are to protect against waste, fraud and abuse and to ensure
that unused or reclaimed funds are promptly returned to the
Treasury, and while we do not believe that the additional steps
are needed to ensure adequate protection of taxpayer funds, and
I think our action in response to the Wisconsin and Indiana
terminations prove that, we have no objection if Congress
believes that the reporting requirements contained in the bill,
in addition to the other mechanisms already in place, would
further protect taxpayers. We do have some concerns, however,
about the specific wording of the requirement to deobligate and
return funds to the Treasury, and we look forward to working
with the subcommittee to clarify this language.
And allow me to close with some comments about our
relationship with the Inspector General. I am extremely
grateful for the ongoing efforts of the IG in helping to
oversee our grant programs. Throughout the life of the program,
the IG has identified additional steps we can take to oversee
our programs more effectively, and we have worked hard to
implement their recommendations as thoroughly as possible. Now
that we are in the oversight phase of our program, we have had
discussions with our IG as to how we should handle complaints
we receive about our projects. We haven't received many, and in
many respects the complaints simply reflect policy
disagreements and do not raise serious allegations of waste,
fraud and abuse, but nonetheless, the Inspector General has
told me we can do better, particularly in developing a more
structured process to review these complaints, and to that end,
we will be working with the IG to improve our performance in
this area just as we have with every other recommendation the
IG has made to us over the course of the program.
Thank you again for the opportunity to testify, and I will
be happy to answer your questions.
[The prepared statement of Mr. Strickling follows:]
Mr. Walden. Thank you, Mr. Strickling, and if you can keep
the committee in the loop, I am sure we all have interest in
that part of the process too as this rolls out, so your
suggestions to the IG and back and forth, if you can keep us in
that loop, that would be helpful as well.
Mr. Strickling. Absolutely.
Mr. Walden. Mr. Adelstein, thank you for being here. We are
delighted to have you here and we look forward to the summary
of your testimony as well, sir.
STATEMENT OF JONATHAN ADELSTEIN
Mr. Adelstein. Thank you, Chairman Walden, Ranking Member
Eshoo and members of the subcommittee. It is an honor to be
here in front of you to talk about the Broadband Initiatives
Program we call BIP and legislation to amend the Recovery Act.
I am delighted to be here again with my friend, Larry
Strickling, which we have done many times before including
before this subcommittee. Our agencies worked very closely
together to fulfill the President's vision of getting broadband
out to every corner of this Nation, and the Assistant Secretary
has been an invaluable partner throughout the process.
Our Secretary Tom Vilsack has made broadband a pillar of
his strategy to revitalize rural economies, and the direct
benefits of broadband to rural economies are immense. USDA's
Economy Research Service has studied the effects of broadband
in rural communities and concluded based on their statistical
analysis that employment growth was higher and non-farm private
earnings greater in counties with a longer history of broadband
availability.
The Recovery Act provided RUS with the unique opportunity
to jumpstart the rural economy, investing more than $3.5
billion in loans and grants to expand broadband networks in the
hardest to serve rural parts of the United States. Demand for
broadband financing under the Recovery Act was really
tremendous. RUS received over 2,000 applications totaling $28
billion. We were able to make only 320 awards for that $3.5
billion, only 16 percent of the applications received. This
amazing response and of course the NTIA's map that the
Assistant Secretary referred to I think demonstrate the huge
demand that remains in rural America for improved broadband
service.
In September 2010, the RUS completed the awards phase of
this program. Our selection process was extremely rigorous. Of
the $3.5 billion in loans and grants, $3.25 billion went to 285
last-mile projects, $173 million was for middle-mile projects.
We did $3.4 million for 19 regional technical assistance
projects, and finally, $100 million went to satellite service
to premises that were otherwise unserved by any of the other
grants under this program.
Now, these investments are going to make a big difference.
They connect nearly 7 million Americans, 360,000 businesses and
more than 30,000 critical community institutions to new or
improved broadband service. They span over 300,000 square
miles, touch 31 tribal lands, serve 125 persistent poverty
counties, about a third of the persistent poverty counties in
the United States, and will create more than 25,000 immediate
and direct jobs for workers. Once built, though, these networks
will provide the platform for economic growth and job creation
for years to come. These projects are really extraordinary. I
know in the interests of time, I had a lot of great examples
here. I will just one example that is particularly important
because it is in an important district in Oregon, the
Confederated Tribes of Warm Springs Reservation in Oregon
scheduled to break ground this month just in a couple of weeks.
