Report: small government agency lost billions in stimulus cash

A very small government agency may be in trouble for reportedly losing BILLIONS of dollars in stimulus cash. POLITICO reports Rural Utilities Service promised to bring broadband to millions of Americans, yet pretty much failed to deliver.


A POLITICO investigation has found that roughly half of the nearly 300 projects RUS approved as part of the 2009 Recovery Act have not yet drawn down the full amounts they were awarded. All RUS-funded infrastructure projects were supposed to have completed construction by the end of June, but the agency has declined to say whether these rural networks have been completed. More than 40 of the projects RUS initially approved never got started at all, raising questions about how RUS screened its applicants and made its decisions in the first place.

But a bigger, more critical deadline looms for those broadband projects still underway: If these networks do not draw all their cash by the end of September, they will have to forfeit what remains. In other words, they may altogether squander as much as $277 million in still-untapped federal funds, which can’t be spent elsewhere in other neglected rural communities.

Never heard of Rural Utilities Service? I hadn’t either until this POLITICO piece, but some research shows it was created during the New Deal (shocker) as the Rural Electrification Administration before being shuffled over to the U.S. Department of Agriculture in 1994. RUS promises to help out rural communities through water, waste treatment, electrical power, and telecommunications. Here’s how it justifies its existence on its website.

Utilities programs connect rural residents to the global economy by:
1. Increasing access to broadband and 21st century telecommunications services;
2. Funding sustainable renewable energy development and conservation;
3. Financing reliable and affordable electric systems;
4. Working to integrate electric smart grid technologies;
5. Developing reliable and affordable rural water and wastewater systems.
These investments support the nation’s long-term prosperity by ensuring that rural communities have the infrastructure to compete in the global economy.


Of course, that’s not what happened at all with the taxpayer cash RUS was given in 2009 and appears to have been something which always plagued the agency. An inspector general discovered in 2005 the agency was having problems with delivering on its promises. From POLITICO’s investigation into RUS.

Federal investigators also calculated that RUS had awarded more than $137 million in loans, despite incomplete or inaccurate applications. About $30 million of its loans “[were] in default due to inadequate servicing,” largely because the agency hadn’t developed strong oversight guidelines for its earliest loans — meaning the cash wasn’t “timely and thoroughly monitored.” And another $6.8 million in canceled broadband loans “was not put to use in a timely fashion and was therefore unavailable for future funding.”

Guess what? It happened again during the stimulus.

Quietly, RUS killed 42 broadband infrastructure projects that it had heralded only months earlier. The agency rescinded more than $300 million in loans and grants before a single check was written. In many cases, local officials had struggled to finance their share of their networks, or obtain the permits needed to lay new fiber cables or erect new wireless towers.

It really shouldn’t be surprising at all to see a government agency completely botch a project it promised to do right. But why doesn’t Congress actually do anything about agencies which are failing by either closing them or reducing their budget? Taxpayers for Common Sense President Ryan Alexander told The Washington Post in 2011 it’s all about politics and nothing about solutions.


“They’re not talking about what the taxpayers are losing; they’re not talking about the failure of the technology, whether we bet on the wrong horse. What they are talking about is ‘How are we going to manage this politically?’ ”

Alexander was specifically talking the Solyndra scandal, but her comments ring true for a lot of programs. The fact is whenever government gets its greedy little fingers into a particular pie it doesn’t want to get them out because it loves the influence. It loves the power and the ability to pick winners and losers. The problem is the winners seem to be those who coddle up to Congress and the losers are the taxpayers.

It’s pretty obvious what the solution is: agencies like RUS should be shut down. Their goal may be considered noble because they (allegedly) want to bring fast Internet to smaller communities, but the question is whether the communities even need the high-speed Internet? Does a farmer who focuses on plowing fields really need 200mbps or can they survive on no Internet at all? Would it be better for them to get satellite service and their spotty Internet or should the bigger ISPs decide to move in there? Or could the farmer make a deal on Internet with the ISP for high-speed Internet if he or she really needed it. Or is it possible for a smaller ISP to be created which could actually serve smaller communities without the need of the government at all?


One thing which always struck me was how hard it is to create an ISP. Ars Technica wrote last year about some of the problems.

A new fiber provider needs a slew of government permits and construction crews to bring fiber to homes and businesses. It needs to buy Internet capacity from transit providers to connect customers to the rest of the Internet. It probably needs investors who are willing to wait years for a profit because the up-front capital costs are huge. If the new entrant can’t take a sizable chunk of customers away from the area’s incumbent Internet provider, it may never recover the initial costs. And if the newcomer is a real threat to the incumbent, it might need an army of lawyers to fend off frivolous lawsuits designed to put it out of business.

It’s really funny how the government wants to be the ones people run to for help, yet they’re the ones who are causing all the problems. It’s a great racket they’ve got going on. One Al Capone would probably love to take a slice of. The best solution is getting rid of these government permits, stopping the stranglehold some of the big ISPs have on cities and states (i.e. convincing local and state governments to not hand out monopolies) and letting the dreaded unfettered free markets have their way. It would probably save taxpayer money because the government wouldn’t have a stake in it, therefore no taxpayer cash would be spent. It’s just convincing politicians, candidates, and people on the idea that nongovernmental reliance might be the best way to go. That way, no one gets to read ridiculous articles from POLITICO on how the government is truly fracking things up.


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