[Federal Register Volume 82, Number 226 (Monday, November 27, 2017)]
[Rules and Regulations]
[Pages 55923-55939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25266]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
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  Federal Register / Vol. 82, No. 226 / Monday, November 27, 2017 / 
Rules and Regulations  

[[Page 55923]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Parts 1703, 1734, and 1735

RIN 0572-AC37


Distance Learning and Telemedicine Loan and Grant Programs

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule; request for comments.

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SUMMARY: The Rural Utilities Service (RUS), a Rural Development Agency 
of the United States Department of Agriculture (USDA), hereinafter 
referred to as RUS or the Agency, is issuing a final rule to 
streamline, revise, and update the Distance Learning and Telemedicine 
(DLT) Grant Program, to minimize the burden of applying for and 
awarding grants. The Agency's goal is to reduce the regulatory burden 
on grant applicants and to ensure that grant funds are awarded for 
projects with the most demonstrable need. The Agency will follow this 
final rule affording the public an opportunity to comment with a 
subsequent final rule.

DATES: This final rule is effective December 27, 2017.
    Written comments must be received on or before December 27, 2017.

ADDRESSES: Submit your comments on this Rule by any of the following 
methods:
     Federal Rulemaking Portal at http://www.regulations.gov . 
Follow instructions for submitting comments.
     Postal Mail/Commercial Delivery: Please send your comment 
addressed to Thomas P. Dickson, Acting Director, Program Development 
and Regulatory Analysis, Rural Utilities Service, U.S. Department of 
Agriculture, 1400 Independence Avenue, STOP 1522, Room 5162, 
Washington, DC 20250-1522.
    Additional information about the Rural Development and its programs 
is available on the Internet at http://www.rd.usda.gov.

FOR FURTHER INFORMATION CONTACT: Kenneth Kuchno, Deputy Assistant 
Administrator, Policy and Outreach Division, Rural Utilities Service, 
Telecommunications Program, U.S. Department of Agriculture, STOP 1599, 
1400 Independence Ave. SW., Washington, DC 20250-1550, Telephone 
number: (202) 690-4673.

SUPPLEMENTARY INFORMATION: 

Executive Order 12866

    This final rule has been determined to be not significant for the 
purposes of Executive Order 12866, Regulatory Planning and Review, and 
therefore has not been reviewed by the Office of Management and Budget 
(OMB).

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The Agency has determined that this rule meets 
the applicable standards provided in section 3 of the 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, in accordance with section 212(e) of the 
Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 
6912(e)), administrative appeal procedures must be exhausted before an 
action against the Department or its agencies may be initiated.

Executive Order 12372

    This final rule is not subject to the requirements of Executive 
Order 12372, ``Intergovernmental Review,'' as implemented under USDA's 
regulations at 7 CFR part 3015.

Executive Order 13771

    This action is expected to be an Executive Order 13771 deregulatory 
action. This rule is expected to provide meaningful burden reduction by 
removing interim steps that delay the application process and reducing 
the amount of resources needed to process and award grant applications.

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 
in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). RUS provides 
loans to borrowers at interest rates and on terms that are more 
favorable than those generally available from the private sector. RUS 
borrowers, as a result of obtaining federal financing, receive economic 
benefits that exceed any direct economic costs associated with 
complying with RUS regulations and requirements.

Environmental Impact Statement

    This final rule has been examined under Agency environmental 
regulations at 7 CFR part 1970. The Administrator has determined that 
this is not a major Federal action significantly affecting the 
environment. Therefore, in accordance with the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321 et seq.), an Environmental Impact 
Statement is not required.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) number assigned 
to this program is 10.855, Distance Learning and Telemedicine Loans and 
Grants. The Catalog is available on the Internet at http://www.cfda.gov 
and the General Services Administration's (GSA's) free CFDA Web site at 
http://www.cfda.gov. The CFDA Web site also contains a PDF file version 
of the Catalog that, when printed, has the same layout as the printed 
document that the Government Publishing Office (GPO) provides. GPO 
prints and sells the CFDA to interested buyers. For information about 
purchasing the Catalog of Federal Domestic Assistance from GPO, call 
the Superintendent of Documents at 202-512-1800 or toll free at 866-
512-1800, or access GPO's online bookstore at http://bookstore.gpo.gov.

Unfunded Mandates

    This final rule contains no Federal mandates (under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for 
state, local, and tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of Sec. Sec.  202 and 205 
of the Unfunded Mandates Reform Act of 1995.

E-Government Act Compliance

    RUS is committed to the E-Government Act, which requires

[[Page 55924]]

Government agencies in general to provide the public the option of 
submitting information or transacting business electronically to the 
maximum extent possible.

