One program is the Rural Broadband  Access Loan and Loan Guarantee Program, which authorizes RUS to  provide treasury rate loans, 4 percent loans, and loan guarantees. “Repaid” loans include  those that have already been fully paid back. Since 2003, 100 Loans Have Been Made to Geographically and Demographically Diverse Areas, but Over 40 Percent Are No Longer Active

		Communities Receiving RUS Loans Are Geographically and Demographically Diverse

RUS has approved 100 loans, out of 249 applications, through the  Broadband Loan Program since 2003. The total dollar amount of the  loans awarded to date is about $2 billion. 1). These areas had low  population densities and also tended to be lower-income, overall. 2). The other 43 loans are no longer active, either  because they have been rescinded or are in default. Despite these issues, RUS has not gathered information or performed  analysis to better understand what might lead a project to default or  otherwise make a project a poor candidate for receiving the loan. Federal guidance emphasizes the importance of assessing the risk  associated with loan programs. RUS Loans Can Help Promote Limited Broadband Deployment and Economic Development, but Performance Goals Do Not Fully Align with Program’s Purpose

		RUS Loans Can Help Overcome Financial Barriers to Deploying Broadband in Rural Areas

Broadband projects in rural areas are generally more expensive, on a  cost-per-subscriber basis, than projects in metropolitan areas, creating a  financial barrier to deployment, according to our review of the relevant  literature. In order  to further assess the impact of loans on broadband deployment, we  compared the number of broadband providers in counties that have RUS- financed broadband projects to the number of providers in counties that  applied but were rejected for a RUS loan as well as counties that had fully  rescinded loans, using the latest data from the NBM. According to our analysis of RUS loans and economic development data,  counties affected by at least one approved RUS loan were associated  with modestly higher levels of employment and payroll after the year of  loan approval and in all subsequent years, as compared to counties that  did not receive RUS loans. Quality of Life

Beyond economic development, broadband services financed with RUS  loans can enhance the quality of life in rural communities. USDA Annual Performance Goals and Measures Do Not Fully Align with the Loan Program’s Purpose

USDA’s Annual Performance Report (APR) provides information on the  achievements of USDA’s programs each fiscal year. As our past work has shown, an attribute of a successful  performance measure is whether it aligns with division and agency-wide  goals. The purposes of the loan program are to  improve broadband deployment in rural areas—that is, increase the  number of broadband subscribers with access to new or improved  broadband service—and ultimately increase economic opportunity in rural  America. As the  National Broadband Plan states, “adoption is necessary for utilization, but  utilization is necessary to extract value from a  connection.”  Furthermore, USDA’s APR does not have any goals or measures to  determine the loan program’s progress towards economic development  outcomes. As our past work has shown, agency performance goals that do not link  to program goals can lead to incentives and behaviors that do not support  the achievement of division or agency-wide goals. Performance goals that better evaluate progress toward the loan  program’s goals may help USDA and Congress better monitor the  outcomes of the loan program. Considerable resources  are invested by RUS to administer these loans and their failures therefore  may represent an inefficient use of RUS resources. USDA evaluates progress toward these and other outcomes in its  APR, though the performance goals it uses do not fully align with the  purpose of the RUS broadband loan program. Recommendations

We recommend the Secretary of Agriculture take the following two  actions: evaluate loans made by RUS through the broadband loan program to  identify characteristics of loans that may be at risk of rescission or  default; and align performance goals under the “enhance rural prosperity” strategic  objective in the APR to the broadband loan program’s purpose, to the  extent feasible. We also provided a draft of this report to USDA for review and comment. 1). Appendix I: Scope and Methodology

To examine the geographic distribution and financial performance of  loans, we gathered and analyzed Rural Utilities Service (RUS) loan data  from 2003—2013. We also analyzed the  extent to which the loans met various definitions of rural, including those  adopted by RUS for the loan program in 2002, 2004, and 2008, as well as  the U.S. Census Bureau (Census) definition (areas not within urbanized  areas) and the U.S. Department of Agriculture’s (USDA) Rural-Urban  Commuting Area (RUCA) Census tract-based codes. We used the most recent data  available, which were current as of June 2013. We also  discussed these reforms with broadband providers that have and have  not received USF support, as described above. Scope and Data

