[Federal Register Volume 64, Number 57 (Thursday, March 25, 1999)]
[Rules and Regulations]
[Pages 14355-14373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6995]



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 Rules and Regulations
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  Federal Register / Vol. 64, No. 57 / Thursday, March 25, 1999 / Rules 
and Regulations  

[[Page 14355]]


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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.
    (c) In administering this subpart, RUS will not favor or mandate 
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.
    (c) Electric or telecommunications borrowers are eligible for loans 
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.
    (c) If State or local governments raise objections to a proposed 
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.
    (c) The recipient's share in the cost of the project must be 
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.
    (c) RUS will monitor recipients, as it determines necessary, to 
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.
    (c) Funding from Federal sources other than RUS cannot be 
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
    (c) Providing technical assistance and instruction for using 
eligible equipment, including any related software; developing 
instructional programming; providing engineering or environmental 
studies relating to the establishment or expansion of the phase of the 
project that is being financed with the 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.
    (c) Costs incurred by the applicant, or others on behalf of the 
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.
    (c) Scoring criteria documentation. Each grant applicant must 
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.
    (C) Mid-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 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.
    (C) If the end user site is located in a Mid-Rural Area, it will 
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.
    (C) Percentage ratios will be rounded up to the next highest or 
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
    (C) NSLP percentage greater than or equal to 25 percent but less 
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.
    (c) RUS will not approve a grant if RUS determines that:
    (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.
    (c) All applicants must submit an original and two copies of a 
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;
    (c) Providing technical assistance and instruction for using 
eligible equipment, including any related software; developing 
instructional programming; providing engineering or environmental 
studies relating to the establishment or expansion of the phase of the 
project that is being financed with 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).
    (c) 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 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.
    (c) RUS will not approve a combination loan and grant if RUS 
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.
    (c) Applications submitted by RUS telecommunications GFRs or 
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
    (c) Any entity that contracts with an eligible organization in 
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;
    (c) Providing technical assistance and instruction for using 
eligible equipment, including any related software; developing 
instructional programming; providing engineering or environmental 
studies relating to the establishment or expansion of the phase of the 
project that is being financed with the 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.
    (c) 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 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 
Register before the opening of the application window. The minimum 
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;

[[Page 14371]]

    (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).
    (c) 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 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 
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 
which adequately reflects the financial capability of project 
participants and the project as a whole to continue a sustainable 
project for a minimum of 10 years and repay the requested loan. 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.
    (2) A list of property which will be used as collateral to secure 
repayment of the proposed 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 first lien in the 
collateral that secures the loan. RUS will consider as adequate 
security for a loan guarantee by a 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 and any project 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 loan 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 
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,

[[Page 14372]]

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) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352);
    (6) E.O.s 12549 and 12689, Debarment and Suspension;
    (7) Resource Conservation and Recovery Act (42 U.S.C. 6962);
    (8) Assistance and Real Property Acquisition Policies Act of 1970;
    (9) National Historic Preservation Act of 1966; and
    (10) Historic Sites Act of 1935.
    (h) Environmental impact and historic preservation. (1) The 
applicant must provide details of the project's impact on the 
environment and historic preservation. Loans 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 
debt with RUS and perform the activities proposed under the loan 
application.
    (j) Federal debt certification. The applicants must provide a 
certification that it is not delinquent on any obligation owed to the 
government (7 CFR parts 3016 and 3019).
    (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 information RUS determines is necessary to 
adequately evaluate the application. Modifications or changes, 
including changes in the loan amount requested, may be requested in any 
project described in an application submitted under this subpart.


Sec. 1703.145  Application selection provisions.

    (a) Loans will be approved based on availability of funds, the 
financial feasibility of the project in accordance with 
Sec. 1703.144(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 loan, whether the application achieves sufficient 
priority, based on the criteria set forth in the 1996 Act, to receive a 
loan from funds available for the fiscal year. If such priority is 
achieved, RUS will process the loan application on a first-in, first-
out basis, provided that the total amount of applications on-hand for 
loans 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 loans, if such applications were approved, 
exceeds 90 percent of amount of loan funding available, RUS will 
process the remaining applications using the evaluation criteria set 
forth in Sec. 1703.126.
    (c) A loan will not be approved if it is determined that:
    (1) The applicant's proposal does not indicate financial 
feasibility, or is not adequately secured in accordance with the 
requirements of Sec. 1703.144(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 
the 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 loan 
will not be approved, 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. 1703.147.


Sec. 1703.146  Submission of applications.

    (a) RUS will accept applications for loans submitted by RUS 
telecommunications General Field Representatives (GFRs), by Rural 
Development State Directors, or by applicants themselves. Applications 
for loans under this subpart may be filed at any time and will be 
evaluated as received on a non-competitive basis.
    (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. 1703.144, 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 loan, 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. 1703.145, 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. 1703.145 and other 
requirements of this subpart, make a preliminary determination of 
suitability for financial assistance. A loan recommendation will be 
prepared by the State Director with concurrence of the RUS 
telecommunications GFR that addresses the provisions of Secs. 1703.144 
and 1703.145 and other applicable requirements of this subpart.
    (4) If the application is determined suitable for further 
consideration by

[[Page 14373]]

RUS, forward an original and one copy of the application with a loan 
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 cursory 
review of the application and the recommendation. A final determination 
will be made within 15 days. If the Administrator determines that a 
loan can be approved, the State Director will be notified and the State 
Director will notify the applicant. Applications for loans will be 
processed, and approved loans serviced, in accordance with 
Secs. 1703.105 through 1703.112.
    (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 will be offered 
appeal rights in accordance with Sec. 1703.147.
    (c) Applications submitted by RUS telecommunications GFRs or 
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 the RUS. 
RUS will:
    (1) Review each application for completeness in accordance with 
Sec. 1703.144, 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 loan, 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 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 loan can be approved, the 
applicant will be notified. Applications will be processed, and 
approved loans 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 offered appeal rights in 
accordance with Sec. 1703.147 of this subpart.


Sec. 1703.147  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.

    Dated: March 17, 1999.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 99-6995 Filed 3-24-99; 8:45 am]
BILLING CODE 3410-15-P