Executive Order 13132, Federalism

    The policies contained in this final rule do not have any 
substantial direct effect on states, on the relationship between the 
national government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
final rule impose substantial direct compliance costs on state and 
local governments. Therefore, consultation with the states is not 
required.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes. Rural Development has 
assessed the impact of this rule on Indian tribes and determined that 
this rule does not, to our knowledge, have tribal implications that 
require tribal consultation under E.O. 13175. If a tribe would like to 
engage in consultation with Rural Development on this rule, please 
contact Rural Development's Native American Coordinator at (720) 544-
2911 or [email protected].

USDA Non-Discrimination Policy

    In accordance with Federal civil rights law and U.S. Department of 
Agriculture (USDA) civil rights regulations and policies, the USDA, its 
Agencies, offices, and employees, and institutions participating in or 
administering USDA programs are prohibited from discriminating based on 
race, color, national origin, religion, sex, gender identity (including 
gender expression), sexual orientation, disability, age, marital 
status, family/parental status, income derived from a public assistance 
program, political beliefs, or reprisal or retaliation for prior civil 
rights activity, in any program or activity conducted or funded by USDA 
(not all bases apply to all programs). Remedies and complaint filing 
deadlines vary by program or incident.
    Persons with disabilities who require alternative means of 
communication for program information (e.g., Braille, large print, 
audiotape, American Sign Language, etc.) should contact the responsible 
Agency or USDA's TARGET Center at (202) 720-2600 (voice and TTY) or 
contact USDA through the Federal Relay Service at (800) 877-8339. 
Additionally, program information may be made available in languages 
other than English.
    To file a program discrimination complaint, complete the USDA 
Program Discrimination Complaint Form, AD-3027, found online at http://www.ascr.usda.gov/complaint_filing_cust.html and at any USDA office or 
write a letter addressed to USDA and provide in the letter all of the 
information requested in the form. To request a copy of the complaint 
form, call (866) 632-9992. Submit your completed form or letter to USDA 
by: (1) Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW., Washington, 
DC 20250-9410; (2) fax: (202) 690-7442; or (3) email: 
[email protected].
    USDA is an equal opportunity provider, employer, and lender.

Information Collection and Recordkeeping Requirements

    This final rule contains no new reporting or recordkeeping burdens 
under OMB control number 0572-0096 that would require approval under 
the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

Background

    Rural Development is a mission area within the USDA comprised of 
the Rural Utilities Service, Rural Housing Service and Rural Business/
Cooperative Service. Rural Development's mission is to increase 
economic opportunity and improve the quality of life for all rural 
Americans. Rural Development meets its mission by providing loans, loan 
guarantees, grants, and technical assistance through more than 40 
programs aimed at creating and improving housing, businesses, and 
infrastructure throughout rural America.
    RUS loan, loan guarantee, and grant programs act as a catalyst for 
economic and community development. By financing improvements to rural 
electric, water and waste, and telecom and broadband infrastructure, 
RUS also plays a big role in improving other measures of quality of 
life in rural America, including public health and safety, 
environmental protection and conservation, and cultural and historic 
preservation.
    DLT grants and loans are designed to encourage and improve 
telemedicine and distance learning services in rural areas through the 
use of computer networks and related advanced technologies by students, 
teachers, medical professionals, and rural residents. RUS believes that 
need is often greatest in areas that are economically challenged, 
costly to serve, and experiencing outward migration. RUS gives priority 
to rural areas that the Agency believes have the greatest need for 
distance learning and telemedicine services based on the criteria 
outlined in the program regulation 7 CFR part 1734. 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. The DLT Program continues to 
implement the provision of the Federal Agriculture Improvement and 
Reform Act of 1996 (1996 Act) (7 U.S.C. 950aaa et seq.) to encourage 
and improve telemedicine services and distance learning services in 
rural areas.
    Under this rulemaking, RUS is streamlining and revising the DLT 
Grant Program to minimize the burden of the application and selection 
processes in this competitive grant program and to ensure that grants 
are awarded for projects with the most demonstrable need. In order to 
reduce time required to announce the program on an annual basis, the 
agency will no longer publish a Notice of Funds Availability and will 
ensure that all pertinent information related to the application period 
is posted in the annual funding opportunity posted on Grants.gov, as 
required by 2 CFR 200.203, and include the information on the program 
Web site and in the program application guide, which will be linked to 
the funding opportunity posting. This rulemaking applies to the DLT 
Grant Program section of the regulation.

Changes to the Regulation

    Changes to the DLT grant program regulation are statutory 
requirements and non-statutory issues. The statutory requirement 
changes are as follows:
    (A) In 7 CFR part 1703, subpart E (newly designated 7 CFR part 
1734, subpart B), revises the ``Appeals'' section. In review of the 
guiding statute, program appeals are defined as applying only to RUS 
Telecommunications and Electric Borrowers.