It will bring broadband to the entire 1,000-square-mile
reservation, connecting 223 community institutions including
government agencies, emergency facilities, 775 households and
22 businesses. It will be transformative for the Warm Springs
Reservation. Our excitement for these projects is matched by
our commitment to execute our duties very prudently and to be
very careful with taxpayer dollars.
RUS shares the goals of your legislation, Mr. Chairman, to
return unused or reclaimed funds to the U.S. Treasury and to
aggressively combat waste, fraud and abuse. The bill's purpose
is entirely consistent with the standard procedures already in
place for RUS programs including BIP. The RUS has some concerns
with the draft and we look forward to working with the
subcommittee to address them, and we would be happy to provide
any drafting assistance as needed if you should request it.
To ensure our continued success and prudent portfolio of
management with regard to the Recovery Act, RUS has done a lot
of work. We have held compliance workshops. We visited every
award recipient and we have required quarterly reports and
annual CPA audits. We have our own field accountants and we
have sent our field accountants to each and every one of these
recipients before any money is spent to ensure that their
accounting system complies with all of our requirements and
that it is set up as something we can really audit and be on
top of.
Now, the USDA Inspector General, we work closely with them
and we appreciate their good work. I understand that in the
last month they were here before this committee raising
concerns about the broadband loan program administered under a
previous Administration, under a previous statute and under
previous regulations, and I share these concerns. To be clear,
none of the issues raised by the IG pertain to the Recovery Act
broadband program or the Obama Administration's conduct of the
RUS broadband loan program. The broadband loan program was
actually suspended during the Recovery Act to allow the agency
to address all of the concerns that were raised by the IG and
to implement statutory changes that were made in 2008 and to
integrate the lessons of the Recovery Act into these new rules.
On March 14th, just last month, the RUS issued new
broadband regulations that open the program for applications
for the first time under this Administration. The new
regulation and other actions taken by the RUS have
satisfactorily addressed all of the issues raised by the IG, so
I am thrilled to report to the subcommittee that last week the
Inspector General concluded and closed completely the RUS
broadband loan audits, so the book is shut on that audit.
The new broadband loan program increases efficiencies,
targets limited resources and builds on the momentum created by
the Recovery Act BIP program to fill the gaps in rural
broadband access that were identified in NTIA's map.
So it is an honor to work with you, with our Inspector
General and with our federal partners including NTIA to make
affordable broadband service widely available throughout rural
America. Your continued support and guidance is deeply
appreciated. I appreciate the opportunity to testify and look
forward to any questions you may have.
[The prepared statement of Mr. Adelstein follows:]
Mr. Walden. I appreciate the testimony of both the
gentlemen, and I want to congratulate you on fulfilling the
recommendations of that audit. I don't care who is in charge
where, I am glad you got it done because that one goes back to
2005, I think, so thank you for doing that.
Again, for our committee members, given the schedule we
face, I am going to try to limit my questions. I think I am
just going to go with one if we could get into the markup but I
don't want to rush anybody. If we could get into the markup
before they call votes on the floor, that would solve having to
come back after the votes, say, at 2:00 or something, 2:30.
So Mr. Strickling, doesn't section 6001(i)(4) of the ARRA
state you may deobligate funds? I can tell you it does.
Mr. Strickling. You are correct.
Mr. Walden. Yes, ``may,'' not ``shall,'' and that is really
the issue. It isn't whether you deposit in the Treasury, and
not you personally. It could be somebody down the road
different has the flexibility whether you will or won't
deobligate. This legislation says you shall, and while you have
said and I trust that you will deobligate funds in such cases
as fraud, waste and insufficient performance, doesn't this
change provide you with that added legal protection in that it
reduces the ability of a failing awardee to quibble over what
would otherwise be your discretionary decision?
Mr. Strickling. I can't debate the change in the words.
What I can tell you is, under Department of Commerce guidance,
it is less discretionary in the sense that we are directed
under DOC provisions that we will take these actions. In any
case, again, we don't have any issues with your legislating in
this area but I don't expect it to change our day-to-day to
practice.
Mr. Walden. But this does put certainty in the statute
because the guidance out of the department could change in
another Administration or even in this one, could it not?
Mr. Strickling. I would agree with that.
Mr. Walden. So we are just trying to get some certainty
there.
I will yield now to anyone else on our side that may want
to ask a question. Mr. Bass?
Mr. Bass. Mr. Chairman, I just have two very quick
questions.