The time frame for our analysis was 2003 through 2011 because those  are the years for which RUS and relevant Census data are available.
Why GAO Did This Study

Access to affordable broadband telecommunications is increasingly viewed as vital to economic growth and improved quality of life. Broadband is particularly critical in rural areas, where advanced communications can reduce the isolation of remote communities and individuals. To extend access to broadband and therefore increase economic opportunity in rural America, RUS finances the construction of broadband through a loan program.
GAO was asked to assess issues related to the loan program. This report addresses the (1) geographic distribution and financial performance of loans and (2) relationship between loans and broadband deployment and economic development, and how USDA evaluates progress towards these outcomes.
To address these research questions, GAO interviewed broadband providers and stakeholders selected for their varying experiences, including those that have and have not received RUS loans. GAO also analyzed RUS and U.S. Census Bureau data from 2003—2013 as well as the most recent National Broadband Map data.

What GAO Found

The U.S. Department of Agriculture (USDA) Rural Utilities Service (RUS) has approved 100 loans to geographically and demographically diverse areas through its Rural Broadband Access Loan and Loan Guarantee Program (“loan program”), though over 40 percent of these loans are no longer active. The geographic distribution of RUS loans is widespread, with broadband providers in 43 states having received one or more loans through the loan program from 2003 through 2013. About $2 billion in loans have been made to providers in areas with diverse demographics and economies, including areas with low population densities and income as well as areas in relative proximity to large cities with robust local economies. Of the 100 RUS loans approved through the loan program, 48 are currently being repaid, and 9 have been fully paid back. Forty-three are no longer active, either because they were cancelled before they were paid out (25 rescinded) or because the provider defaulted by failing to abide by the terms of the loan (18 defaulted). Approving a loan requires significant resources. Loans that default or are rescinded can represent an inefficient use of RUS resources. Despite these issues, RUS has not gathered information or performed analysis to better understand what might lead a project to default or otherwise make a project a poor candidate for receiving a loan. Federal guidance, though, emphasizes the importance of assessing the risk associated with loan programs.
RUS loans can help promote limited broadband deployment and economic development, but USDA's performance goals do not fully align with the loan program's purpose. According to GAO analysis of National Broadband Map deployment data as of June 2013, areas with RUS loans generally have the same number of broadband providers as areas without a loan. However, the RUS loan program can enhance the quality and reach of broadband networks in rural areas, according to stakeholders. Further, according to GAO analysis of RUS loans and U.S. Census Bureau data from 2003 through 2011—the years for which RUS and relevant Census data are available—areas affected by at least one approved RUS loan were associated with modestly higher levels of employment and payroll (1 to 4 percent) after the year of loan approval and in all subsequent years, as compared to areas that did not receive RUS loans. As stated in the program regulations, the purpose of the RUS loan program is to increase broadband deployment (that is, the number of broadband subscribers with access to new or improved broadband service) and economic opportunity in rural America through the provision of broadband services. USDA's Annual Performance Report ( APR ) provides information on the achievements of USDA's programs each fiscal year. The goals in USDA's report, though, do not fully align with the purpose of the loan program. For instance, USDA's APR does not have any goals or measures to determine the loan program's progress towards economic development outcomes. As our past work has shown, an attribute of a successful performance goal is whether it aligns with division and agency-wide goals. Agency performance goals that do not link to program goals can lead to incentives and behaviors that do not support the achievement of division or agency-wide goals. Performance goals aligned with the program's purpose may help USDA and Congress better monitor the outcomes of the loan program.

What GAO Recommends

GAO recommends that USDA (1) evaluate loans made by RUS through the loan program to identify characteristics of loans that may be at risk of rescission or default and (2) align the goals in its APR to the loan program's purpose, to the extent feasible. In commenting on a draft of this report, USDA said it will strive to fully implement the report's recommendations.