[[Page 55925]]

    (B) In 7 CFR part 1703, subpart D (newly designated 7 CFR part 
1734, subpart A), The Agency is revising this regulation to make RUS 
Telecom and Electrics borrowers eligible to apply for grants. In review 
of the guiding statute RUS Telecom and Electric Borrowers are not 
restricted to DLT loans only.
    (C) The Agency is now making broadband facilities an eligible grant 
purpose. In the past, to leverage appropriations to their fullest, the 
Agency restricted transmission facilities from being an eligible 
purpose and focused the program on end user equipment. In today's 
environment, broadband facilities have become an integral part of 
providing distant learning and telemedicine services and therefor the 
Agency has decided to include them as an eligible grant purpose.
    (D) In 7 CFR part 1703, 7 CFR part 1734 and 7 CFR part 1735 make 
administrative updates to reflect changes affected by this rule.
    Other than the statutory changes, the Agency is affording the 
public the opportunity to comment on the following non-statutory 
changes which are as follows:
    (A) Relocate the DLT Loan and Grant Program from 7 CFR part 1703, 
subparts D, E, F and G to 7 CFR part 1734, subparts A, B, C, and D.
    (B) In 7 CFR part 1703, subpart D (newly designated 7 CFR part 
1734, subpart A), remove the definitions of the National School Lunch 
Program (NSLP), Empowerment Zone/Enterprise Community (EZ/EC), and 
Champion Community.
    (C) In 7 CFR part 1703, subpart E (newly designated 7 CFR part 
1734, subpart B), remove points for scoring the criteria from the code 
of Federal Regulations (CFR) which is used for determining the 
competitive need and eligibility among submitted applications. Instead, 
publish the points for scoring the criteria in the application guide 
and on the program Web site, and update as needed. This change is being 
made to allow the DLT program to keep up with changes in the industry 
and the landscape in rural America.
    (D) In Subparts E, F and G (newly designated 7 CFR part 1734, 
subparts B, C, and D), remove references to the publication of notices 
in the Federal Register. In order to reduce time required to announce 
the program on an annual basis, the agency will no longer publish these 
notices and will ensure that all pertinent information related to the 
application period is posted in the annual funding opportunity posted 
on Grants.gov, as required by 2 CFR 200.203, and include the 
information on the program Web site and in the program application 
guide, which will be linked to the funding opportunity posting.

List of Subjects

7 CFR Part 1703

    Community development, Grant programs--housing and community 
development, Loan programs--housing and community development, 
Reporting and recordkeeping requirements, Rural areas.

7 CFR Part 1734

    Community development, Grant programs--education, Grant programs--
health, Loan programs--education, Loan programs--health, Rural areas.

7 CFR Part 1735

    Loan programs--communications, Reporting and recordkeeping 
requirements, Rural areas, Telecommunications, Telephone.

    Accordingly, for reasons set forth in the preamble, chapter XVII, 
title 7, the Code of Federal Regulations is amended as follows:

PART 1703--RURAL DEVELOPMENT

0
1. Revise the authority citation for part 1703 to read as follows:

    Authority:  7 U.S.C. 901 et seq.

Subparts D, E, F and G--[Removed and Reserved]

0
2. Amend part 1703 by removing and reserving subparts D, E, F and G, 
consisting of Sec. Sec.  1703.100 through 1703.147.

0
3. Revise Sec.  1703.300 to read as follows:


Sec.  1703.300  Purpose.

    This subpart H sets forth RUS' policies and procedures for making 
loan deferments of principal and interest payments on direct loans or 
insured loans made for electric or telephone purposes, but not for 
loans made for rural economic development purposes, in accordance with 
subsection (b) of section 12 of the RE Act. Loan deferments are 
provided for the purpose of promoting rural development opportunities.

0
 4. Add part 1734 to read as follows:

PART 1734--DISTANCE LEARNING AND TELEMEDICINE LOAN AND GRANT 
PROGRAMS

Subpart A--Distance Learning and Telemedicine Loan and Grant Programs--
General
1734.1 Purpose.
1734.2 Policy.
1734.3 Definitions.
1734.4 Applicant eligibility and allocation of funds.
1734.5 Processing of selected applications.
1734.6 Disbursement of loans and grants.
1734.7 Reporting and oversight requirements.
1734.8 Audit requirements.
1734.9 Grant and loan administration.
1734.10 Changes in project objectives or scope.
1734.11 Grant and loan termination.
1734.12 Expedited telecommunications loans.
1734.13-1734.19 [Reserved]
Subpart B--Distance Learning and Telemedicine Grant Program
1734.20 [Reserved]
1734.21 Approved purposes for grants.
1734.22 Matching contributions.
1734.23 Nonapproved purposes for grants.
1734.24 Maximum and minimum grant amounts.
1734.25 Completed application.
1734.26 Criteria for scoring grant applications.
1734.27 Application selection provisions.
1734.28 Submission of applications.
1734.29 Appeals.
Subpart C--Distance Learning and Telemedicine Combination Loan and 
Grant Program
1734.30 Use of combination loan and grant.
1734.31 Approved purposes for a combination loan and grant.
1734.32 Nonapproved purposes for a combination loan and grant.
1734.33 Maximum and minimum amounts.
1734.34 Completed application.
1734.35 Application selection provisions.
1734.36 Submission of applications.
1734.37 Appeals.
1734.38-1734.39 [Reserved]
Subpart D--Distance Learning and Telemedicine Loan Program
1734.40 Use of loan funds.
1734.41 Approved purposes for loans.
1734.42 Non-approved purposes for loans.
1734.43 Maximum and minimum amounts.
1734.44 Completed application.
1734.45 Application selection provisions.
1734.46 Submission of applications.
1734.47 Appeals.

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

Subpart A--Distance Learning and Telemedicine Loan and Grant 
Program--General


Sec.  1734.1   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

[[Page 55926]]

the general policies for administering the DLT program. Subpart B of 
this part contains the policies and procedures related to grants; 
subpart C contains the policies and procedures related to a combination 
loan and grant; and subpart D contains the policies and procedures 
related to loans.


Sec.  1734.2   Policy.

    (a) The transmission of information is vital to the economic 
development, education, and health of rural Americans. To further this 
objective, the Rural Utilities Service (RUS) will provide financial 
assistance to distance learning and telemedicine projects that will 
improve the access for 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 may provide loans under this subpart to an 
entity that has received a telecommunications or electric loan under 
the Rural Electrification Act of 1936. A borrower receiving a loan 
shall:
    (1) Make the funds provided 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 subparts B, C, and D, 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 on the RUS Telecommunications Program Web site 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, DC 
20250.


Sec.  1734.3   Definitions.

    As used in this part:
    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.
    Broadband facilities means facilities that transmit, receive, or 
carry voice, video, or data between the terminal equipment at each end 
of the circuit or path. Such facilities include microwave antennae, 
relay stations and towers, other telecommunications antennae, fiber-
optic cables and repeaters, coaxial cables, communication satellite 
ground station complexes, copper cable electronic equipment associated 
with telecommunications transmissions, and similar items.
    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 Sec. Sec.  1734.125, 1734.134, and in form and 
substance satisfactory to the Administrator.
    Consortium means a combination or group of entities undertaking the 
purposes for which the distance learning and telemedicine financial 
assistance is provided. At least one of the entities in a consortium 
must meet the requirements of Sec.  1734.4.
    Construct means to acquire, construct, extend, improve, or install 
a facility or system.
    Distance learning means a telecommunications link to an end user 
through the use of eligible equipment to provide educational programs, 
instruction, or information originating in one area, whether rural or 
not, to students and teachers who are located in rural areas.
    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 is calculated based on Internal Revenue 
Service depreciation rules or recognized telecommunications industry 
guidelines.
    Eligible equipment means computer hardware and software, audio and 
video equipment, computer networking components, telecommunications 
terminal equipment, terminal equipment, inside wiring, interactive 
video equipment.
    Eligible facilities means land, buildings, or building construction 
needed to carry out an eligible distance learning or telemedicine 
project for loan financial assistance only.
    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 educational centers, libraries and teacher training 
centers, and students, teachers and instructors using such rural 
educational facilities, that participate in 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 participants in a rural 
distance learning telecommunications program through a project funded 
under this part; 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. An end user 
site can also be the residence of someone living in a rural area that 
is

[[Page 55927]]

receiving telemedicine or distant learning services.
    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 course material for teaching over 
the Distance Learning or Telemedicine network, including computer 
software.
    Interactive equipment means equipment used to produce and prepare 
for transmission of 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, but is not 
limited to, 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 (LEC) is a regulatory term in 
telecommunications for the local telephone company. In the United 
States, wireline telephone companies are divided into two large 
categories: Long distance (interexchange carrier, or IXCs) and local 
(local exchange carrier, or LECs). This structure is a result of 1984 
divestiture of then regulated monopoly carrier American Telephone & 
Telegraph. Local telephone companies at the time of the divestiture are 
also known as Incumbent Local Exchange Carriers (ILEC).
    Matching contribution means the applicant's contribution for 
approved purposes.
    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 facility means a facility such as a school, 
library, learning center, training facility, hospital, or medical 
facility that provides 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 electric or telecommunications loan or loan guarantee 
under the provisions of the Act.
    Telecommunications systems plan means the plan submitted by an 
applicant in accordance with Sec.  1734.25 for grants, Sec.  1734.34 
for a combination loan and grant, or Sec.  1734.44 for loans.
    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.  1734.4  Applicant eligibility and allocation of funds.