Secretary Strickling, what is the current requirement to
report to Congress regarding awards that show material
noncompliance, and do you think that the passage of this
legislation would increase the transparency of the Recovery
Act?
Mr. Strickling. I can't speak to there being a--I can't
identify a particular legislative directive to us to do that,
but I think as reflected in the letter I sent earlier this
week, it is certainly our practice to do so.
Mr. Bass. Both of you mentioned the number of awards that
you have made, amount of money spent to date. I think you
identified three that have been discontinued. Have you learned
anything from these returned awards that would be beneficial to
you in your oversight on the existing projects?
Mr. Strickling. We have actually had two projects that went
to award and we actually went through the process, started the
process with the applicant and then they have since terminated.
There is a third award that the applicant never actually
accepted the award, a small award up in Minnesota to Leach Lake
for about $1.7 million. But of the two projects, I think each
of them presented a unique set of circumstances. In Indiana,
quite frankly, it was a situation where other things were going
on economically in the State. It was a project designed to
serve schools. Indiana is going through a school consolidation,
and our grantee along with our folks at NTIA realized that
their business case was deteriorating as a result of this other
set of governmental actions and the project just didn't seem
viable any longer and so the applicant decided to withdraw
because they couldn't see that they would have an ongoing
project after the completion of the grant period.
We have been very focused on giving awards to projects that
we think are sustainable and will continue on even after the
grant period. In the Indiana case, I think again through our
oversight and discussions with the applicant, we learned early
on that the project really wasn't viable in the way we thought
it was when we had reviewed it during the review process.
Wisconsin again, totally separate set of facts there that I
would be happy to discuss with you separately.
Mr. Bass. Administrator Adelstein, do you have any comments
on that?
Mr. Adelstein. If there is anything we draw from that, it
is that we need to very aggressively work with and oversee
every aspect of each one of our awardees' programs and the
progress they are making on the projects. With each of those 10
that we decided mutually not to move forward on, there were a
lot of issues that we worked hand in hand with them. We sent
our field accountants to visit them. We sent our general field
representatives to visit them. I personally worked with a
number of them. We met with them. We determined whether or not
changes they were proposing were consistent with their original
application. In some cases, they weren't and we weren't able to
work it out and so we went our separate ways. Not one dime of
taxpayer money was spent in any of those projects so we were
able to save the taxpayer by up front making sure that they
understood what we expected and that they were meeting all of
the concerns that we had, and if they weren't, we didn't
hesitate to rescind the projects.
Mr. Bass. Thank you very much, Mr. Chairman.
Mr. Walden. Do any other members on our side have questions
they feel compelled to ask? If not, I will yield 5 minutes to
the gentlewoman from California.
Ms. Eshoo. Thank you, Mr. Chairman. And again, thank you to
both of you for not only being here today but for the work that
you have done, which really speaks for itself.
I am going to go as quickly as possible because we are
under time constraints here. My question is, how does the bill
that is going to be marked up that you have obviously reviewed,
how does it differ in any way from your existing mandate or
practice to terminate grant or loan awards for cause? Is the
legislative language different from current practices relative
to the deobligations of funds? When an award is deobligated,
how does your agency work with the awardee to account for the
funds? I think that you have touched on that. And how long does
it take on average for a deobligated fund to be returned to the
U.S. Treasury, which you already have a responsibility to do.
And the last thing I want to touch on, which is what both the
majority and the minority need to work through is this issue of
the IG, the OIG and where they may identify potential fraud and
the language of the bill--I mean, we don't want to throw ice
water on a case that has real potential to it. That is not the
intent of any member on the committee. So if you want to
comment on that, it is something that we need to work out, and
I think that is the intention from both sides of the aisle.
Mr. Strickling. Yes.
Ms. Eshoo. In other words, what we are taking up today, how
different is it from what we have already passed?
Mr. Strickling. I think on the first part of your question
related to our practices with respect to deobligating dollars
and what happens to the dollars and that, I don't think it
really changes the existing law. In terms of how long that
takes, in the case of the Indiana project, since there had been
no expenditures of federal dollars, we were able to very
quickly return that full amount. In the case of Wisconsin, we
will do an accounting with the State because we think they have
spent a nominal amount of dollars. We think it is less than
$100,000 of allowable costs, which would they be allowed to
recover, and then the remainder will go to the Treasury, but we
do have to carry out that accounting.
Ms. Eshoo. But the legislation doesn't change any of that?
