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Posted at 10:15 a.m. on June 24, 2014
An Agriculture Department loan program designed to foster deployment of broadband in rural areas has been criticized at times over issues such as providing loans in areas near big cities, and the scrutiny continues: A recent Government Accountability Office report says that more than two-fifths of all approved loans have been rescinded or defaulted upon.
The report says that the Rural Utilities Service (RUS) is tasked with administering a loan program targeted at encouraging more broadband investment in rural areas, but the program “has experienced mixed results. For instance, over 40 percent of approved loans are no longer active, with many having not resulted in new or improved broadband services.”
The report said that out of the 100 loans the RUS approved under the Rural Broadband Access Loan and Loan Guarantee Program since 2003, 57 are either being paid back or have already been repaid. But 25 of them were rescinded (cancelled before the government actually issued the loan) and another 18 defaulted, the report says.
The report said RUS officials said the reason these loans default is generally because the “provider cannot produce the necessary revenue to support the broadband network and debt payments, often due to not attracting enough subscribers.”
And the report states that RUS officials said there are varying reasons for rescission of loans, “including situations where the provider cannot meet equity requirements or the provider experiences significant financial problems before the principal has been loaned. Although providers sometimes voluntarily request a full rescission, that situation is less common.”
And while approved loans require “significant resources to review and monitor,” the Rural Utility Service hasn’t analyzed what might cause defaults or make certain projects poor candidates for receiving a loan, the report said.
“According to RUS officials, a lack of staff resources has prevented them from studying the reasons for failed projects,” the report says, though GAO adds that other staff at the Agriculture Department, such as researchers at the Economic Research Service, might have the expertise to do so.