    To be eligible to receive a grant, loan and grant combination, or 
loan under this subpart:
    (a) The applicant must be legally organized as an incorporated 
organization, an Indian tribe or tribal organization, as defined in 25 
U.S.C. 450b(b) and (c), a state or local unit of government, a 
consortium, as defined in Sec.  1734.3, or other legal entity, 
including a private corporation organized on a for-profit or not-for 
profit basis. Each applicant must provide written evidence of its legal 
capacity to contract with RUS to obtain the grant, loan and grant 
combination, or the loan, and comply with all applicable requirements. 
If a consortium lacks the legal capacity to contract, each individual 
entity must contract with RUS in its own behalf.
    (b) The applicant proposes to utilize the financing to:
    (1) Operate a rural End-User Site for the purpose of providing 
Distance Learning or Telemedicine services; or
    (2) Deliver distance learning or telemedicine services to entities 
that operate a rural community facility or to residents of rural areas 
at rates calculated to ensure that the benefit of the financial 
assistance is passed through to such entities or to residents of rural 
areas.


Sec.  1734.5  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 reapply 
in the next program window if the agency and the selected applicant 
cannot agree on the new scope of the award.
    (c) If state or local governments raise objections to a proposed 
project under the intergovernmental review process that are not 
resolved within 90 days from the time the public is made aware of the 
award, 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 imminent.
    (d) RUS may request additional information that would not change 
the application or scoring, in order 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,

[[Page 55928]]

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 recipient shall provide evidence, in form and substance 
satisfactory to RUS, demonstrating that the recipient 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 RUS notifies the applicant that they have been selected for an 
award, 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.  1734.6  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 2 CFR part 200, which is adopted by USDA through 2 CFR part 
400.
    (b) Grants and loans will be disbursed to recipients on a 
reimbursement basis, 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
    (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.  1734.7  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) 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 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.


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 
ensure that projects are completed in accordance with the approved 
scope of work and that the financial assistance is expended for 
approved purposes.


Sec.  1734.8  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 following 
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 
subpart F of 2 CFR part 200, as adopted by USDA through 2 CFR part 400.
    (c) Grantees shall comply with 2 CFR part 200, as adopted by USDA 
through 2 CFR part 400, and rules on the disposition of grant assets in 
Part 200 shall be applied regardless of the type of legal organization 
of the grantee.


Sec.  1734.9  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.

[[Page 55929]]

Sec.  1734.10   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. If RUS does not approve the change and the awardee is unable 
to fulfill the original purposes of the award, the awardee will work 
with RUS to return or rescind the financial assistance.


Sec.  1734.11  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.  1734.12  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 B, C, or D of this part. See 7 CFR 
part 1737 for loans and 7 CFR part 1744 for advances under this 
section.


Sec. Sec.  1734.13-1734.19   [Reserved]

Subpart B--Distance Learning and Telemedicine Grant Program


Sec.  1734.20  [Reserved]


Sec.  1734.21  Approved purposes for grants.

    For distance learning and telemedicine projects, grants shall 
finance only the costs for approved purposes. Grants shall be expended 
only for the costs associated with the capital assets associated with 
the project. The following are approved grant purposes:
    (a) Acquiring and installing, by lease or purchase, eligible 
equipment as defined in Sec.  1734.3;
    (b) Purchases of extended warranties, site licenses, and 
maintenance contracts, for a period not to exceed 3 years from 
installation date, so long as such purchases are in support of eligible 
equipment included in the project and made concurrently;
    (c) Acquiring or developing instructional programming; but shall 
not include salaries, benefits, and overhead of medical, educational, 
or any personnel employed by the applicant. The funded development and 
acquisition of instructional programming must be done through an 
independent 3rd party, and may not be performed using the applicant's 
employees.
    (d) Providing technical assistance and instruction for using 
eligible equipment, including any related software; developing 
instructional programming; or providing engineering and environmental 
studies relating to the establishment or expansion of the phase of the 
project that is being financed with the grant. These purposes shall not 
exceed 10 percent of the grant; and
    (e) Purchasing and installing broadband facilities. This purpose is 
limited to a maximum of 20 percent of the request grant amount and must 
be used for providing distance learning or telemedicine services.


Sec.  1734.22  Matching contributions.

