US Government Accountability Office GAO

Rural broadband to be developed - Background

The Rural Utilities Service (RUS), an agency within the United States Department of Agriculture (USDA), provides loans and grants to help finance the construction of broadband infrastructure in rural America. GAO was asked to review RUS’s management of its programs to fund broadband deployment, including consistency with leading practices for federal funding, program management, and broadband deployment.

Consistent with leading practices

With regard to reviewing applications, RUS has procedures for training reviewers, guarding against conflicts of interest, and conducting multiple levels of review. For external training and external communication, RUS holds workshops and seminars to inform rural communities and applicants about its programs. RUS’s website contains program information, including eligibility criteria, time frames, and frequently asked questions. Applicants can also seek assistance from the RUS general field representative (GFR) assigned to their area. Program recipients whom GAO interviewed often spoke positively of the help provided by GFRs. As to coordination mechanisms, RUS has worked with other federal agencies on rural broadband-deployment efforts, including having a memorandum of understanding with the Federal Communications Commission.

Individual programs need documented goals and measures

(...)the annual performance report contains a performance measure for RUS: the annual number of borrowers or subscribers receiving new or improved telecommunications services. According to the report, the performance target for 2016 was 120,000 borrowers or subscribers receiving new or improved telecommunications services; the 2017 target is 100,000. Outside of this one high-level strategic goal and performance measure, RUS officials told us they do not have formal documented program performance goals and measures for the individual loan and grant programs. RUS officials told us that they believe their goals for each of the three programs are to ensure that facilities are constructed properly and that the service is actually provided. However, these goals are not documented, and there are no specific performance measures that link to these goals.

Recommendation 1 Develop and document clear goals and performance measures linked to those goals, for each program.
Holistic look is incomplete

With regard to fraud risks, there are procedures to help limit fraud incidents. For instance, the grant agreements that Community Connect recipients are required to sign stipulate that invoices are to be submitted with requests for advance or with reimbursement forms before grant funds are disbursed. Recipients, depending on entity type, are to provide RUS with an audit for each year in which grant funds are expended and an annual project performance activity report. Loan agreements lay out specific conditions that loan recipients are required to follow for loan advances. Loan recipients are required by their loan agreements to have fidelity bond or theft insurance coverage and maintain all documentation, such as invoices, receipts, and annual financial reports, available for federal inspection, if requested. Loan recipients are required to provide RUS with annual audited financial statements until the loans are paid off.

While RUS has risk assessment activities at the application and individual project level and procedures related to fraud risks, RUS has no risk assessment activities at the overall program level. As set forth in the Green Book, a precondition to risk assessment is the establishment of clear, consistent program objectives. When clear program objectives are established up front, then internal controls can be designed around the fundamental risk that program objectives will not be met. As previously discussed, RUS does not have clear goals and performance measures in place for its loan and grant programs. RUS officials acknowledged that they have not conducted a formal risk assessment of the broadband loan and grant programs because to date, as noted, they have focused on risk assessment at the application and project level. But a higher-level, programmatic risk assessment would provide a holistic look at the programs’ core processes and practices and assess internal controls over each program. Such a programmatic risk assessment could include an examination of risks at the portfolio level for both the portfolio of loans and the portfolio of grants. RUS officials told us that they recognize the need for portfolio risk assessments and would like to put procedures in place in the future to assess the loan and grant portfolios.

Recommendation 2 Establish and implement procedures to conduct a risk assessment of each program, including an examination of risk at both the programmatic and portfolio level for each program.
Centralized information system needed

RUS’s procedures and activities are partially consistent with the leading practice of internal communication as it has established an organizational structure to permit the flow of information to assist agency staff and recipients, appropriate methods of communication throughout the organization, and mechanisms to obtain relevant data based on identified project information requirements. However, RUS falls short of this leading practice in that it does not have a centralized system to obtain relevant data to monitor grant awards and loans, including correspondence and deliverables.

Recommendation 4 Establish a timeline for implementing a centralized internal system for staff to obtain relevant and timely program data for use in managing and monitoring loans and grant awards.
Retain institutional knowledge

RUS’s procedures and activities are partially consistent with the written documentation leading practice. According to the Green Book, an effective management framework for grants and loans includes developing and maintaining written documentation as a means to obtain and retain organizational knowledge and to ensure accountability for achieving agreed-upon results. Although RUS has effectively developed written documentation to communicate to program applicants and recipients, we found that RUS has not consistently updated its written policies and procedures to retain organizational knowledge and to communicate loan- and grant-management knowledge internally among its staff.

Recommendation 5 Develop, update, and maintain complete written policies and procedures for RUS+IBk-s programs as a way to retain and communicate organizational knowledge internally among agency staff. RUS should determine the critical documentation that should be created or updated, including considering documentation such as loan-application review guidance and employee manuals for each of the three programs.
Potential improvements to be analyzed

While RUS established many project-monitoring activities, with regard to the key activity of evaluating project results, we found that RUS evaluates loan performance but does not review post-award grant program performance. For loans, RUS necessarily follows loan projects through the repayment process—which is often 20 years or more—and evaluates what happened when a loan recipient defaults. However, for grants, once a Community Connect grant is fully disbursed, RUS does not conduct any evaluation of whether the grant recipient is still providing broadband service at a later date or measure the effectiveness of the project in meeting its goals. RUS officials told us that they would like to go back and evaluate grant projects, but that staffing resource constraints have prevented them from doing so. However, not periodically evaluating grant project results affects RUS’s ability to measure the outcomes and success of its grant program. Without analysis of post-award project successes or failures, Community Connect program managers are missing information that could be used to determine if programmatic changes might improve the selection of grant recipients or the results of grant awards.

Recommendation 3 Establish and implement procedures to conduct periodic evaluations of completed grant projects to determine the outcomes associated with these projects, and analyze the information gained to assess if any programmatic changes are needed to improve the Community Connect program.

This report examines the extent to which RUS’s procedures and activities are consistent with leading practices and how, if at all, its management practices could be improved. GAO synthesized, from federal guidance and relevant literature, a set of 10 leading practices that would be appropriate for the management of broadband loan and grant programs. GAO validated its set of practices with states that have programs similar to the RUS programs. GAO then reviewed RUS documentation and interviewed RUS officials and six program recipients, selected for having geographically dispersed projects currently under construction. Based on this information, GAO determined whether RUS’s procedures and activities were consistent, partially consistent, or not consistent with each leading practice.

The items above were selected and named by the e-Government Subgroup of the EUROSAI IT Working Group on the basis of publicly available report of the author Supreme Audit Institutions (SAI). In the same way, the Subgroup prepared the analytical assumptions and headings. All readers are encouraged to consult the original texts by the author SAIs (linked).