Mr. Strickling. Fundamentally, no. On the issue of--I mean,
the second part of the legislation does impose some time limits
on us in terms of taking actions and reporting to Congress, and
I think Administrator Adelstein----
Ms. Eshoo. From what to what?
Mr. Strickling (continuing). May have had a little more
experience with the implications of that.
Ms. Eshoo. From what to what? What is the time frame on it?
Mr. Adelstein. The time frame is, as the chairman knows, 30
days we have after we are given any information that pertains
to potential misuse of funds to make a determination as to
whether to terminate the project or not, and then we are given
3 days subsequent to report to Congress what our determination
was, which is a new requirement. As the Secretary said, all the
other requirements are basically consistent with existing law.
Ms. Eshoo. And what is the nexus between that and this
issue of a possible fraud and the effect that it would have on
that potential case? Is there a nexus between the two?
Mr. Adelstein. There could be in some cases. In the case of
serious fraud, which of course this legislation is designed to
combat, RUS is generally given an indication by OIG. We get a
confidential little folder that says confidential, do not
report, and generally the OIG requests us not to take action to
rescind a loan or grant if they refer it to the Department of
Justice for criminal prosecution. So we are asked basically to
stay out of the way of a criminal prosecution. Under this
requirement, however, we would be required--we would be at a
loss, because on the one hand, we are being told not to do it,
and there is potential obstruction of justice----
Ms. Eshoo. Mr. Chairman, I think this is the area we need
to work on.
Mr. Walden. That is the part we are going to work on. Would
the gentlewoman yield to me?
Ms. Eshoo. I would be glad to.
Mr. Walden. Because I want to just clarify something Mr.
Adelstein said. You said if you got any information you would
have to notify us, and actually I think if you look at the
language in the bill, such information that pertains to
material noncompliance. That is different than just saying any
information. We tried to set a fairly high standard.
Mr. Adelstein. I did say information pertaining to misuse
of funds, but you are exactly right. That is what the
legislation says, and it would have to be significant
information.
Mr. Walden. Yes, it is not just information.
Mr. Adelstein. So to your question, I mean, if there was a
serious one, these are the most serious cases where they
actually would be referred to DOJ for prosecution. We would be
sort of in a conflict between the requirement of this law----
Ms. Eshoo. Well, we need to repair that.
Mr. Walden. We will work that out.
Ms. Eshoo. We are going to work that out, but I appreciate
this being raised because I think it is important, and I think
that my time is up, Mr. Chairman.
Thank you again, gentlemen. I think that you have confirmed
what we already know and have voted on. But thank you. I do
think that the oversight of the committee is what is really key
here. Thank you.
Mr. Walden. I thank the gentlewoman, and I would just say
that is why we are doing the hearing today is to flesh out
these sorts of issues and get it right.
Mr. Doyle.
Mr. Doyle. Thank you, Mr. Chairman.
Mr. Strickling, Mr. Adelstein, welcome. Thanks for your
good work.
As our last hearing, many of my Republican colleagues
expressed a belief that overbuilding is a persistent and
ongoing problem with these BTOP and BIP awards, and now that
you are finally both here to represent your respective
agencies, would you once and for all dispel these concerns?
Mr. Strickling. Sure. I do think it is a misconception with
our program in particular since we focused on middle-mile
projects, which are open network projects and available to
anybody to take advantage of, including the incumbents as well
as new entrants, and as I pointed out in my opening remarks, we
have already seen 90 interconnection agreements that have been
executed between our infrastructure grant recipients and
carriers who want to take advantage of these facilities to
improve the level of service that they are offering to their
end-user customers. So in that light, what we see our role is
doing is priming the pump. We are putting these middle-mile
facilities out there through these organizations like Merit in
Michigan and MCNC in North Carolina that are going to be able
to provide much middle-mile capacity throughout their States of
Michigan and North Carolina, just to give two examples, and
then other parties including incumbents like AT&T in Michigan
and North Carolina can actually lease capacity on those systems
to improve the service that they offer to their end-user
customers.
So what we did in evaluating our projects was to ensure
that we would be bringing substantial benefits to the area in
which the projects would be built, and we think our projects
pass that test.
Mr. Doyle. Thank you.
Mr. Adelstein?