    (a) The grant applicant's minimum matching contribution must equal 
15 percent of the grant amount requested and shall be used for approved 
purposes for grants listed in Sec.  1734.21. Matching contributions 
generally must be in the form of cash. However, in-kind contributions 
solely for the purposes listed in Sec.  1734.21 may be substituted for 
cash.
    (b) In-kind items listed in Sec.  1734.21 must be non-depreciated 
or new assets with established monetary values. Use of specific 
manufacturers' equipment or services, or discounts thereon, are not 
considered eligible in-kind matching if the manufacturer, or its 
authorized reseller, is a vendor on the project, the grant writer for 
the grant application, or has undertaken any responsibility on the 
grant application, including payment.
    (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.  1734.23 shall not be used as an in-kind matching contribution.
    (e) Any financial assistance from Federal sources will not be 
considered as matching contributions under this subpart unless there is 
a Federal statutory exception specifically authorizing the Federal 
financial assistance to be considered as a matching contribution.


Sec.  1734.23  Nonapproved purposes for grants.

    (a) A grant made under this subpart will not be provided or used:
    (1) To pay for medical or educational equipment not having 
telemedicine or distance learning as its essential function;
    (2) To pay for Electronic Medical Records (EMR) systems;
    (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 unless that 
service provider is the applicant.
    (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 or campus environment;
    (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.  1734.21, to pay the 
cost of recurring or operating expenses for the project; or
    (14) For any other purposes not specifically contained in Sec.  
1734.21.
    (b) Except as otherwise provided in Sec.  1734.12, grants shall not 
be used to finance a project, in part, when the success of the project 
is dependent upon

[[Page 55930]]

the receipt of additional financial assistance under this subpart or is 
dependent upon the receipt of other financial assistance that is not 
assured.


Sec.  1734.24  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 and minimum amounts of a grant to be made 
available to an individual recipient for each fiscal year under this 
subpart by publishing notice of the maximum and minimum amounts in the 
RUS DLT Program Application Guide and/or the RUS DLT Program Web site 
and in the funding opportunity posted on www.Grants.gov on an annual 
basis.


Sec.  1734.25  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 9 
categories:
    (1) A description of why the project is needed;
    (2) An explanation of how the applicant will address the need cited 
in paragraph (b)(1) of this section, why the applicant requires 
financial assistance, 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.  1734.4;
    (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.  1734.3. 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 grants do not duplicate adequate established telemedicine or 
distance learning services; and
    (9) A listing of the location of each end user site (city, town, 
village, borough, or rural areas) plus the State.
    (c) Scoring criteria documentation. Each grant applicant must 
address and provide documentation on how it meets each of the scoring 
criteria contained in Sec.  1734.26, and as supplemented in the listing 
on grants.gov, the DLT Application Guide and the agency's Web site.
    (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 non-approved purposes for grants as contained in 
Sec.  1734.23.
    (e) Financial information and sustainability. The applicant must 
provide a narrative description demonstrating: Feasibility of the 
project, including having sufficient resources and expertise necessary 
to undertake and complete the project; and, how the project will be 
sustained following completion of the project.
    (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 contributions in Sec.  1734.22; and
    (3) 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 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. If funds are being requested for broadband 
facilities, a description of the use of these facilities and how they 
will be used to deliver distance learning or telemedicine services.
    (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) Architectural barriers;
    (3) Flood hazard area precautions;
    (4) Assistance and Real Property Acquisition Policies Act of 1970;
    (5) Drug-Free Workplace Act of 1998 (41 U.S.C. 8101 et seq.), 2 CFR 
part 421;
    (6) E.O.s 12549 and 12689, Debarment and Suspension, 2 CFR part 
180, which is adopted by USDA through 2 CFR part 417;
    (7) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352), 2 CFR part 418.
    (j) Environmental review requirements.
    (1) The applicant must provide details of the project's impact on 
the human environment and historic properties, in accordance with 7 CFR 
part 1970. The

[[Page 55931]]

application must contain a separate section entitled ``Environmental 
Impact of the Project.''
    (2) The applicant must use any programmatic environmental 
agreements, available from RUS, in effect at the time of filing 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 (31 U.S.C. 3720B).
    (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) 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.


Sec.  1734.26   Criteria for scoring grant applications.

    The criteria by which applications will be scored will be published 
in the RUS DLT Program application guide and/or the RUS DLT Program Web 
site and in the funding opportunity posted on www.Grants.gov Web site 
on an annual basis. The criteria will be used to determine and 
evaluate: Rurality; economic need; service need and benefit; and 
special considerations as determined by the Administrator


Sec.  1734.27  Application selection provisions.

    (a) Applications will be evaluated competitively by the Agency and 
will be ranked in accordance with Sec.  1734.26. Applications will then 
be awarded generally in rank order until all grant funds are expended, 
subject to paragraphs (b), (c), and (d) 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.  1734.26, 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 type 
of 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.  
1734.25(e). An applicant or multiple applicants affected under this 
paragraph will have the opportunity to be considered for loan financing 
in accordance with subparts C and D 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.  1734.25(e);
    (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 with Sec.  1734.25(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.  1734.2.
    (d) 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.


Sec.  1734.28  Submission of applications.

    (a) Applications will be accepted as announced in the RUS DLT 
Program application guide and/or the RUS DLT Program Web site and in 
the funding opportunity posted on www.Grants.gov on an annual basis.
    (b) When submitting paper applications:
    (1) 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''.
    (2) Applications must be submitted to RUS postmarked no 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 announced in the RUS DLT Program application 
guide and/or the RUS DLT Program Web site and in the funding 
opportunity posted on www.Grants.gov on an annual basis.
    (3) All applicants must submit an original and a digital copy of a 
completed application.


Sec.  1734.29  Appeals.

    RUS Telecommunications and Electric Borrowers may appeal the 
decision to reject their application. 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.

Subpart C--Distance Learning and Telemedicine Combination Loan and 
Grant Program


Sec.  1734.30  Use of combination loan and grant.

    (a) A combination loan and grant may be used by eligible 
organizations as defined in Sec.  1734.4 for distance learning and 
telemedicine projects to finance 100 percent of the cost of approved 
purposes contained in Sec.  1734.31 provided that no

[[Page 55932]]

financial assistance may exceed the maximum amount for the year in 
which the combination loan and grant is made published in the funding 
opportunity posted on www.grants.gov on an annual basis.
    (b) Applicants must meet the minimum eligibility requirement for 
determining the extent to which the project serves rural areas as 
determined in Sec.  1734.26(b)


Sec.  1734.31  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.  1734.3;
    (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 or broadband 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.  1734.32  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.  1734.31), to pay the cost of 
recurring or operating expenses for the project; or,
    (8) For any other purposes not specifically outlined in Sec.  
1734.31.
    (b) Except as otherwise provided in Sec.  1734.12, 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.  1734.33   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 and minimum 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 posting a funding 
opportunity in the RUS DLT Program Application Guide and/or the RUS DLT 
Program Web site and in the funding opportunity posted on 
www.Grants.gov on an annual basis.


Sec.  1734.34   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;
    (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.  1734.4;
    (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.  1734.3. 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;

[[Page 55933]]

    (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.  1734.4(1), 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 
(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 or broadband 
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.  1734.31(h).
    (5) The capabilities of the telecommunications or broadband 
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 and as supplemented by regulations contained in 41 CFR part 60;
    (2) Architectural barriers;
    (3) Flood hazard area precautions;
    (4) Assistance and Real Property Acquisition Policies Act of 1970;
    (5) Drug-Free Workplace Act of 1998 (41 U.S.C. 8101 et seq.), 2 CFR 
part 421;
    (6) E.O.s 12549 and 12689, Debarment and Suspension, 2 CFR part 
180, which is adopted by USDA through 2 CFR part 417;

[[Page 55934]]

    (7) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352), 2 CFR part 418.
    (h) Environmental review requirements.
    (1) The applicant must provide details of the project's impact on 
the human environment and historic properties, in accordance with 7 CFR 
part 1970. The application must contain a separate section entitled 
``Environmental Impact of the Project.''
    (2) The applicant must use any programmatic environmental 
agreements, available from RUS, in effect at the time of filing 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 (31 
U.S.C. 3720B).
    (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 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.  1734.35  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.  1734.34(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 referenced in Sec.  1734.26.
    (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.  1734.34(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.  1734.2.
    (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.  1734.37.


Sec.  1734.36  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 an electronic copy 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.  1734.34, 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, 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.  1734.35, 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.  1734.35 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 
Sec.  1734.34 and Sec.  1734.35 and other applicable requirements of 
this subpart.
    (4) If the application is determined suitable for further 
consideration by RUS, forward an original and electronic version 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

[[Page 55935]]

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 Sec. Sec.  1734.5 through 1734.12.
    (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.
    (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 an electronic version 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.  1734.34, 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.  1734.35, 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 
Sec. Sec.  1734.5 through 1734.12.
    (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.  1734.37.


Sec.  1734.37  Appeals.

    RUS Electric and Telecommunications Borrowers may appeal a decision 
to reject their application. 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.


Sec. Sec.  1734.38-1734.39  [Reserved]

Subpart D--Distance Learning and Telemedicine Loan Program


Sec.  1734.40  Use of loan funds.