Mr. Adelstein. Yes, we made a major effort in both rounds
of funding to prioritize the most remote rural areas. In fact,
we gave extra points priority for going to rural areas. We gave
extra points for the number of customers that were totally
unserved, extra points for being the most remote in eligibility
standards and trying to get people 50 miles away from an urban
area, which was actually too extreme for some, so we ended up
really making every effort I think we could to avoid overlap,
to make sure that there was service to those who didn't have
it, and in fact we did get service out to the most rural areas,
and we are going to serve many, many millions of customers that
don't have access to broadband today.
Mr. Doyle. Thank you. Mr. Chairman, I will yield back.
Mr. Walden. I recognize the gentlewoman from California.
Just know we have about 5 minutes before we go vote. Otherwise
we will have to come back after votes.
Ms. Matsui. I will keep that in mind.
I want to thank both of you for being here, and I applaud
your efforts in administering the BTOP and the process. I
believe Americans will have greater access to broadband because
of these programs, particularly in my home State of California.
With that said, the GAO report noted that the uncertainty
of continued funding for oversight presents a risk that both
NTIA and RUS will have insufficient staff and resources to
actively monitor BTOP and BIP projects. I have a question for
both of you. Do both of you believe you have sufficient funding
to devote the resources necessary to oversee compliance?
Mr. Strickling. As of now, yes, and I want to thank the
leadership of this committee for its help on a bipartisan basis
to ensuring that we got the resources we needed in this fiscal
year to provide appropriate oversight, but at the level we are
currently funded at in the existing C.R., assuming that
continues through the rest of this fiscal year, we are in fine
shape, and again, it is through the efforts of the leadership
of this committee that we got to that point, and I want to
thank everyone for that.
Mr. Adelstein. RUS requested no additional funds in order
to oversee this program so we are basically dealing with it out
of our existing budget, which was already very tight. So the
President's full budget really is required in order for us to
do, I think, the level of oversight that we need to do.
Ms. Matsui. So what you are saying is that the budget
currently is fine with you if you don't anticipate any cuts in
the budget moving forward?
Mr. Strickling. That is right.
Ms. Matsui. OK. Fine. And that is all my questions. Thank
you.
Mr. Walden. Thank you. I recognize the gentlewoman from
Tennessee.
Mrs. Blackburn. Thank you, Mr. Chairman.
I have a question for Mr. Adelstein, and I will be happy to
submit it, but I want to refer to the letter that you wrote the
chairman regarding the recipients of RUS loans using USF money
to make payments on those loans. And Mr. Chairman, I would love
for us to have a copy of that letter for the record, the letter
you sent to the FCC chairman.
And then my question to you specifically about this, some
of these loans are for 30 years, and does that mean that we
shouldn't reform USF until that point in time and are we really
advocating the use of a ratepayer subsidy to pay off a
government subsidy? And in light of your letter and your
conversation in that letter, those would be the two questions.
We will submit these, and then I would ask for it to be
included in the record. Yield back.
Mr. Walden. Without objection.
Anyone else seeking recognition? If not--if you want to,
yes.
Mrs. Christensen. I will just ask one.
Mr. Walden. The gentlelady from the Virgin Islands is
recognized.
Mrs. Christensen. Thank you.
The bill calls for termination for insufficient
performance, and while I am sure some fall in that category may
need termination, we are trying to expand to places that are
rural and don't have a lot of experience, and don't you think
that maybe some of those should get technical assistance and
support rather than just be terminated? That is my question.
And I just wanted to say I have evidence of really tight
oversight in a letter to my government that I received a copy
of. Thanks.
Mr. Strickling. Just very, very briefly, I think in terms
of insufficient performance from our perspective, we do intend
to provide technical assistance where we can to work with our
grantees to help them over the bumps that they may run to. I
think an example of insufficient performance could be where the
entire project management staff resigns and leave a program and
there doesn't seem to be a plan in place to bring leadership to
the project. In that kind of situation, we take a hard look at
it and wonder whether it is worth continuing on.
Mr. Adelstein. And we perform similarly. We make every
effort to work with our rural awardees because some of them are
really struggling sometimes, and each one of the 10, we tried
to work to save the ones we could. Sometimes they couldn't be
done. But we will give them every opportunity to comply and to
make it work.
Mr. Towns. I recognize time constraints, so I have some
questions and I would like to place in the record.
Mr. Walden. Absolutely. Yes, all members have that
privilege to submit questions for the record. Thank you, and I
appreciate your courtesy in trying to help us move this along.
With that, the hearing is adjourned.
[Whereupon, at 11:12 a.m., the subcommittee proceeded to
other business.]
[Material submitted for inclusion in the record follows:]