    A loan may be used by eligible organizations as defined in Sec.  
1734.4 for distance learning and telemedicine projects to finance 100 
percent of the cost of approved purposes contained in Sec.  1734.41 
provided that no financial assistance may exceed the maximum amount for 
the year in which the loan is made. 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.  1734.4. 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.  1734.44(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.  
1734.41, except for those purposes in Sec.  1734.41(h).
    (d) Applicants must meet the minimum eligibility requirement for 
determining the extent to which the project serves rural areas as 
contained in Sec.  1734.26(b)


Sec.  1734.41  Approved purposes for loans.

    The following are approved purposes for loans:
    (a) Acquiring, by lease or purchase, eligible equipment or 
facilities as defined in Sec.  1734.3;
    (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

[[Page 55936]]

for this purpose must be necessary and incidental to the total amount 
of financial assistance requested;
    (h) Acquiring of telecommunications or broandband 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, except for salaries and administrative 
expenses, 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.  1734.42  Non-approved purposes for loans.

    (a) Loans made under this subpart will not be provided to pay the 
costs of recurring or operating expenses incurred after two years from 
approval of the project except for leases (see Sec.  1734.41).
    (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) To pay for salaries, wages, or administrative expenses; or
    (5) For any purpose that the Administrator has not specifically 
approved.
    (c) Except as otherwise provided in Sec.  1734.12, 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 D or is dependent upon the receipt of other funding that 
is not assured.


Sec.  1734.43   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.


Sec.  1734.44  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.  1734.4;
    (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.  1734.3. 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;
    (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 the loan 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

[[Page 55937]]

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 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 loan is 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.  1734.4(a)(1), 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 
(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 loan.
    (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.  1734.41(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 and as supplemented by regulations contained in 41 CFR part 60;
    (2) Architectural barriers;
    (3) Flood hazard area precautions;
    (4) Assistance and Real Property Acquisition Policies Act of 1970;
    (5) Drug-Free Workplace Act of 1998 (41 U.S.C. 8101 et seq.), 2 CFR 
part 421;
    (6) E.O.s 12549 and 12689, Debarment and Suspension, 2 CFR part 
180, which is adopted by USDA through 2 CFR part 417;
    (7) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352), 2 CFR part 418.
    (h) Environmental review requirements.
    (1) The applicant must provide details of the project's impact on 
the environment and historic properties, in accordance with 7 CFR part 
1970. The application must contain a separate section entitled 
``Environmental Impact of the Project.''
    (2) The applicant must use any programmatic environmental 
agreements, available from RUS, in effect at the time of filing 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 (31 U.S.C. 3720B).
    (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.  1734.45  Application selection provisions.

    (a) Loans will be approved based on availability of funds, the 
financial feasibility of the project in accordance with Sec.  
1734.44(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.

[[Page 55938]]

    (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 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 referenced in 
Sec.  1734.26.
    (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.  1734.44(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.  1734.2.
    (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.  1734.47.


Sec.  1734.46  Submission of applications.

    (a) RUS will accept applications for loans submitted by RUS 
Telecommunications 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 an electronic version 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.  1734.44, 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.  1734.45, 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.  1734.45 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 Sec. Sec.  
1734.44 and 1734.45 and other applicable requirements of this subpart.
    (4) If the application is determined suitable for further 
consideration by RUS, forward an original and an electronic version 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 Sec. Sec.  1734.5 through 1734.12.
    (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.
    (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 an electronic version 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.  1734.44, 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

[[Page 55939]]

accordance with Sec. Sec.  1734.5 through 1734.12.
    (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.  1734.47.


Sec.  1734.47  Appeals.

    RUS Electric and Telecommunications Borrowers may appeal a decision 
to reject their application. 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.

PART 1735--GENERAL POLICIES, TYPES OF LOANS, LOAN REQUIREMENTS--
TELECOMMUNICATIONS PROGRAM

0
5. The authority citation for part 1735 continues to read as follows:

    Authority: 7 U.S.C. 901 et seq., 1921 et seq., and 6941 et seq.

0
6. Amend Sec.  1735.30 by revising paragraph (d)(1)(v) to read as 
follows:


Sec.  1735.30  Hardship loans.

* * * * *
    (d) * * *
    (1) * * *
    (v) Distance Learning and Medical Link Facilities. Borrowers will 
receive 2 points for loan funds included in the application for the 
purpose of providing distance learning or medical link transmission 
facilities. If loan funds are included for both distance learning and 
medical link transmission facilities, borrowers will receive 3 points. 
(See 7 CFR part 1734 for definitions of distance learning and medical 
link.)
* * * * *

    Dated: October 10, 2017.
Christopher A. McLean,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2017-25266 Filed 11-24-17; 8:45 am]
 BILLING CODE P